With Navy’s Frigates Now Actively Serving South Africa, Defence Offset (DIP) is Completed Final TKMS- Armscor Results Shows Massive Boost to Local Economy South African manufacturers benefited directly from offset contracts worth R 860-million at current exchange rates from the Navy’s acquisition of four new frigate platforms, the final accounting of the Defence Industrial Participation (DIP) related to the ships by Armscor has shown. DIP is the offset directly related to the defence equipment being acquired. The € 88,124-million obligation directly related to the frigate platforms has been essentially fulfilled, said Armscor’s senior DIP manager Brenzia Potgieter. The offset relates only to the platforms and not to the combat systems, which were installed in South Africa with high local content. The four Valour Class MEKO A-200-SAN frigates have all been taken into full service by the Navy following the commissioning of the fourth ship, the SAS Mendi, in Port Elizabeth in March. Among the small and large companies benefitting from the Frigate DIP contracts, creating and sustaining jobs, and acquiring technologies and skills in the process, are DCD Dorbyl, Bennett’s Engineering, Titanium Industries, Booyco Engineering, Siemens Pinetown and MTU Cape Town. All participated directly in the offset program, supplying significant elements of the frigates’ electrical, diesel, high-tech exhaust, and integrated platform management systems, superstructures and mast modules, refrigeration and ventilation plants, gearboxes, and hydraulic power units. The skills and technology transfer programs which were an integral part of the DIP program ensured that the frigates and their key systems can be maintained in South Africa by South Africans in future. Besides supplying important elements of the South African frigates, local companies have also benefited under the DIP agreement through contracts to provide components for ships built for other navies. Among them, Titanium Industries of Alberton has been commissioned to supply specially welded titanium exhaust gas systems for ships for the Malaysian, Korean, and Italian navies, while Hyflo SA of Cape Town has supplied hydraulics systems for a number of ships. Together, the companies have won additional business valued at € 5-million (almost R 48,8-million) as a result of the quality of their work on the South African frigates. “The DIP system has been a tremendous success, ensuring not only the integration of South African components onto the frigate platforms built in Germany, but also securing skills and technologies for South Africa relevant to shipbuilding, engineering more broadly, and other aspects of the economy,” said ThyssenKrupp offset manager Ulrich Scheel. “We are very pleased that it has been possible with our colleagues at Armscor to identify really excellent local partners who not only delivered top quality, but have also been able to show their capabilities to the world through the DIP program.” The DIP program, frequently referred to as offset, required defence manufacturers supplying South Africa within the Strategic Defence Acquisition Program to source components and systems from local manufacturers, assemble essential elements locally, and transfer skills and technologies to local partners while assisting local manufacturers to integrate into the global economy. Armscor is responsible for monitoring DIP performance as contractually agreed, while the Department of Trade and Industry monitors the separate civilian offset component known as National Industrial Participation (NIP). “We are very pleased that it is possible at the end of a long road to certify that the DIP obligations on the frigate platforms have been essentially completed, with just one subcontractor currently completing their obligation,” said Armscor CEO Sipho Thomo. “Together with TKMS, Armscor’s officials have ensured that South Africa has benefited directly through the creation of jobs, transfer of technologies and skills coming out of the contract to re-equip the South African Navy with state of the art stealth frigates.” Because they were exported to Germany for inclusion on the frigates, the locally manufactured and assembled components earned foreign currency, thereby reducing the net outflows related to the defence acquisition, and contributing to the stabilisation of South Africa’s balance of payments. Since their acquisition the four ships have been extremely busy both locally and overseas. In 2007 the frigates SAS AMATOLA and SAS MENDI visited Brazil and Gabon and the United Kingdom respectively. Operationally they have more than proven their worth in exercises – particularly with various foreign navies including the German and British Royal Navies. They also performed with credibility with warships 2 from various NATO navies in Exercise AMAZOLA in 2007. These exercises and other weapons testing trials have proven the ships and their weapons systems to be both effective and reliable. In July 2007 SAS AMATOLA passed one of the most rigorous operational testing trials in the world when she successfully completed the British Operational Sea Trials (BOST). This is a particularly noteworthy feat since the SA Navy last operated ‘big ships’ when the last of the Type 12 frigates were decommissioned over 20 years ago Further Information for Editors and Reporters: A Selection of the Main South African Companies Which Supplied Components for the SAN Frigates DCD Dorbyl with Bennett’s Engineering, Cape Town Manufacture of Ventilation Units, Mast Modules, Grid Pallet Systems MTU South Africa, Cape Town Assembly of Main Diesel Engines, Assembly of Diesel Generators, Technology Transfer Siemens South Africa, Pine Town Assembly of Electrical Plant, Integrated Platform Managment System, Technology Transfer Booyco Engineering, Germiston Manufacture of HVAC and Refigeration Equipment, Technology Transfer Hyflo South Africa, Cape Town Supply of Hydraulic Power Units and associated Subassemblies, Technology Transfer Landsystems Gear Ratio, Alberton Supply of Gearboxes, Technology Transfer Titanium Industries, Alberton Manufacture of Titanium Exhaustgas Systems, Technology Transfer About Armscor 3 In terms of the Armscor Act (Act 51 of 2003), Armscor is mandated to meet the defence materiel requirements of the Department of Defence (DOD) effectively, efficiently and economically, and to meet the defence technology, research and development, analysis and test and evaluation requirements of the Department of Defence, effectively, efficiently and economically. About ThyssenKrupp Marine Systems: ThyssenKrupp Marine Systems AG, with its head office in Hamburg, Germany, is part of ThyssenKrupp Technologies AG within the ThyssenKrupp Group. Since 2005 it has been the umbrella organisation for eight European shipyards – Blohm + Voss, Blohm + Voss Repair, HDW-Gaarden, Hellenic Shipyards, Howaldtswerke-Deutsche Werft, Kockums, Nobiskrug, Nordseewerke – and various marine engineering companies. With its technological competence, extensive portfolio and continuous innovations, the corporate group, employing around 8,700 staff, is one of the leading systems houses in European shipbuilding. ThyssenKrupp’s German Frigate Consortium, with its lead shipyard Blohm + Voss, has successfully completed four MEKO® A-200 SAN stealth frigates for the South African Navy. The SAS Amatola, SAS Isandlwana, SAS Spioenkop and SAS Mendi have successfully been commissioned into service by the navy. The fourth of the ships, the SAS Mendi, was commissioned in Port Elizabeth in March. The four are the most modern naval vessels worldwide through their exterior stealth design and combination of water jet propulsion system with a conventional diesel plant. Employing about 200 000 people worldwide, ThyssenKrupp holds excellent technology and market positions in its three main businesses, steel, capital goods, and services. It has a projected annual turnover for the current financial year of around € 50-billion (R 490-billion). Media Contacts: Armscor: Bertus Celliers 082 771 7893 4 [email protected] ThyssenKrupp Marine Systems: Stephen Laufer 083 444 2739 [email protected] 5 .