Hidden away in a back street of an industrial area in Benoni, Gauteng, is a factory that is defying the South African defence industry’s lack of success in winning large contracts in foreign markets.

The armoured and mine-protected vehicles made by BAE Land Systems OMC are used in more than 40 countries.

On the production line at the factory are 18 nearly complete versions of its flagship mine-protected armoured personnel carrier, the RG-31, that will be shipped to the US before the plant closes for Christmas.

It is part of a rushed order of 148 vehicles placed by the US army this year, which has realised its Humvee gives inadequate protection in Iraq against bullets, mines, roadside bombs and improvised explosive devices.

The company is now talking to the US about a second order but will not reveal its possible size.

It is almost certain the US will use the vehicles in Iraq and Afghanistan.

“We don’t ask where they go,” says BAE Land Systems spokesman Tony Savides.

But the company has a letter from two US soldiers in Afghanistan praising the RG-31 for saving their lives in a mine blast.

With demands for its RG-31 from peacekeepers around the world, and from armed and police forces, the company will soon enlarge its factory.

It is also completing more than 100 vehicles for the Swedish army and a number of “public order” vehicles for the Italian police.

When the old South African Defence Force was fighting the South West Africa People’s Organisation and Angolan forces in Namibia and Angola, thousands of land mines were planted.

In large part due to the arms embargo, necessity became the mother of invention and SA became a world leader in the field of mine-protected and armoured vehicles, although now it faces far larger competitors in the US, Germany and Australia.

Engineering company Dorbyl is selling a minesweeping vehicle that looks similar to a grader to the US army, and a South African team has joined up with a US team to design a new protected vehicle for the Marines.

These successes in producing armoured military vehicles could offer a lesson for the country’s defence industry as a whole, and for the massively unprofitable state-owned defence contractor Denel in particular.

What distinguishes the Benoni factory is that it can win international contracts with small production volumes.

Over the past six years, BAE Land Systems OMC’s sales have grown fourfold and it expects sales of R800m this year and R1bn over the next few years.

Nearly 55% of current production is sold outside SA, although the South African National Defence Force remains the company’s largest customer, buying the Olifant tank, the Ratel infantry fighting vehicle and the Rooikat fighting vehicle.

Management declined to give indicators of profitability as the company is not listed and is a subsidiary of giant UK defence contractor BAE Systems, which has a 75% stake. A black empowerment consortium owns the rest.

The use of off-the-shelf components has been central to the company’s international success as this controls costs and allows for easy partnering with companies in customer countries — often a precondition for a sale.

For the RG-31 sale to the US, the firm partnered with US defence contractor General Dynamics. Its Italian partner was truck maker Iveco.

MD Johan Steyn attributes the company’s success to a focus on quality and customers, the ability to use staff on a range of projects and the extensive use of off-the-shelf components, including engines and gearboxes.

The company stresses its ability to support its products around the globe with a team of four mechanics, who, says Savides, “can be anywhere in 24 hours, with a suitcase and a toolbox”.

With acknowledgements to Jonathan Katzenellenbogen and the Business Day.