South Africa's Paramount in talks to expand Egypt's home-grown arms industry

South African defence company Paramount Group is in discussions with the Egyptian government to expand the country's defence manufacturing capabilities and boost its position as an arms exporter to Africa. Paramount is seeking to set up a modernised defence industrial complex to produce advanced land, air and naval equipment, Ivor Ichikowitz, the group's chairman said.

"We're talking to the Egyptian government to try and understand their priorities in terms of invigorating the defence and aerospace industry," Mr Ichikowitz told The National. "The domestic market is sizeable as the country modernises, becomes more efficient and reduces its reliance on former Soviet legacy equipment."

Egypt is one of the biggest arms makers in the Arab world and Africa has a robust military industry dating back to the 1800s. The North African country produces battle tanks, heavy armoured vehicles, machine guns and ammunition, and rocket launchers, among other equipment, according to the Egyptian ministry of military production's website. Some are produced under United States and Russian licensing contracts. 

The closely-held defence company sees “big potential” for production, in partnership with the Egyptian government, of light, attack and reconnaissance aircraft and armoured vehicles as well as providing the technology for clearing landmines in the Sinai to free up large plots of land and ensure civilian safety.

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The response from the Egyptian government has been “positive” as it understands the need to consider a defence industrial complex that’s not reliant on US and Russian production licensing, Mr Ichikowitz said.

The North African country, which has an automotive industry that enables production of land forces equipment, has the capacity to boost its arms exports to the rest of the continent.

“Egypt has the potential to become one of our major export hubs to the rest of Africa, not for everything, but certainly for land forces equipment,” he said.

While it has some concerns about the country’s ability to finance long-term and large-scale defence production projects, Paramount offers financing solutions to support the governments it works with, which will be an option in Egypt.

“We have a financing arm that syndicates funding structures and allows us to lease equipment to provide sovereign lines of credit,” Mr Ichikowitz said.

The current period of relative political stability compared to the years after the 2011 revolution that toppled former President Hosni Mubarak has made this right time to look into the Egyptian market.

“There is light at the end of the Egyptian tunnel,” he said. “The first-mover advantage is a good thing. We look at Egypt with caution and optimism.”

Paramount, which says it's profitable and sees 15 to 20 per cent growth in annual sales, is focused on the Middle East as one of its main growth markets.

The company is in discussion with Saudi Arabia to set up a defence manufacturing plant in the kingdom, with tech-transfer and creation of jobs, as one of the world’s biggest buyer of arms seeks to build its nascent military production industry.

Paramount operates in 30 countries and has already set up facilities in Jordan and India.