OREANDA-NEWS. BMI View: South Africa's defence budget will remain limited in the medium term, amid difficult economic conditions and as the government focuses spending on much-needed service delivery improvements rather than military development. Over the longer term, as the economy improves, defence spending will register gradual growth amid rising regional terrorist threats and domestic risks linked to crime and social unrest, necessitating investment into maintaining and improving the SANDF's capabilities. We expect exports from the well-developed South African defence industry to grow steadily over the next decade, as foreign engagement with local companies strengthens.

Recent Developments:

- For FY2016/17, the government has allocated ZAR47bn (USD3bn) for defence. A significant share of the defence budget will be directed towards border safeguarding, peacekeeping missions, the African Capacity for Immediate Response to Crises (ACIRC) and maritime operations, as well as Operation Thusano, under which the South African National Defence Force (SANDF)'s armoured vehicles are being maintained and upgraded. This will leave limited funding available for new procurement.

- South Africa's Paramount Group unveiled its new Mbombe 8 ICV at the Kazakhstan Defence Expo in early-June 2016.

- In May 2016, Paramount announced the formal launch of a military/weaponised version of the Advanced High-Performance Reconnaissance Light Aircraft (AHRLAC) - the Mwari. Boeing is developing an integrated mission system for the aircraft and has agreed to promote the AHRLAC on the global market.

- In January 2016, Denel Group's Mechem announced it had developed a new armoured and mineprotected recovery vehicle based on its Casspir NG armoured personnel carrier.

- Denel Dynamics reported completion of its flight test programme for the Seeker 400 UAV system in August 2015.

- Denel Land Systems' Badger IFV reached the stage of 'Product Baseline One' in February 2016.