Petrodollars boost African arms buying

Jan. 3, 2011 at 12:45 PM   |   0 comments

LUANDA, Angola, Jan. 3 (UPI) -- Defense spending in Africa has increased significantly over the last few years, largely because the continent's key oil producers have scored heavy economic gains as crude prices have risen.

An annual review of the African defense market by Forecast International says that "this trend is unsustainable over the long term and growth in the African defense market is expected to slow."

Shaun McDougall, author of the report by the Connecticut-based consultancy that provides market intelligence on the defense and aerospace sectors, said that Africa's defense market had a compound growth rate of 13 percent in 2005-09.

He predicted that would ease to an average of 3 percent through 2014. However, with oil prices hitting $90 a barrel once more that may not be the case.

West Africa in particular is fast becoming one of the hottest oil zones in the world while there have been big strikes in East Africa as well.

This is providing sizeable export boosts for the established oil producers like Angola and Nigeria. But it's also transforming long-impoverished states like Equatorial Guinea, the Democratic Republic of Congo, Uganda and Kenya into significant producers.

This is likely to impact on the defense sector in a continent that is gripped by a dozen wars and insurgencies and a swathe of political crises that are likely to trigger conflict.

The surge in oil revenue "has provided an opportunity for African governments to support much-needed military acquisition and improvement programs, resulting in defense spending growth that has significantly outpaced that of non-petrostates," the survey said.

Apart from the continent's major oil producers, such as Angola, Algeria, Libya and Sudan, the Forecast International review observed that Morocco and South Africa, which has long had its own defense industries, are among the continent's primary spenders.

"Morocco's defense budget doubled in size between 2005 and 2009," McDougall said.

"This development comes as the government supports a series of new arms acquisitions that will allow the country to maintain a balance of power with neighboring Algeria.

"South Africa also remains a focal point of in the African arms market, though its spending habits have been far more stable than those of the aforementioned countries."

The northern tier of African states, particularly Algeria, the regional military heavyweight, have eclipsed South Africa, once sub-Saharan Africa's dominant military power, as the continent's most active, and thus most lucrative, arms market.

The global economic slump has affected many African economies, and cash-rich China has made major economic inroads on the continent.

It has yet to make any arms exports of any note but these may come in time, possibly as part of barter deals for access to oil and other resources that Beijing needs to fuel its expanding economy.

"The strategic importance of sub-Saharan Africa is rising gradually," the International Institute for Strategic Studies in London reported in its annual Military Balance.

"Its oil and gas reserves, though insufficient to dislodge broad dependence on Middle East supplies, are substantial; enough to warrant global concern about potential sources of insecurity or inaccessibility, which include the activities of militia groups … and competing major-power customers."

In recent years, Algeria and Morocco have leveraged economic gains to buy new aircraft and warships.

Algiers is expected to decide shortly on the purchase of three or four multi-role frigates, with the FREMM vessel built by DCNS of France a frontrunner. The naval deal is expected to be worth around $11.6 billion.

The Moroccan navy ordered three 2,300-ton multi-mission frigates worth $875 million from Schelde Naval Shipbuilding of the Netherlands in 2008, with deliveries start this year. Morocco is also due to receive a FREMM multi-role frigate built by DCNS.

Russia has made several major sales to North African states, particularly Algeria and Libya, which were arms clients for Moscow during the Cold War. Both are reported to be set to buy Russians Pantsir S1 short-range air-defense systems.

The Moscow media reported in June that Algeria planned to sign a $1.2 billion deal with Russian state arms exporter Rosoboronexport for 16 Sukhoi Su-30MKA Flanker multi-role fighters.

"The African arms market is likely to remain dynamic in light of the region's widespread political, economic and security challenges," McDougall concluded.

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