The 10-year contract was issued by Armscor, a weapon-producing conglomerate supported by the South African government.
The vehicles to be produced are the Badger New Generation Infantry Combat System, an 8x8 armored infantry combat vehicle.
Denel said initial development of the vehicle platform was carried out by the Finnish defense firm Patria under a 2007 sub-contract from Denel, but the manufacturing of the production units will be migrated to South Africa.
In addition to creating local jobs, the contract will result in spinoff business for small- and medium-sized enterprises in the country.
"This is the most significant defense contract signed with a South African company in at least the last 10 years, and demonstrates government and the SANDF's (South African National Defense Force) confidence in the ability of the local industry to provide fron-tline equipment," said Denel Group Chief Executive Riaz Saloojee.