Rheinmetall Denel Munition wins ‘triple-digit million-euro’ explosives contract

Rheinmetall Denel Munition (RDM) has won a triple-digit million-euro contract for an explosives factory in Hungary.

This contract comes immediately after RDM scored a deal to supply an unnamed Nato country with 155mm ammunition valued in the “mid three million digit Euro range”. In the latest deal, the Hungarian state is building an explosives plant to produce RDX (Research Department eXplosive), and in line with the deal, RDM will supply the necessary plant technology.

The contract specifies that a new plant will be built and operated by a joint venture consisting of Rheinmetall and N7 Holding, a state-owned Hungarian enterprise. The company said that the contract is worth a figure in the low three-digit million-euro range. Rheinmetall Denel Munition (Pty) Ltd (RDM) is jointly owned by Rheinmetall Waffe Munition GmbH of Germany and Denel (Pty) Ltd South Africa. Denel is a state-owned enterprise, with the South African government as the sole shareholder.

A Rheinmetall statement said: “Now that the planning phase is complete, the project will start in 2023, so production can begin by 2027.” The statement said the explosives produced in the new plant can be used for artillery, tank, and mortar ammunition, among other things. The contract covers the supply of plant engineering, technology, and process know-how as well as the associated documentation, training, and all activities necessary to achieve full-scale production.

Reacting to the news, Solidarity Union, which represents workers at RDM, appeared doubtful of the impact this deal would have on RDM locally. Solidarity’s defence and aerospace sector coordinator Derek Mans said: “We are to meet with RDM’s chief executive in Somerset West on January 18, where this and other matters, such as issues with export permits, will be discussed.” Mans argued that RDM is a multinational company with multiple offices in Europe and said that he assumed these would service the Hungary contract.

“What the impact on the South African outfit is remains to be seen. We however welcome it and some business will filter down to Africa.” He said the first order of business however would be to sort out the issue with the export permits. “RDM South Africa exports almost 90% of its business. There is currently a delay in issuing permits by NCAC under the chairmanship of Mondli Gungubele, Minister in the Presidency.” He said the union would write to the minister pleading for clarity and action.

Denel has over the last couple of years experienced corruption, state capture and malfeasance with revenue falling from a peak of R8.2bn in R2015/16 to under R2bn in 2021/22. Last year Chief Restructuring Officer Riaz Saloojee said: “The only way for Denel to support itself is through a deep restructuring and reduction of the cost base to affordable levels.”

He said a future Denel would be a streamlined and sustainable company with the ability to significantly grow its order pipeline and access new revenue streams.