S.Africa Risks $1.7B Arms Sales to Saudi, Arab States for Invoking End-User Clause

South Africa has $1.7 billion worth of sales at stake after suspending defence exports to the Arab states, including Saudi Arabia and the United Arab Emirates (UAE) for allegedly violating end-user agreements that restricts transfer of weapons to third parties and also allow for inspection of the recipient's facilities.

"We've got one clause that's disabling us from exporting 25 billion rand ($1.7 billion) worth of value today, right now," Simphiwe Hamilton, the head of Aerospace, Maritime and Defence Industries Association of South Africa (AMD), was quoted as saying by Reuters on Friday.

The country’s rule book prohibits foreign customers from transferring weapons to third parties, and allows South African officials to inspect their facilities to verify compliance. In this case, the gulf nations purportedly dispatched arms for use in the Yemen war.

Saudi Arabia and the UAE account for lion’s share of at least a third of South Africa’s arms exports.

"The countries have rejected the inspections which they consider a violation of their sovereignty," sources said.

Oman and Algeria have also refused inspections and seen their imports from South Africa blocked, the industry officials added.

"The authorities considered criteria including human rights, regional conflict, risk of diversion, United Nations Security Council (UNSC) resolutions and national interest when evaluating applications for export permits," said Ezra Jele, South Africa's director for conventional arms control in the defence ministry.

The industry body estimates the export blocks put an additional 50-60 billion rand ($3.4-4 billion) in future business at risk and could cause the loss of up to 9,000 jobs at defence firms and supporting industries.

Officials at major South African defence groups Denel and Rheinmetall Denel Munition (RDM) said the dispute was holding up their exports, as did a third big defence company which asked not to be named. RDM said some of its exports to the Middle East had not been approved since March.