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Denel Land Systems, a subsidiary of Denel (Pty) Ltd, has been awarded an R8 billion contract by Armscor to develop the South African Army's new generation infantry combat vehicle.

The vehicle will replace the old Ratel ICV which has been around for about 30 years, said Denel's Group CEO, Shaun Liebenberg.

Mr Liebenberg was addressing the media in Parliament on Thursday, shortly after Minister of Public Enterprises, Alec Erwin's budget vote.

The multi-billion Rand contract, for about 270 infantry combat vehicles (ICV) for the SANDF, was three years in the making and signified "a tremendous boost to local industry and the South African economy in general," said Mr Liebenberg.

The tender was open internationally but ultimately Denel was the only one that bid for it.

The contract, Project Hoefyster, is arguably the largest contract Denel has landed in its 16-year history, he said.

Denel is the prime contractor in the programme with South African companies delivering more than 70 percent of the total value of the contract, and companies abroad delivering the remainder.

Armscor will be placing phased orders on Denel Land Systems (DLS) over a 10-year period as milestones are achieved towards final delivery to the Army of five variants of the ICV system, namely Command, Mortar, Missile, Section and Fire Support vehicles.

Denel's proposal was based on a Finnish Patria platform with a turret designed by Denel Land Systems.

The turret will be the heart of the system.

According to Denel Land Systems, they are not off-the-shelf items. The future Command variant will be equipped with intricate network communications and battlefield awareness systems, while others carried a variety of weapons systems.

The CEO explained that the first phase would be the development phase and is to run over a three-year period. This will see 18 percent of the contract completed.

It would be six to seven years before the first vehicle would be off the production line, said Mr Liebenberg.

The light infantry vehicle, in its complete state, will be able to hold between five to 11 soldiers.

As prime contractor Denel will be required to manage a supply chain of local subcontractors, including Small, Micro and Medium Enterprises and Black Economic Empowerment companies.

All of these companies stand to have guaranteed business for the next 10 years, some with follow-on support work after delivery with the vehicles set to have a life span of about 25 years.

Denel as main contractor would involve numerous South African defence companies and subcontractors, like BAE Systems' South African subsidiary Land Systems OMC.

The actual vehicle will be locally built under a Patria license.

"The awarding of this contract is a clear example of very high level alignment to meet South Africa's defence needs," said Mr Liebenberg.

"Our Department of Public Enterprises and the Department of Defence, along with Armscor and the SANDF, all cooperated admirably to bring us to this point. But importantly, for Denel a new chapter has been written. This Armscor contract puts Denel Land Systems on the road to sustainability."

Denel's macro strategy for the turnaround of the company started some 19 months ago and has already shown very good progress.

Based on transformation and people, the five-pronged strategy calls for:

Securing "privileged access" for the local defence industry - not only Denel - to a minimum portion of defence spend by the Department of Defence; Partnering with state agencies to align planning and obtain "political support"; Focus on growing commercial viable businesses in Denel; Secure equity partners with major global and local industry players; and Raise capabilities and productivity to world-class levels.

Project Hoefyster signifies a significant acquisition programme that essentially underwrites all the pillars of Denel's macro strategy.

"I foresee tremendous opportunities and further spin-offs to be realized through this contract, mainly for young technicians and engineering students who wish to make a career in the defence-related industry.

"This contract will contribute immensely to skills development and training, which are very much part of the Deputy President's Joint Initiative for Priority Skills Acquisition (JIPSA) programme," Liebenberg concluded.