Geopolitics puts SA’s private space industry at risk

SA hosts one of the world’s most advanced private space industries, with a small cluster of specialist companies competing globally in the manufacture and supply of satellite payloads, control systems, telemetry receivers and power systems.

Particularly impressive is how the sector has achieved this mostly on its own, with investors and the public sector only recently recognising the potential of space to drive commercial returns, economic growth and social development.

Today, the industry is on track to generate close to R1bn in annual export revenue. But this success is now under pressure as geopolitics creates a more uncertain and divided international trade environment.

Almost all of SA’s space exports go to the US and Europe, markets that have been the backbone of the industry’s growth, providing the scale and stability needed to reach production efficiencies.

Geopolitical tensions threaten growth

Though SA promotes itself as nonaligned, its close ties with China, Russia and Iran — along with its Brics membership and sensitive domestic issues — are prompting Washington to rethink its relationships with Pretoria. The most visible manifestation is the new 30% tariff on SA exports, including space components.

Industry executives at this year’s National Space Conference noted that while the tariffs would not cripple the sector, they would slow it down. Military sales are exempt but civilian exports are not — and that could deter some customers. For SA suppliers that have reached scale and efficiency, this represents a real handbrake.

Competitive advantages under pressure

By all accounts, low manufacturing costs and a favourable exchange rate make SA components up to five times cheaper than those from direct competitors abroad. This gives the industry some breathing room, but tariffs threaten to erode that margin — and there is split consensus over whether US customers will switch to local suppliers, shoulder the higher costs or simply wait for trade regimes to improve.

The risk of sanctions

However, a bigger risk is if Washington adopts a bill to sanction SA — whether in a targeted or broader sense — which would do reputational damage and prohibit US companies from working with SA suppliers. That would hit both civilian and military exports and deliver a far harder blow to the sector.

Europe offers some opportunity. Nato and EU members are increasing their defence budgets, and while there is a commitment to working more closely with commercial suppliers most of this funding is flowing into “hard defence” — troops, combat systems and vehicles — rather than satellites or remote-sensing technologies. In any event, Europe may prefer local companies to reduce reliance on international supply chains.

There are also prospects in the Global South, with India, Brazil and other Brics nations investing heavily in space, though even put together this is a far smaller market. According to speakers at this year’s conference, Western hardliners are unlikely to work with SA companies that also serve their geopolitical rivals, leaving the industry caught between competing blocs.

Between these poles lies Africa, where an increasing number of governments are adopting space strategies and launching national satellite programmes. SA in particular has stressed the importance of collaboration and leveraging its AU membership to foster collective progress in space initiatives.

However, questions remain about whether the demand across the continent is sufficiently matched with the ability to pay — and at sufficient scale while weighed against competitors — to offset potential losses in global markets.

SA’s private space sector has proved  it can thrive against the odds. The next test is whether it can continue to grow and compete internationally while navigating a rapidly changing world.

• Birns is a director of Cape Town-based aerospace consultancy Plane Talking.

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