Before the Second World War South Africa had a viable indigenous defence industry. During the nineteenth century there were three generations of the Botha family in Cape Town who were renowned gunsmiths, and during the First Anglo-Boer War of 1880-81 Marthinus Ras manufactured three artillery pieces for the Boer forces. During the Second Anglo-Boer War (1899 -1902) damaged Boer artillery pieces were repaired in the workshops of the Zuid-Afrikaanse Spoorwegmaatschappij.

During the Second World War (1939 - 1945) more advanced weaponry and equipment were manufactured locally by South African companies under the auspices of Dr HJ van der Bijl, the Director-General of War Supplies. However, this was for the duration of the War. In October 1948 an Advisory Committee on Union Defence Force Equipment Requirements was appointed. This date may therefore be regarded as the beginning of the Armaments Corporation of South Africa (Armscor) as it is known today.

With the change of government in 1994, government spending priorities changed from defence to social upliftment, and by the end of 1997 the defence budget had been reduced to about 1.6% of the gross domestic product. In anticipation of these changes, Armscor drew up a three-point plan, which included converting the defence industry from a manufacturer of military products only to a manufacturer of civilian products as well. As the Act in terms of which Armscor had been set up prohibited it or any of its subsidiaries from manufacturing civilian products of competing with the private sector, this plan resulted in the splitting of Armscor into two separate entities. On 1 April 1992 a new company, Denel (Pty) Ltd, was established under the Minister of Public Enterprises.

Armscor has since focussed its energies towards programme management and acquisition, whilst Denel is a major supplier of manufactured products and systems.