Denel Saab Aerostructures (DSA) remains a loss-making challenge to Denel, the Department of Public Enterprises says. Addressing a Portfolio Committee on Public Enterprises on the future of DSA, department director-general Tshediso Matona, said Saab, which had owned 20% of DSA since 2007, exited the business last month.
Matona said that while talks to sell DSA to the Aerosud group were ongoing, the department was restructuring the business. Meanwhile, although DSA’s losses were not as high now as in 2008/9, it was still in the “red”. Losses in March 2009 amounted to R444 million, while in February 2011, losses stood at R259 million, the South African Press Association reports.
Denel this morning confirmed the development. “Denel confirms that the Swedish company, Saab, has decided to exercise its ‘put option’ with regards to its equity partnership in DSA. This effectively means that Saab has transferred its 20% equity shareholding to the Denel group. Saab retained an irrevocable right to ‘put’ (sell) their shares back to Denel between May 2010 and end March 2011. SAAB has indicated specific commercial reasons for exiting DSA.” Denel is now the 100% shareholder of DSA, the group said in a statement.
A spokeswoman said SAAB purchased the 20% stake when they entered the business and Denel repurchased the 20% stake for the same value on SAAB’s exercise of the “put option”, as prescribed by the shareholders agreement. “Unfortunately, we cannot disclose the actual amounts as the information is commercially privileged.” But the INet Bridge financial news service reported in June 2006 that Saab would provide an “investment of R66 million over the first two years, ongoing skills and technology transfers, as well as management and market access.”
“The business is still in a turnaround phase and that we are making steady progress towards meeting our goals”, Denel Group CE Talib Sadik said this morning. The holistic turnaround plan focuses on lean manufacturing principles and continuous improvement against international benchmarks. This is to ensure cost effective, quality and on-time delivery to customers. “We have made major strides with this programme, with key KPI’s achieved”, said Sadik.
The department’s acting deputy-director general for investment and portfolio management, Anthony Kamungoma, said restructuring was taking place because it could not simply work on the basis that Aerosud would buy DSA. “We don’t want to be in a situation where we put all our eggs in one basket. If the deal doesn’t come to execution then we’ll have to look at other methodologies to address the crisis.”
Aerosud, a private sector enterprise and the state-owned DSA produce components for the Airbus Military A400M. This, as a result of South Africa joining the A400M programme as a partner and ordering eight of the military transporters in December 2004, SAPA added. The order was cancelled in 2009, because of delays in the programme and alleged cost overruns. The move has raised questions about the future of local industrial participation in the A400M programme. The committee was told that Airbus had “expressed satisfaction with DSA’s performance against key milestones on the A400M programme”. However, “margins on all contracts remain under pressure and are currently unacceptable.”
The committee heard that as art of the turnaround, DSA’s staff has been cut to a present total of 397, including 25 engineers, 85 technical staff, 113 skilled artisans and 20 apprentices, the Business Report newspaper add.
Kamungoma said that these delays and cost overruns were also some of the reasons behind the crisis in which DSA found itself. Matona said the department would have a better idea on a way forward for DSA once the department of defence outlined its priorities, as these aircraft were for the defence force. “We have been asked by the joint defence committee to come back next week. The minister of defence will be tabling a strategic document… It would inform these [DSA’s] decisions. We need to know the defence department’s plans.”