The Democratic Alliance (DA), in the form of its shadow public enterprises minister, has had enough of “repetitions of turnaround strategies and plans trotted out ad nauseam for State-owned enterprises” and plans to meet Denel’s interim chief executive to establish what is being done.
Talib Sadik, a former chief executive of the now beleaguered defence and technology conglomerate, was last week named as interim chief executive following the departure of Danie du Toit.
“He is reportedly working with the board on a turnaround strategy for the entity. This cannot be a repetition of plans trotted out by successive state-owned entities (SOE), to no particular positive consequence or impact,” Ghaleb Cachalia said in a statement.
“Denel is in dire straits and like most SOEs appears unable to survive without government bailouts which will not be forthcoming. Even if it wanted to, the Finance Ministry says it cannot amend Denel bailout terms before the October budget.
“The embattled entity needs to pay outstanding salaries and honour pension fund obligations. To add insult to injury, Denel failed to provide a guarantee for a R4.5 billion contract to supply the Egyptian navy with surface-to-air missiles, resulting in cancellation.
“The harm done to Denel’s reputation by this cancellation is considerable and will affect future contracts necessary for the entity’s survival.
“Denel was a more than viable company in the State’s collection of public enterprises, providing useful revenues and cutting-edge intellectual property and technology in developing complex navigation systems and integrated air defence solutions.
“It is becoming increasingly clear in the absence of yet another bailout, the loss of contracts, delays in delivery of Project Hoefyster (delayed by four years due to inability to perform), salary backlogs and outstanding pension fund obligations and poaching of engineering skills by parties in the Middle East, the writing is on the wall for Denel.
“Government needs to embrace a radical restructuring of the country’s defence industry along with aspects of privatisation and partnerships that may provide wherewithal for the survival of an important industry,” he said.
He recommends Denel should engage Armscor whose mission is “to become the premier defence technology and acquisition service provider for the South African Government and its allies on the African continent and in the world” to investigate opportunities. This should include economies of scale and efficiencies impacting international competition, investment in research and development as well as diversification.
“The DA looks forward to a fruitful engagement with Denel leadership that will bring about urgent reforms to restructure the state-owned defence industrial group. A return to profitability requires an open mind to privatisation and partnerships for survival of an important industry.
“We need to put a lid on the misuse of SOEs like Denel for political gain. The country’s patience is wearing painfully thin – as is its money,” he said.