Denel bailouts total R9 billion over four years

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Further evidence of the drain Denel is on the public purse comes from Public Enterprises Minister Pravin Gordhan replying to a Parliamentary question.

He told Democratic Alliance (DA) parliamentarian Farhat Essack, a member of the Public Enterprises Portfolio Committee (PEPC), the State-owned defence and technology conglomerate has not paid a dividend to its sole shareholder – the South African government – for the past five years.

On the opposite – debit – side of the ledger, Denel has been on the receiving end of close to R9 billion from Finance Minister Enoch Godongwana’s National Treasury (NT). The amounts given, according to the Department of Public Enterprises (DPE) response to Essack came from “information received from Denel”. They are R1.8 billion in 2019/20, R576 million in 2020/21, R3.07 billion in 2021/22 and R3.5 billion in 2022/23.

Denel, once pointed out by Gordhan as a major target of grand corruption, better known as “state capture” in South Africa, is working to re-establish itself as a reputable manufacturer and supplier of defence equipment and technology via a turnaround strategy. At the helm is Mike Kgobe, interim chief executive, and chief restructuring officer, Riaz Saloojee, removed as chief executive at the height of the grand corruption looting of State assets.

Last week the Department of Public Enterprises (DPE) noted Denel is considered a strategic national security and industrial asset, which led it to implement actions to strengthen the entity, improve its strategic focus and ensure it has the human resource capabilities to implement its turnaround plan.

In 2022/23 Denel submitted a turnaround plan with a “realistic business case and strategic objectives”, the DPE said. The latest R3.4 billion recapitalisation for Denel, announced in October last year, “allows Denel to fully implement its turnaround plan to ensure support to the Department of Defence (DoD) and specifically the SANDF in order to secure our country’s strategic defence and security of supply of defence capabilities.”

The Denel board has initiated an process to appoint a Group CEO (Chef Executive Officer) and CFO (Chief Financial Office) – positions which have been vacant for over two years.

While there is no demand from government, as sole shareholder in State-owned enterprises (SOEs) for return on investment (ROI), with client satisfaction as well as work and employment creation given high priority, the need for Denel to perform adequately was highlighted by SA National Defence Force (SANDF) Chief, General Rudzani Maphwanya.

He told an April medal parade at Air Force Base (AFB) Ysterplaat the national defence force “relies heavily” on Denel for its defence equipment needs.

Another take from his address at the Cape Town base was: “Denel is an original equipment manufacturer (OEM) and maintenance, repair, and overhaul (MRO) authority for numerous critical SANDF systems. Denel is mandated to support the SANDF by providing and maintaining defence equipment as a national security asset and thus Denel is crucial to the SANDF’s preparation and readiness for deployment, both internally and externally”.

In similar vein, following a Denel presentation to Parliament’s Joint Standing Committee on Defence (JSCD) in March, Denel and the SANDF were advised to meet and “thrash out concerns” over supporting sovereign and strategic defence capabilities.