Denel has failed to deliver 40 Casspirs to the government of Chad after being handed a R100 million deposit two years ago for the armoured vehicles.
Chad signed a contract for the Casspirs around September 2017 with the state-owned arms company.
An audit committee was appointed in April 2018 and Denel launched an investigation into the contract between Denel and Chad when Denel had not achieved its contractual milestones, reports City Press.
Chairman of Denel’s audit committee and board, Talib Sadik, stated that Denel’s former CEO and CFO had led and concluded the negotiations, signed the contract without any authority and stripped the company of all its responsibilities.
Sadik, stated that, “The contract was an onerous one, meaning it was loss-making and also unrealistic timelines [were] associated with the delivery of the 40 Casspirs.”
The investigation into the contract by Denel’s audit committee found that Denel’s CFO and CEO, “…had acted with high levels of negligence” and contravened legislation.
Sadik, speaking to the SABC, went onto say that Denel’s audit committee has, “launched a case and given a statement to the South African Police Service (SAPS) and Hawks and are also pursuing civil action against the implicated individuals [Denel’s former CFO and CEO]”.
Chad has since cancelled the contract with Denel and is demanding its deposit be returned.
Sadik maintains that the intellectual property (IP) rights for the Casspir are owned by Denel and that VR Laser, a Gupta owned company, was a sub-contractor for the contract.
VR Laser was acquired by the Guptas and Salim Essa in 2013 and according to Sadik, some of the agreements entered into with VR Laser post-2018 were unlawful which Denel’s audit committee have investigated. “VR Laser do not own the IP around the Casspir vehicles, we [Denel] own it but being a sub-contractor they had access to the IP.”
Sadik stated that the failing of the contract was due to two key reasons. The first being that the contract was loss-making and that Denel’s CFO and CEO ignored the governing structures in place meaning that the division that would have been responsible for delivering the project was stripped of its functions, all authority went to Denel’s CFO and CEO and subsequently negotiated a contract that was against the policies of Denel, against the best interests of Denel and was not protecting the company’s assets. The second reason is that the division that would have been responsible for the contract only found out about it three months after it was signed, resulting in an inability to deliver on the contract’s milestones.
This failure of the unrealistic contract has occurred at a time when Denel are struggling with liquidity issues. Last month Denel had received a bailout of R1.8 billion and Treasury stated that the company would receive another billion rand next year.
The company is recovering from the effects of state capture and has only been able to pay 85% of its staff salaries.
Sadik confirmed that Chad threatened to report Denel and South Africa to the International Court of Justice however Denel and the government of Chad is in talks over returning the deposit of R100 million.