Minister supports Denel turnaround plans

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It was evident on the sidelines of the Africa Aerospace and Defence (AAD) 2022 exhibition that Denel was getting strong support for its turnaround plans. Flanking Minister of Public Enterprises Pravin Gordhan at a briefing last week in Denel’s hospitality suite were some Denel board members, Armscor chairman Philip Dexter, and Transnet chief executive Portia Derby. Also present were numerous aviation and defence industry executives.

After Denel experienced corruption, state capture and malfeasance, the minister said he was pleased that Denel was in the phase of stabilising, sustaining, growing, and innovating. “In fact, this applies to the country as a whole, with most state-owned enterprises getting there.”

He referred specifically to Eskom, which he noted would look substantially different in the next couple of years. In Eskom’s generation business, partnerships similar to those Denel is building will be implemented. These will take the form of public-private partnerships, particularly in the renewable energy space with billions of rands worth of investments.

“Once this is implemented, around 2023 and 2024, thousands of megawatts will come onto the grid,” the minister affirmed.

He believed that entities like Denel, Armscor, the SANDF and the police services, are all important defenders of the nation’s sovereignty.

“It is critical that the new path Denel’s Board and Management have embarked upon, succeeds and is supported by us all, including the wider industry sector,” he stated. “You as industry also suffered under State Capture, because the business you used to get from Denel no longer came through.”

He emphasised that the manufacturing sector that has been shrinking worldwide, must be reactivated. For that to succeed, much more energy, support and sustenance are required for innovation, especially since Denel was known for innovation – as is also the case with industry in South Africa.

Addressing the industry executives present, he said “innovation keeps you ahead of the competition, it’s your ability to develop new products, to understand your markets, to make what your clients want, all of which determines if you are in the game or out of it.”

In closing, Gordhan mentioned how he interrogated all the Denel business sections at the show on how well they were performing and whether they would be generating the cash that is required to take the business forward.

“The industry has been through a rough time, but I hope we can reintroduce integrity, in Denel and the industry as a whole, because integrity is an important part of building a nation and business that can stand on its feet,” Gordhan concluded.

For his part, Mike Kgobe, acting Group Chief Executive Officer, said he was proud of Denel’s presence at Africa Aerospace and Defence 2022. “As much as Denel is in the process of rebuilding, Denel is back here at this, the most important aerospace, defence, and security show on the African continent.”

He noted that the Covid-19 pandemic, and resultant economic downturn, coupled with regional and global insecurities, have left a negative imprint on the local industry’s business. However, the South African aerospace and defence industry is renowned for its resilience to bounce back, to adapt and to innovate.

With a two decades long career in Denel’s aeronautics business, Kgobe said he was looking forward to contributing and rebuilding the business based on his institutional knowledge and experience.

“Denel is back, and is busy redefining its future,” he stated. “It might be in a different shape and in different structures, but the essence of Denel will remain. It is a valuable asset that plays a key role in the country’s sovereignty.”

He said the commitment and purpose have survived the ravages of State Capture as was laid bare at the judicial commission of enquiry. Yet, despite its fortunes that have declined, Denel is not at an end and will indeed thrive. His confidence is based on the quality of Denel’s products, its support structures, long-standing relationships and partnerships with customers and stakeholders, the quality of its personnel, and the strong support from stakeholders, the board and the shareholder as represented by the Minister of Public Enterprises.

“Some uncomfortable decisions will have to be made in the near future, which will be implemented to strengthen Denel into the future,” Kgobe stated.

Riaz Saloojee, Denel’s chief restructuring officer, repeated some of his remarks outlined at a recent media briefing on the comprehensive strategy for the Denel Group. He explained that he was brought on board three months ago to assist in rebuilding Denel.

He explained that a roadmap has been charted, which is focused on a streamlined and sustainable company with the ability to significantly grow its order pipeline and access new revenue streams.

“The question is whether Denel is relevant, and the answer is that its mandate is derived from among others the Defence White Paper, but fundamentally from its support of the SANDF,” he stated.

Denel’s prime role is supporting the South African National Defence Force (SANDF) to execute its constitutional mandate to safeguard the country’s citizens and territorial integrity. It is the custodian of key strategic capabilities of the SANDF. As an original equipment manufacturer (OEM) and maintenance repair (MRO) facility for numerous critical equipment systems Denel enables much of the SANDF’s combat capability.

He believes it was critical to effect a restructuring to retain strategic capabilities, particularly as the defence force needs Denel’s support as the custodian of critical capabilities both internally and externally.

He cited the United Nations (UN) peace support operations in the eastern Democratic Republic of Congo (DRC) in which South Africa is involved, and the SADC mission in northern Mozambique. Denel provides technical support of SANDF equipment, including during recent floods in KwaZulu-Natal, as well as the July unrest in that province.