Moving Denel from Public Enterprises needs “entire government” participation

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Defence and Military Veterans Minister Thandi Modise made it clear she alone cannot move Denel from the control of its current government shareholder to her Department of Defence (DoD).

There is talk of moving shareholder control of the troubled defence and technology conglomerate from Minister Pravin Gordhan’s Department of Public Enterprises (DPE). Denel is still feeling the ill-effects of Gupta-backed grand corruption and poor management decisions by previous boards, and is restructuring with a view to eventual profitability.

Tackling the issue head-on, African National Congress (ANC) public representative Thabo Mmutle, who sits on both Parliamentary defence oversight committees, raised it with Modise by way of a Parliamentary question.

He asked her “what progress she has made in implementing the resolution to relocate Denel from the DPE to the DoD”. Her 11 April response reads – in part – relocation necessitates participation of “the entire government, especially DPE, under which it falls, as well as National Treasury (NT).

“The Ministry of Defence and Military Veterans (DoDMV) cannot execute this process on its own, they [presumably DPE and NT] must be satisfied there is due diligence prior to relocation” and “there will also be legal ramifications from the relocation”.

Modise further told Mmutle “deadlines cannot yet be defined because they are dependent on conditions”.

In his medium term budget policy statement (MTBPS) last October, Finance Minister Enoch Godongwana said: “Denel is allocated R3.4 billion to support recent progress made to stabilise the entity”.

The R3.4 billion will come to Irene, Centurion-headquartered Denel to implement a turnaround plan estimated to need R5.2 billion in total. This is being funded by R990 million from the Denel Medical Benefit Trust (DMBT) with R1.8 billion to come from the sale of non-core assets and along with government’s injection to put the restructured defence and technology conglomerate on the road back to profitability, albeit with a leaner workforce. Indications at that time were that around 30% of Denel’s reported 1 807 employees could be retrenched, according to the then newly named interim chief executive Mike Kgobe.

All told, 663 Denel employees could be retrenched in five categories. They are senior officials and managers, professionals, technicians and associate professionals, clerks and “crafts and related trades”.

In response to Godongwana’s largesse, Kgobe said it would enable Denel to “streamline the business and establish a base from which we can significantly grow our order book and access new revenue streams”.