R1.8 billion injection for Denel


Denel, in the form of chief executive Danie du Toit, welcomes government’s decision to recapitalise the defence and technology conglomerate saying it will contribute to “a comprehensive turnaround”.

On the opposite side, Democratic Alliance (DA) shadow public enterprises minister Natasha Mazzone maintains the R2.8 billion requested, with R1.8 billion granted in the first tranche and the balance to come in the 2020/21 financial year, is an unsustainable bail-out.

Du Toit said the recapitalisation comes on the “back of tangible progress with detailed plans to restructure the business, enter into strategic partnerships and find new markets for Denel’s high-technology products and solutions”. He added Denel was “grateful for the unwavering support received from government and National Treasury”. This showed a high level of confidence in Denel’s board and management.

“There is strong agreement that Denel is a strategic national asset adding value to the defence and security sectors as well as contributing to broader efforts in fields including technology, advanced manufacturing and skills development.

”The allocation forms part of a R2.8 billion request, with the additional billion to be considered in the 2020/21 budgetary process. The allocated portion will enable Denel to improve delivery performance and support to local and international customers.

“It will bring relief to our partners and supply chains affected by Denel’s liquidity issues in recent months,” Du Toit said on obvious reference to short payment of salaries and non- and late payment of suppliers and sub-contractors.

Mazzone maintains “throwing money at Denel won’t fix it – the arms manufacturer needs an overhaul”.

“It is no longer rational or feasible for government to have full ownership of Denel and it should be partially privatised. There are many defence companies in the world that would be interested in buying shares and government should explore these possibilities.

“Bail-outs provide temporary relief to state-owned entities, in this instance Denel, but cause permanent damage to the national fiscus. By privatising Denel, we will reduce the impact of government guarantees on the fiscus, promote competitiveness, improve efficiency and stimulate job creation,” she said.

Du Toit said Denel will work hard to achieve the conditions of the recapitalisation.

“Continued careful management of the supplier base, on-time and on-budget execution of projects is critical in the next 12 months. Denel remains aligned with the shareholder’s expectations it disposes of non-core assets on an urgent basis and establishes strategic equity partnerships across its various divisions,” du Toit said.