Charges to be laid against Public Enterprises Minister over Denel Asia joint venture

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The Public Protector report “State of Capture” indicated Denel will only come under the microscope in the next phase of the investigation but the opposition Democratic Alliance (DA) party is not waiting and will lay charges against, among others, Public Enterprises Minister Lynne Brown.

Additionally, DA leader Mmusi Maimane said the party is also calling for her immediate resignation. This is because of the part she allegedly played in allowing mismanagement and apparent “capture” of some State Owned Entities including Denel, Eskom and SAA by the Gupta family.

Maimane said criminal charges would be laid in terms of the Public Finance Management Act and the Prevention and Combatting of Corruption Act.

Denel and its joint venture with VR Laser, a company linked to the Gupta family, and the establishment of the Denel Asia joint venture based in Hong Kong formed part of Madonsela’s investigations into state capture. She also investigated aspects of Eskom’s dealings with Gupta connected companies as well as allegations that a now retired MP (Vytjie Mentor) would be rewarded with the Ministry of Public Enterprises for getting national carrier SAA to stop flights to India allowing Gupta-connected operators on to the route.

Maimane said in a statement there have to be consequences for South Africa being “governed by a mafia – a criminal syndicate so deeply interlinked with private crony interests it is no longer possible to distinguish between the two”.

The consequences include criminal charges being laid against President Jacob Zuma, Eskom senior management, the Minister of Mineral Resources (Mosebenzi Zwane) as well as the Gupta family and Zuma’s son, Duduzane.

In her “State of Capture” report Madonsela, who relinquished her position last month, recommends a commission of enquiry as the next phase of a national investigation in state capture. She wants the commission headed by a judge chosen by chief Justice Mogoeng Mogoeng “who shall provide one name to the President”.

The Denel board earlier this year pointed out it had followed all the necessary prescripts and regulations when setting up the Denel Asia joint venture, but National Treasury disagreed. Minister Brown has yet to respond publicly to this issue as well as a Denel board report on the suspension of three senior employees, including former chief executive, Riaz Saloojee, whose contract was subsequently not renewed.

In the latest Denel annual report, Denel board chairman Lugisani Daniel Mantsha wrote that “In growing Denel’s order book and in view of the potential opportunities presented by the Asian market, the board approved the establishment of a company in Asia through a strategic partnership with VR Laser Asia, called Denel Asia LLC”.
“Subsequent to finalising due approval processes, this company was established in Hong Kong [on 29 January 2016].”
“This partnership brings access to markets in a region where Denel had been blacklisted for more than a decade, as well as the ever so important funding for business development activities.”

Acting chief executive Zwelakhe Ntshepe in his group chief executive officer’s report writes: “The Asia/Pacific market is the fastest growing outside the United States with defence industry experts estimating half of future global defence sales will come from Asia/Pacific markets”.
“In the 2015/16 financial year Denel’s export revenue accounted for 58% (2014/15 52%) of its total revenue with the primary markets emanating from Asia/Pacific, Europe, Middle East and South America.
“Within this region Denel is positioning itself for major programmes in India. There are a number of opportunities Denel Asia will be pursuing in this market, mainly in the artillery domain.”

Denel Asia will focus its marketing attention on countries such as India, Singapore, Cambodia, Indonesia, Pakistan, Vietnam and the Philippines, which have all announced their intentions to embark on major new defence acquisitions and grow their research and development budgets in the next four years.

The Denel Asia partnership’s existence is also acknowledged as one of seven strategic equity partnerships listed in the report directly following an organisational structure organogram.

The partnerships are with Airbus Defence and space, International Golden Group, Rheinmetall Defence, Pamodzi, Safran, Tawazun and VR Laser Asia Ltd.



The Denel board issued a statement earlier this year intimating that National Treasury had overstepped the mark when it said the state-owned defence industry group had not complied with all legal prescriptions in the creation of Denel Asia. It has been reported that Minister Brown has prohibited Denel Asia from trading until such time as the dispute regarding its establishment has resolved.