Cabinet names new Denel board

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Zoli Kunene is the new chairman of state arsenal Denel. He replaces Dr Sibusiso Sibisi who steps own after a six year tenure. The announcement was made at the two-weekly post-Cabinet briefing earlier today. Thirteen non-executive directors were also named.

They are: Mr BF Ngwenya, Mr G Badela, Mr NJ Motseki, Ms M Ntshikila, Ms S Sebotsa, Professor S Nkomo, Ms Z Mathenjwa, Mr M Msimang, Mr M Ratshimbilani, Ms B Paledi, Professor T Marwala and Ms M Janse van Rensburg. Mr GC Cruywagen was re-appointed. He was first appointed to the main Denel board in September 2008.

Kunene has been an independent non-executive director of the state group since October 2006. He is also chairman of Denel Dynamics and a non-executive director of Denel Saab Aerostructures. Kunene is in addition CE of Kunene Brothers Holdings, Kunene Industrial Holdings, Kunene Motor

Holdings and the Kunene Finance Company. He is a director of 3C Telecommunications, Cell C, CellSAF, Grintek Ewation, OB Investments, Virgin Mobile, and member of Corporate Forum SA.

He is further Honorary Colonel of 5 Signal Regiment, SA Army and past chairman of the South African Aerospace Maritime and Defence Industries Association (AMD) and past president of the Defence Industries Interest Group of SA (DIIGSA).

Minister of Public Enterprises Malusi Gigaba last month said Denel has made “some progress” since embarking on a turnaround strategy in 2005. But its solvency continues to pose serious challenges, with Denel Saab Aerostructures (DSA) being the major contributor to the entity’s losses.

DSA was to blame for a loss of R328 million of a total Denel Group loss of R246 million for the year to March 2010, Gigaba said in his annual budget vote. Denel answers to his ministry. Denel is expected to announce its loss for the annum to March 2011 later this year. “Clearly, the business is not sustainable in its current model. A more robust turnaround plan that pursues financial recovery and stability through improvements in its operational and financial performance needs to be developed to secure the company’s long term viability.”

Denel last posted a net profit in 2001 when it banked R24.1 million. The only other profit recorded since its formation in 1992 was in 1997, when it reported R81.5 million. Its worst loss was in 2006 when it posted a deficit of some R1.6 billion. A turn-around strategy was put in place that included government guarantees for debt raised commercially. This project has been mostly successful with the state arsenal in August posting an operating profit of R200 million for the year to March 31, 2010. But CE Talib Sadik last November complained of the debt and interest burden, when announcing the numbers.

At the end of March last year, debt stood at R1.9 billion and interest payments stood at R130 million. Sadik lamented Denel would have posted a R200 million profit but for the loss at DSA caused by delays with the Airbus A400M project and the interest payments due “in the absence of recapitalisation requested from the National Treasury.”

Gigaba says a “structured mechanism is required in order to effect the necessary alignment of Denel’s business plan with the requirements of the Department of Defence. Shrinking defence budgets have resulted in scaling back of certain procurement programmes, with lower economies of scale and increasing unit costs. There is a need to re-think Denel’s strategic direction going forward to ensure its financial sustainability.
“Denel will be expected to accelerate its efforts towards skills development and transformation. The company must generate skills across the full spectrum, ranging from artisan level to engineers and high-tech technologists,” Gigaba said. He did not elaborate what this meant. Neither did he comment on what is described as ongoing talks regarding the placement of Denel. Defence minister Lindiwe Sisulu in 2009 said she wanted Denel to fall under her department to facilitate better coordination.



Sadik has also announced he is leaving the company in September after a fiv year tenure as cief finance officer and then CE.