Denel going back to court for legal ruling on Denel Asia joint venture

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State-owned defence industry conglomerate Denel has applied to the North Gauteng High Court for an order declaring it obtained approval to form a joint venture with VR Laser Asia which resulted in the establishment of Denel Asia.

In spite of the company’s numerous attempts to work with National Treasury to explain the legal processes followed in establishing the Denel Asia joint venture, this matter remains unresolved and continues to unfairly cast doubt on Denel’s reputation and governance regime, a statement said.
“We have always maintained and still maintain Denel Asia was duly established after following and complying with all the relevant prescripts of the Public Finance Management Act (PFMA). We acted lawfully and in accordance, and compliance, with the provisions of sections 51(1)(g), 54(2)(b) and 54(3) of the Act in concluding and forming the joint venture agreement,” Denel Acting Group Chief Executive Officer, Zwelakhe Ntshepe, is quoted as saying in the statement.

The doubts that have been cast over Denel Asia’s legal standing have led to negative perceptions about Denel from various stakeholders, clients and potential clients which has impeded the company’s ability to do business effectively.
“The Asian-Pacific region is an extremely important region for Denel to expand its business and find new markets for our world-class products, especially in the fields of artillery, armoured vehicles, missiles and unmanned aerial vehicles,” Ntshepe said.

Research shows that by 2018 Asia-Pacific nations will command more than half of global defence procurement outside of the United States and two-thirds of non-US defence markets.
“We need a firm foothold in this region and the establishment of Denel Asia will give us a strong presence and the ability to pursue desperately needed opportunities in that region,” the acting chief executive said. As a result of the unresolved legal standing of the company, Denel has missed out on what the statement terms “a number of lucrative business opportunities”.

Denel Asia will focus its marketing attention in the Asian region as most countries there have announced intent to embark on major new defence acquisitions and grow research and development budgets.

Denel has several equity partnerships, joint ventures and co-operation agreements with companies in the global defence industry. All these were established following the same process used to establish Denel Asia. Denel’s partnerships give the company the ability to penetrate new markets which are important for the company’s future success.
“Denel Asia is a bold step into the future for Denel. It will grow our reputation in the global defence industry and enable us to penetrate new markets in a rapidly growing region,” Ntshepe said.

Denel’s founding affidavit, which cites the Minister of Finance and the National Treasury as the first and second respondents respectively, was lodged with the High Court in Pretoria On Friday, March 24.