Denel–Gupta links to be investigated in second phase of State Capture Investigation

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Denel’s links with the Gupta family are to be investigated in the second phase of the State Capture inquiry that the Public Protector has said should be headed by a judge.

The former Public Protector, Thuli Madonsela, said that the state owned defence company’s links with Gupta-connected VR Laser as well as the establishment of Denel Asia, should form part of the next phase of the investigation.

Madonsela, whose term of office ended last month, left it up to the proposed judge-led inquiry to look into contracts between Denel and VR Laser Services.

Yesterday President Jacob Zuma’s lawyers dropped an attempt to halt the release of a long awaited report on the alleged role played by the Gupta family in influencing government. The report raised “serious concerns” about a range of actions including the influence of the Gupta’s in the selection of government ministers and the close links between Eskom and the family.

In the State Capture report released yesterday, Madonsela lists the allegations about Denel made in an article published in the 5 February 2016 article in the Mail and Guardian headlined “Guptas conquer state arms firm Denel”.

The Mail and Guardian reported on claims about the establishment of Denel Asia as a means for the Gupta’s to profit from the state owned company’s sales. It alleged that the joint venture with the Guptas had been concluded while Denel’s permanent Chief Executive, Chief Financial Officer, and Company Secretary had been suspended.

The Mail and Guardian reported that Hong Kong corporate records show that Denel Asia was founded in January with Denel holding of 51 percent and VR Laser Asia 49 percent. The Boksburg based VR Laser, a specialist steel cutter and processor, was bought by the Gupta’s two years ago.

Madonsela recommends in the report that the President appoint, “within 30 days, a commission of inquiry headed by a judged solely selected by the Chief Justice who shall provide one name to the President.”

This remedial action could be challenged by the President, but now that the State Capture report is public, it could well undermine President Jacob’s Zuma’s political standing if he were to do so.

Madonsela says the Commission of Inquiry should deliver its recommendations to the President within 180 days and tell Parliament within 14 days of the release of the commission’s report of his intentions.



She further says that the judge should be given power to appoint the staff of the commission of inquiry, that it be adequately resourced, and be given power of evidence collection. She said that a second phase of the investigation was required due to “time and resource limitations” in conducting the investigation. Madonsela says in the report that funds were released late and at R1.5 million they were inadequate to fund a full investigation. Speaking to Radio 702 yesterday she also pointed to problems in arranging times to interview many of those implicated in allegation about impropriety.