Denel penalised

Denel, the state arsenal, says it faces penalties following from the cancellation of a contract awarded to it eight years ago. 
Its latest annual report the company says it entered into an export contract in July 2000 with a value of approximately €6.5 million.
“The programme has since encountered technical problems and has significantly fallen behind on its delivery schedule. A provision of R 26.7 million for the qualification, penalty costs and completion of the contract was raised.
“In addition, the debtor of R 2.5 million has been provided for in full. Subsequent to year-end [31 March], Denel was notified by the client of its intention to cancel the contract and impose penalties.
“At this stage the total exposure cannot be measured and a contingent liability has been disclosed in the financial statements.”
Denel business development senior executive Willie Pienaar would not yesterday comment on the details of the contract concerned other than saying it was “not a high-profile contract”.
That would exclude a series of agreements signed with Italian helicopter giant Agusta on 26 July 2000 related to the SA National Defence Force`s R47 billion Strategic Defence Package. The agreements, signed by then Denel deputy CEO Max Sisulu and Agusta chairman Amedeo Caporaletti, included a product supply agreement for the A109 Light Utility Helicopter (LUH) programme.
A further agreement for the license production and sale of the Agusta A109 LUH and Agusta A119 Koala helicopters was to follow. “The production under license of the A119 Koala will grant South Africa’s aerospace industry, and in particular Denel, additional benefits allowing it to enter the civil market in the long term,” Sisulu said at the time.
Nothing has been heard of the Koala programme for some time. The production of the A109 for the SA Air Force (Project Flange) has ended and Pienaar says the production line is now occupied with export work.