Denel working on R18 billion order book as turnaround strategy is implemented

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With its factories resuming production after a hiatus of several years, Denel is working on its R18 billion order book and targeting R30 billion in new business.

Last month the Department of Public Enterprises said that Denel has a ‘robust’ order book, which stands at R18.37 billion for 2023/24, while planned total sales are projected to be R2.08 billion, compared with R1.08 billion in the 2022/23 financial year.

Denel Chief Restructuring Officer Riaz Saloojee told defenceWeb that orders at the moment are not a problem, and that Denel has more than enough business and enough outstanding work to keep the company busy for the next two years. However, it will need to secure orders after that.

He said that Denel’s artillery and missile systems are still world leaders and Saloojee is confident Denel can get Badger infantry fighting vehicle (IFV) production back on track for the South African Army. Similarly, the company hopes to resume Project Kamas, for the supply of A-Darter air-to-air missiles to the South African Air Force. “We will have to work with industry here,” Saloojee said, as Denel will try and use private companies to assist with manufacture as many skilled personnel have left Denel Dynamics. This Saloojee believes, is “a new philosophy of doing business.”

Denel Integrated Systems Solutions (DISS) has made good progress on the Ground Based Air Defence System (GBADS) for the South African Army, and is waiting for the next phase of this. The entity is picking up its old strategy of taking system design skills and focussing on other areas, such as border security and infrastructure protection. It is talking to Transnet and Prasa, especially regarding the securing of coal terminals.

Denel in August last year finally settled outstanding salaries, using R992 million from the Denel Medical Benefit Trust to do so. In March this year, it received R1.8 billion in bailout funding from National Treasury, and is using this to resume production (another R1.5 billion is being withheld while Denel proceeds with the sale of remaining non-core assets as part of its turnaround plan, including property, Denel Gear Ratio, and its Hensoldt stake). Saloojee said that as production restarts, Denel hopes to become self-reliant and not dependent on further bailouts. He said the key fundamentals are in place, and Denel just needs to maintain its skills base.

Saloojee told defenceWeb that Denel had stopped the bleeding and is now aiming to grow the business. “Denel has absolutely turned a corner. We still have significant challenges especially regarding skills.”

The Department of Public Enterprises and National Treasury are supporting the company, which also has the full backing of the South African National Defence Force (SANDF), he said. The company still needs to restore trust with its suppliers, however. Denel is reliant on local suppliers and wants to tell them that it is able to work with them again.

“We should take a South Africa Incorporated approach,” Saloojee said, adding that he also wants to see support from entities like Armscor and the Council for Scientific and Industrial Research (CSIR).

Various delegations in recent weeks and months have been visiting Denel to see progress on its turnaround. In March, the Parliamentary Portfolio Committee on Defence conducted an oversight visit at Denel Aeronautics and in early April, the Military Command Council paid a visit to Denel to strengthen ties between Armscor, Denel, and the SANDF.

May was particularly busy, starting with a military attache delegation touring the company’s facilities on the fourth in what Denel said was its first annual attache day. On 12 May, Public Enterprise Deputy Minister Obed Bapela conducted an oversight visit at Denel Land Systems and Pretoria Metal Pressings to see turnaround activity first hand – that same day, Denel hosted 400 members of the SANDF, including senior members of the Military Command Council. Other delegations came from Kenya and Ghana, and were followed by members of the Nigerian Armed Forces Command and Staff College who visited Denel Land Systems. On 23 May Denel and Hensoldt South Africa welcomed the SA Naval Staff College Junior Staff and Warfare Course 92 (JSWC) at the Denel Irene Campus.

Denel officials said that many delegations have approached Denel without invitation from the company, indicating strong interest in developments at the State-Owned Entity. Denel also plans to host product demonstrations for potential clients and as it makes itself more visible, has been taking part in defence exhibitions around the world. It was at the September 2022 edition of Africa Aerospace and Defence, and IDEX in the UAE in February.

More recently a Denel delegation, along with Defence Minister Thandi Modise was in Brazil for LAAD in April. Company officials were due to attend the LIMA exhibition in Malaysia in May. If the company does not have a stand at exhibitions, it will at least send representatives, particularly in African markets. Saloojee said the significant opportunities in Africa were important for the development of the continent and its peace and stability.