Denel’s fragile financial situation reason for Denel Asia joint venture not to go ahead – Finance Minister

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The “fragile financial situation” Denel is in has been given as the reason why finance Minister Malusi Gigaba opposes the Denel Asia joint venture.

The latest salvo in what has become a mini-barrage of media statements on the contested joint venture, which apparently involve a Gupta linked company, was fired by National Treasury. This came only days after a Denel statement in which the State-owned defence and technology conglomerate again defended the joint venture saying it would give access to the Asia/Pacific market.

Treasury’s latest word salvo “notes” media statements attributed to Denel as regards the Denel Asia joint venture and the holder of the national purse strings puts it on record that “Minister Gigaba held a meeting with Denel chairman Daniel Mantshe to discuss the joint venture”.

According to the Treasury statement “the Minister invited Denel to withdraw its litigation against National Treasury. The position of the Minister of Finance has not changed in this regard”.
“He (Gigaba) remains opposed to the transaction for reasons stated elaborately in the National Treasury affidavit to court.
“The matter is currently before the court and we would like to respect the process. We will, therefore, not be making any further comment until the matter has been finalised. We hope the other parties will also refrain from misleading public comments,” spokesman Mayihlome Tshwete said in what is seen as an obvious reference to the latest Denel statement on the joint venture.

In that statement Denel, taking note of media reports on the affidavit submitted to court by previous National Treasury director general Lungile Fuzile, said penetration of the Asia/Pacific market was “critical for any progressive global defence company”.
“The selection of a partner for this joint venture followed a rigorous process which started with two major defence businesses which unfortunately had already committed themselves with exclusive partnerships with other competing global defence businesses. VR Laser Asia’s proposition was found to be the next best opportunity given the financial commitment made risk free to Denel, demonstrable defence adjacent industry network as well as direct links to defence capabilities,” that statement said.

It also quoted Denel acting chief executive Zwelakhe Ntshepe as saying the financial commitment was “adequately embedded into the shareholders agreement with the necessary default clauses to deal with the unlikely event of the commitment not being fulfilled”.

Denel believes the Denel Asia joint venture, established late in January last year, after “following and complying with all the relevant prescripts of the Public finance Management Act (PFMA)” should go ahead. It also met with the sections relevant specifically to the establishment of a joint venture.

As far as can be ascertained no court date has yet been set for hearing arguments for and against the joint venture.