Fired Denel chief executive speaks about Denel Asia for the first time


While the apparently summarily dismissed Denel chief executive maintains his innocence regarding his involvement in a joint venture with a Gupta associated company, the opposition Democratic Alliance (DA) party has called for a meeting between all parties concerned for clarity on the State-owned defence industry conglomerate’s involvement.

Natasha Mazzone, the party’s shadow public enterprises minister, believes the answer lies in correspondence lodged as part of the Public Finance Management Act (PFMA) and has requested it. At the same time she has requested documents relating to PFMA compliance in the “dodgy” VR Laser/Denel joint venture that plans to set up a company, Denel Asia, in Hong Kong.

At the weekend Riaz Saloojee, the erstwhile chief executive of Denel who apparently found out about his dismissal shortly after returning from last year’s DSEI (Defence and Security International) exhibition in London, went public.

He told Afrikaans weekly Rapport he was called in by the then recently appointed new board soon after his return from London and told he was being suspended.
“It was Denel chairman Daniel Mantsha’s board who verbally told me on September 10 last year my contract will, without a doubt, be extended for another five years. Two weeks later he suspended us [Saloojee, chief financial officer Fikile Mhlontlo and group company secretary Elizabeth Africa].
“At that time I did not even know the new board members but they apparently knew enough about us to suspend us. They accused us of being belligerent and withholding information. They said ‘We will give you three month’s salary if you resign’.”

City Press reports that Denel’s new audit and risk committee in September accused him of 17 counts of serious misconduct relating to the R855 million acquisition of Land Systems South Africa from BAE Systems.

Saloojee said that at the time, they had only had one formal meeting with the board. He added that it was “inexplicable” replacing the entire board as only one original board member, Johannes Motseki, was retained.

Since the suspensions in September, only six weeks after the new Denel board was named by Public Enterprises Minister, Lynne Brown, speculation has revolved around their removal from work and the Denel Asia joint venture.

Saloojee also denied involvement in the Denel Asia joint venture. He is reported as saying: “I told the board we were still busy with a feasibility study to determine a strategy. There was no entity like Denel Asia on the table, much less any possible partners”.

Both Denel and Minister Brown denied this, saying the trio’s suspension was because the acquisition of BAE Land Systems Land Systems South Africa (LSSA) put Denel in a precarious position, financially. This allegation was denied by both Saloojee and former Denel chairman Martie Janse van Rensburg.

Current Denel chairman Daniel Mantsha last week said Saloojee “initiated” the decision to form Denel Asia and submitted a request to the board. Van Rensburg late last week claimed that it was Mantsha who raised the idea first, with Saloojee only recommending a thorough analysis to see if the venture was viable.

On behalf of the entire former Denel board with the exception of Johannes Motseke, van Rensburg disputed Mantsha’s claims that Saloojee was involved in reckless borrowing and damaging the liquidity of the company.

The Denel Asia joint venture appears to have put the new Denel board diametrically opposite National Treasury with public statements by both sides apportioning blame and accusations of acting without authorisation in terms of the PFMA being made.

It is this aspect of the issue that Mazzone wants to hone in on with her request for documentation and a meeting where National Treasury, Brown’s Ministry and Denel are all present.

She said “no concrete answers” were given to last week’s Public Enterprises Portfolio committee meeting regarding adherence or non-adherence to the PFMA.
“Denel representatives remained adamant that all necessary requirements had been adhered to and that Treasury had been derelict in its handling of this matter,” Mazzone said.

Last week Odwa Mhlwana, acting Denel Chief Financial Officer, told the Parliamentary Portfolio Committee on Public Enterprises that Denel submitted a pre-notification letter for the approval of Denel Asia to the Department of Public Enterprises (DPE) and National Treasury on October 29, 2015, and received approval, with conditions, the following month.

It then submitted an application in terms of the Public Finance Management Act (PFMA) to both Public Enterprises and Treasury on December 11, 2015. No response to this request has yet been received from Treasury. In terms of Section 54 (3) of the PFMA applicants may assume approval has been granted if no response is received within 30 days, Denel said, adding that it proceeded with the registration of Denel Asia in Hong Kong only after 47 days and 98 days after the first pre-notification was sent.

Mhlwana said the decision to suspend Saloojee as Group CEO as well as the Group CFO and Company Secretary relates to the funding model used for Denel’s acquisition of LSSA. “The Board is of the opinion that LSSA’s liquidity to service the loans were misrepresented and decided to suspend the executives to allow an unfettered investigation.”

Saloojee will this week head to the High Court in Pretoria to institute a bid challenging his firing, the Sunday Times reports.