Public Enterprises Minister Pravin Gordhan today announced the appointment of a new board at state owned company Denel, and pledged to turn the company around, without resorting to retrenchments.
Gordhan said the interim board is subject to confirmation during the next Cabinet meeting. Most of the old board had resigned by February this year, including the chairman, with only two original board members left.
He said the appointment of the new board is in line with President Cyril Ramaphosa’s 2018 State of the Nation Address, when he called for immediate action in a number of State Owned Companies that are experiencing “severe” governance and financial problems. Ramaphosa said “we will intervene decisively to stabilize and revitalise state owned enterprises. The recent action we have taken at Eskom to strengthen governance, root out corruption and restore its financial position is just the beginning.”
Gordhan said steps are being taken to strengthen governance, root out corruption and restore the financial position of SOCs; address structural challenges as they don’t have sufficient revenue to fund operations; change the way that boards are appointed so that people with appropriate expertise, experience and integrity serve in these vital positions; remove board members from any role in procurement; and review the funding models of SOCs – they cannot borrow their way out of their financial difficulties, Gordhan affirmed.
Denel has had a reasonably proud history, Gordhan said, and between 2010 and 2016 Denel experienced phenomenal growth, averaging over 15% per annum, with revenue growing from just over R3 billion to over R8 billion in 2016. The company was winning significant export contracts and the order book peaked at R30 billion.
Denel had good representation in the capital markets, but recently that reputation has been lost, Gordhan said, and the trust of the public and lenders has to be regained. Changing the board is the first step to regaining that trust.
“Denel was a victim of and participated in state capture,” Gordhan said, and pledged to reverse that. He said the company’s positive storyline has deteriorated significantly because of bad decisions. “The Denel Asia saga in 2016 deeply tarnished the Denel brand. The insistence by the previous Board to proceed with the venture, despite evidence showing it was a bad strategic move. Denel now faces the real threat of collapse unless far-reaching decisions are taken urgently.”
“We are opening a new chapter in Denel’s existence,” he said, and said there would be a three to six month transition period while the new board finds its feet.
Gordhan today visited Denel Dynamics and Denel Land Systems where he saw different products that he said are crucial to the South African National Defence Force and marketable internationally.
Gordhan also spent time with the five trade unions that represent Denel, “to open the line of communications” in the interest of greater transparency and commitment. Addressing rumours, he said he was not aware of any staff cuts at Denel. “The last thing we’d like to do is add to the unemployment problem.”
However, it has been reported that hundreds of Denel employees will be put on short time where they are employed for fewer days so they can be paid less and retrenchments avoided.
Gordhan also met with hundreds of suppliers who are struggling to get paid by Denel – they need to be taken care of in order for Denel to keep producing. Denel’s monthly debt to suppliers stands at R350 million.
Monhla Hlala, chairperson of the new board, said the next few months will be dedicated to finalising Denel’s financial statements and urged everyone to bear with the new board for a while. Gordhan said it must be seen whether money left Denel or not, and if so it must be followed and recovered.
The new members of the interim board of directors are:
Monhla Hlala – Chairperson of the board
Hlahla is a former CEO of ACSA. She has been Non-executive at Exxaro Resources Ltd. She has spent the larger part of her career in the infrastructure sector, starting in 1994 at the Development Bank of Southern Africa, which later seconded her to the municipal infrastructure investment unit. She was then appointed as Non-Executive Chair of Johannesburg Water utility and later as Managing Director of Airports Company South Africa.
Zoli Kunene
Founded Kunene Bros. Holdings (pty) Ltd. and serves as its Chief Executive Officer. Has served on the Board of Denel SOC Limited previously. Has served as the Chairman of Saab Grintek (Pty) Ltd. From 1980 to 1984, he served as legal unit co-ordinator for the Council of Unions of SA (CUSA), the forerunner of COSATU.
Prof Tshilidzi Marwala
Was appointed as the University of Johannesburg’s second Vice-Chancellor and Principal in 2017. Has been an Independent Non-Executive Director of EOH Holdings Limited since November 22, 2006. He served as Director of SITA (Pty) Ltd. He serves as Director of the State Information Technology Agency, Statistics South Africa, the National Advisory Council of Innovation and the South African Council of Natural Scientific Professions.
General TT Matanzima
General Matanzima is a career soldier and has served in various capacities in the SANDF, including Chief of Joint Operations and Chief of Human Resources. He was awarded with the Commander Class Medal and the Southern Cross Medal.
Gloria Serobe
Founding Member and Executive Director of WIPHOLD. Serobe serves as Chief Executive Officer of Wipcapital and serves on several Boards including Sasol Mining, Hans Merensky and Old Mutual Emerging Markets. Serobe has been the Chairman of Adcorp Holdings Limited since July 11, 2017.
Talib Sadiq
Mahomed Talib Sadik, CA (SA) has been Chief Financial Officer and Executive Director of Basil Read Limited since October 1, 2016. Sadik served as the Chief Financial Officer and Finance Director at Basil Read Holding Limited since October 1, 2016. He served as the Group Financial Director of Times Media Limited, De Beers Group Services and Denel SOC Ltd. He has been the Executive Director of Basil Read Holding Limited since October 1, 2016. He is a chartered accountant. He holds a B.Com from The University of KwaZulu-Natal.
Sue Rabkin
A former Special Advisor to the Minister of Defence. She has a distinguished, long-standing history as a political activist.
Dr Sibusiso Sibisi
Dr. Sibusiso Patrick Sibisi is head of Wits Business School (WBS) from January 2018. He served as the President and Chief Executive Officer of The Council for Scientific and Industrial Research. Sibisi served as the President and Chief executive officer of Council for Scientific and Industrial Research (CSIR) since 2002.
Cheryl Carolus
Carolus is Chairperson of Peotona Holdings, an investment holding company. She previously served as Chairperson of SAA, SANParks and CEO of SATOUR. She is a former South African High Commissioner to London.
Nonzukiso Siyotula
Nonzukiso Siyotula, has been Independent Non-Executive Director at Growthpoint Properties Ltd. since January 1, 2018. Siyotula served as the Chief Executive Officer of Thebe Capital of Thebe Investment Corporation (Pty) Ltd. from 2014 to 2016. Siyotula held various senior positions in Barclays Africa Group, Old Mutual Retail Mass, Royal Bafokeng Holdings and South African Breweries including Chief Financial Officer for Wealth Management and Chief Operating Officer for Africa Finance. Siyotula has professional experience in areas such as finance, corporate governance, strategy, restructuring, investment management, business development, sales and distribution.
Thami Magazi
Has been Acting Chief of Medium Business at Business Connexion Group Limited since 2016. Holds a Bachelor of Science in Business Administration and Masters in Business Administration. He holds Disney Institute Leadership Excellence Program, GIBS Executive Leadership Development Program, University of North Carolina Executive Development Program and Strategic Account Management Program.
Martin Mnisi
Qualified lawyer and Director at MNS – Mncedise Ndlovu & Sedumedi Inc. Former lecturer of business law and mercantile law at the University of Johannesburg. Was part of the advisory panel at the Department of Justice and Constitutional Development.
Gordhan stated that the immediate priorities for the new interim board will be to restore sound corporate governance; to review the effectiveness of the management team; to review major contracts (for instance to see if there are unsustainable terms); to review the company’s financial position with the view to creating sustainability; and to consult all stakeholders.
Denel remains an important part of the arms industry and is a partner to the defence force and Armscor, Gordhan said. “For government Denel is a strategic national asset – for national security and for technology- and economic development. Denel alone constitutes over 45% to the local defence industry and sources approximately 70% of input from local suppliers.
“One of the most important relationships for Denel is with the Department of Defence (DOD). We will take further steps to understand the DoD’s needs and be responsive to them. In the coming weeks I will be reviewing the composition of boards at other SOCs under the authority of the Department of Public Enterprises as well as the executive management teams to ensure that SOC’s are set on a new path.”
