Public Enterprises Minister Pravin Gordhan reportedly requested the indulgence of Johannesburg mayor Herman Mashaba not to liquidate Denel after it failed to repay a large loan.
The Democratic Alliance (DA) mayor who is at the helm of the coalition running South Africa’s economic hub, apparently threatened to liquidate Denel after it failed to repay a R290 million loan from the Johannesburg Metro Council two months ago, according to City Press.
The weekend paper reports the money was lent in the form of a “note paper”, a bond-like financial instrument, to Denel in 2012 through Gupta-linked financial advisory and investment company Regiments Capital, which falls under Regiments Fund Managers. The note was to mature in June but Denel could not honour it and repay the loan. This development saw Gordhan step in via a letter to Mashaba.
In it he informs the Johannesburg mayor a lifeline is under consideration for Denel, which is in financial difficulties.
The letter reads, in part: “An application for a government guarantee, aimed at providing interim support to the company, has already been considered by the minister of finance.
“In addition, consideration will be given to the need for appropriate funding for the company, but the earliest this could occur is at the medium-term budget policy statement in October 2018.
“I therefore request your indulgence in rolling over this maturity for a short period of time to be agreed by both parties to allow government and the board to implement the interventions.”
As a further indicator of the need to keep Denel a going concern, the Public Enterprises Minister points out “as a strategic arms manufacturer Denel fulfils a role of critical importance ensuring the country’s security. Denel has responsibility for preserving certain sovereign and strategic defence capabilities which, if lost, would threaten South Africa’s defence capability and consequently our sovereignty”.
City Press further quotes Gordhan as informing Mashaba that since 2016 Denel’s financial position has been deteriorating due to challenges including a weak board and management, project management failures and allegations of unabated deep corruption.
Steps being taken to put Denel back in the black include appointment of an experienced interim board, replacement of the chief executive officer, forensic investigations to eliminate corruption and revising “a corporate plan”, the newspaper reported.
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