Minister maintains there is no problem with Denel cash reserves


Public Enterprises Minister Lynne Brown has denied the acquisition of BAE Systems Land Systems South Africa by Denel earlier this year exhausted the government-owned defence industry conglomerate’s cash reserves.

Replying to a question asked by opposition Democratic Alliance (DA) shadow public enterprises minister, Natasha Mazzone, the Minister indicated the acquisition of the Ekurhuleni-based company was funded separately from Denel’s cash reserves.
“The acquisition was fully financed by financial institutions and has had no impact on the cash reserves of Denel,” she said.

Since its acquisition by Denel, the name of the company has been changed to Denel Vehicle Systems (DVS). It continues to manufacture armoured vehicles mostly for international customers.

Brown said in her written response to Mazzone: “The company is of critical sovereign importance to the country from a national security point of view, as it is an Original Equipment Manufacturer (OEM) and continues to support and maintain all strategic military vehicles and some landward logistical equipment of the SA National Defence Force (SANDF). These include the Olifant Main Battle Tank (weapon platform and turret); Ratel; Rooikat platform; Samil logistic trucks; Casspir; Mamba; Hornet; G6 platform and Floatable Foldable Bridging Systems (FFB)”.

There was no impact on Denel’s net asset value because the new asset, now DVS, is valued at R855 million. A contra increase in liabilities by the loan funding of the asset to the value of R855 million means there is no impact on either the net asset value of cash reserves of Denel, Brown said in her written reply.
“Since its acquisition by Denel, what is now DVS has signed contracts to the value of about R1.5 billion, now in the execution phase. Within a period of less than six months since acquisition, DVS’s prospects have substantially increased from the business case Denel used to value the business. Denel is convinced the acquisition is complementary to its current business and makes good business sense.”

The Minister has not, as yet, responded to the suspension of three senior Denel executives late in September. Chief executive Riaz Saloojee, chief financial officer Fikile Mhlontlo and group company secretary Elizabeth Africa were placed on special leave with immediate effect after a Denel board meeting.