Sisulu says Saudi deal with Denel will not happen

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International Relations and Cooperation Minister Lindiwe Sisulu has said there has been no decision to proceed with a Saudi Arabian investment in struggling state-owned arms conglomerate Denel while President Cyril Ramaphosa has said Denel is ripe for investment.

According to the Mail & Guardian, Sisulu is quoted as saying “There was an offer from Saudi to invest in Denel, not buy a stake. At some point we did consider it, but we did not come [to] any conclusion.”

She told the Mail & Guardian that no deal had been reached and Saudi’s “personal challenges” were a factor, causing discussions to end. “So it would be out of context to be debating something that has not taken root or [been] formalised, or is not a possibility right now,” she said.

Saudi Arabia recently approached South Africa about an equity stake or partnership deals with Denel, with Saudi Arabian Military Industries reportedly seeking to invest in the company, which this week posted a R1.7 billion operating loss for the 2017/18 financial year.

Denel has also attracted interest from the United Arab Emirates and Qatar.

On Thursday President Cyril Ramaphosa said Denel “ripe” for joint venture partnerships, but he hadn’t yet applied his mind to a bid for Denel by Saudi Arabia, or any of the other bids for the loss-making firm.
“It is one of those entities that is ripe for joint venture partnerships, where we would bring in an equity player with financial resources, new technology and so forth,” he told reporters in Johannesburg. “South Africa would obviously want to retain control.”
“There have been quite a lot of suitors, a number of countries and companies which are looking at Denel,” he said, adding that Denel has been going through quite a number of proposals from suitors.
“There are a variety of considerations which we need to take into account. Right now we haven’t really sat down to apply our minds on the Saudi bid, nor have we applied our mind on any of the bids in the air,” Ramaphosa said. “I’m not able to say definitively what the outcome of all this will be,” he is quoted by MoneyWeb as saying.

Denel said on Wednesday that it was working on a turnaround plan that would involve cost-cutting and exploring joint ventures after posting a loss driven by a steep fall in revenue, higher borrowing costs and foreign exchange losses.

It said its new board of directors, appointed by Ramaphosa in April, had appointed a team of forensic investigators to probe procurement irregularities and that it was working with law enforcement officials to root out corruption.

Denel also said new joint venture partnerships could be set up at a product and divisional level.

It had an order book of around 18 billion rand, despite its financial difficulties, Denel said.