I wish to take this opportunity to welcome members of the media, the Board of Denel (specifically the Nominations Committee), the Executive of Denel, especially the outgoing Group Chief Executive Officer, Mr Talib Sadik. The Chairman of Denel, Mr Zoli Kunene could not be with us today because of prior commitments.
Since its incorporation in 1992, Denel’s main purpose remains to provide the Department of Defence with cost-effective, tailor-made defence solutions. With the end of the so called border wars and subsequent shift of government priorities in 1994, Denel had to adapt. As a result, Denel had to undergo numerous restructuring exercises; all aimed at ensuring that the company was no longer inward looking with one client, but also to become diversified and globally competitive. Some of the options taken at the time did not produce good results. For instance, the investments to establish ventures which did not draw from the technological base already at Denel proved disastrous. In 2005, Denel was technically insolvent and required support from the Shareholder.
The 2006 turnaround strategy has seen a noticeable reversal of the downward spiral in the fortunes of Denel. Since 2005, when posted a loss of R1.6 billion, Denel has steadily reduced its losses and recorded a R111 million profit in the 2010/11 financial year. The only other profit recorded since Denel’s formation was in 1997, when it reported R82 million. Denel Aerostructures remains a challenge to the entire Denel group as it continues to be the major contributor to Denel’s losses. The 28% improvement in the performance of DSA in the previous year was an encouraging sign that the company is beginning to turnaround, mainly due to the ongoing restructuring in the business. It is pleasing that Denel Aerostructures’ delivery on the Airbus A400M programme has been exemplary despite the financial challenges. I have been informed by the Department that there are profound developments with regard to the contract renegotiations with Airbus on the A400M work packages which point to a commercially sustainable Denel Aerostructures. Details of the contract renegotiations will be made available in due course once all the necessary amendments have been completed.
Government reaffirms its view that Denel is a strategic State Owned Company which supplies the Department of Defence with key strategic defence equipment and services, contributes towards the building of a dynamic defence related industrial cluster and acts as a catalyst for advanced manufacturing in the broader economy. Denel is a key supplier and custodian of several strategic national technologies such as artillery and guided weapons systems, munitions, aerostructures and military aircraft maintenance, repair and overhaul (MRO) support to to our country’s security forces. As a global trading company with nine entities and three associate companies, Denel is a key player in the development of South Africa’s advanced manufacturing, industrial and technology base. As a major employer of engineering talent, Denel facilitates the enhancement of the national technology and knowledge base, thus contributing significantly to development of intellectual property and the country’s human capital development as envisaged in the New Growth Path.
I wish to take this opportunity to acknowledge the sterling work done by the outgoing Group Chief Executive Officer of Denel, Mr Talib Sadik. Talib has been GCEO since October 1, 2008, after having served as Group Finance Officer from 2006 and as acting GCEO from June 1, 2008. Talib departs at the end of his contract to pursue other opportuinties. In essence, Talib epitomises the spirit of resilience that has seen Denel weathering difficult and uncertain times where hard mission critical decisions had to be taken. I want to say to Talib – you can be proud of your achievements. You are leaving behind a significantly different company that is stronger in many ways than it was when you took up the position of GCEO. Yours is a proud legacy of commitment to Denel and its future.
Congratulations to Denel on the following achievements:
The completion and delivery of the five (5) deployable Rooivalk combat support aircraft. This was a significant achievement in the twenty five (25) year history of the programme.
DSA for consistently achieving all technical milestones and on time delivery on your A400M obligations, despite the structural challenges facing the company.
A successful completion of the development phase of the Hoefyster infantry combat vehicle programme.
The progress in the A-Darter missile programme in collaboration with Brazil is highly commendable.
The two significant export contracts in the Middle East and Far East signed recently. This is proof that the capabilities at Denel are world class.
We now have an opportunity to leverage the progress made up to this point as effectively as possible. Our very best wishes are with Talib as he embarks on this new phase of his life. The platform is well set for his successor to take ownership over the next wave of moving Denel to long term viability and sustainability.
Today we are announcing a change in the executive leadership team at Denel. Riaaz Saloojee is joining as the Group Chief Executive Officer of Denel. He succeeds the current GCEO Mr.Talib Sadik, whose contract comes to an end on 31 December 2011. As a consequence of his appointment, Mr. Saloojee will also become an ex officio member of the Denel Board of Directors for the duration of his contract as GCEO.
Our search for a new leader to lead Denel to sustained success has been focused and thorough. We wanted a strong individual with the acumen to drive the state company’s renewal to be successfully accelerated. The Board considered the criteria, qualifications and required profile of the Group Chief Executive Officer taking into account the objectives of Denel, its challenges and its strategic role as a key strategic defence equipment and services to the South African National Defence Force, contributor towards the building of a dynamic defence related industrial cluster and catalyst for advanced manufacturing in the broader South African economy. After a thorough search by the Board, we narrowed in on Riaz. He came to our attention because of his strong execution skills, his proven ability to lead top performing teams and his track record in driving shareholder value.
Riaz has the right industry experience and leadership skills to take Denel to the next level, building on the solid foundation and momentum achieved by the Denel team under the leadership of Mr Talib Sadik. The Board and I have the confidence that Mr Riaz Saloojee’s experience and expertise will assist Denel to get full traction in its financial recovery and operational performance to secure long term viability. Mr Riaz Saloojee has extensive senior management experience. I have no doubt that Riaz will be a good organisational fit, and will bring enthusiasm, passion, people skills and most importantly a clearly demonstrated understanding and appreciation of how Denel fits within Government’s developmental agenda.
His defence industry experience and understanding of the complex array of stakeholders within which Denel operates are some of the critical attributes that make us even more confident about our choice. He is very knowledgeable about strategic trade-offs in the defence industry and has experience in implementing turnaround strategies. He also understands the geo-political drivers of State Owned Companies and their role in the economic development of South Africa.
I wish to assure Mr Saloojee and the entire Board that the Department and I stand ready to assist in any way we can to ensure that Denel’s long term growth and sustainability is attained.
I thank you.
Ministry of Public Enterprises
30 November 2011