Denel Asia to be liquidated

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Denel’s slow extrication from the mire of state capture continues with the liquidation of Denel Asia another step on the road to recovery.

Parliament heard this week from a Denel delegation that provisional liquidation of Denel Asia was approved. Denel Asia was a joint venture between Denel and Gupta-linked VR Laser.

While there was no official word from Denel at the time of publication, indications are the application for liquidation is part of the overall Denel turnaround strategy approved in February this year. At the time, Public Enterprises Minister Pravin Gordhan said the strategy included disposing of non-core assets as well as finding suitable equity partners.

Fin24 has it that Denel Asia’s liquidation next year will be the “end of a state capture era”. In testimony to the Zondo Commission last year the Public Enterprises Minister said Denel Asia was part of an attempt by Gupta family associates to hijack Denel intellectual property.

Speaking during his budget vote debate in Parliament in July, Gordhan said Denel was “a case study in damage visited on a State-owned enterprise by state capture driven corruption and thievery”. Evidence of this was to be found, in part, in shrinking Denel revenue. Four years ago revenue from the State-owned defence and technology conglomerate was R8.2 billion. For the 2018/19 financial year it was R3.2 billion – a 60% decline.

He made the telling point that the impact of Denel’s decline on local industry was “immense” as it obtained more than half its inputs from suppliers, with 75% of them South African.

The Denel Asia joint venture reportedly saw Denel relinquish its intellectual property to the Far East venture. Following intervention by National Treasury, Denel ended its involvement with the joint venture in 2017. Denel Asia has not traded since.

In August Denel was one of the State-owned enterprises to benefit from government assistance in the form of a R1.8 billion bailout. Denel chief executive Danie du Toit called it “a demonstration of the confidence” government and National Treasury had in Denel. The R1.8 billion is part of a R2.8 billion request with the second tranche to be considered in the 2020/21 budget process.



Du Toit said the financial assistance from government would enable Denel to improve delivery performance and support to local and international customers. He added it would also “bring relief” to partners and supply chains affected by Denel’s recent liquidity issues.