Business

Gupta company gets slice of R10bn

2016-04-18 10:05

In our story about a Denel and Gupta-linked company deal published April 17 2016, the headline of the story did not accurately reflect the content of the story.

The headline suggested that VR Laser, the Gupta-linked company, was awarded a R10 billion contract by Denel. This is incorrect. The body of the story, however, indicated that VR Laser’s share of the contract was for steel cutting, and not the entire contract of building and supplying combat vehicles for the SA National Defence Force.

The headline created the wrong impression, while the story clearly indicated otherwise.

We apologise for the error and embarrassment caused.

Denel is pushing ahead with its contentious Gupta partnership despite Finance Minister Pravin Gordhan having declared it illegal, and it appears the Guptas have landed a further highly profitable Denel deal.

City Press can reveal for the first time, on the basis of information from stablemate Rapport, that Denel has awarded the contract for cutting steel for the army’s new combat vehicles to VR Laser, a Gupta-associated company.

Kamal Kant Singhala (24), Ajay Gupta’s eldest son, is a director of VR Laser.

This follows hot on the heels of the news that VR Laser registered a controversial joint venture with Denel Asia in Hong Kong at the end of January.

The contract for 238 Badger vehicles to the value of R10 billion, Project Hoefyster, was awarded to Denel in November 2013.

Denel spokesperson Pam Malinda confirmed that Denel Vehicle Systems would be responsible only for the construction of the vehicles, while VR Laser would do the steel cutting.

They were the specialists in the field, Malinda said.

“All the prescribed procedures were followed in awarding the contracts.”

Denel declined to comment on the value of the VR Laser subcontract, which might result in a loss of jobs at Denel, even though the company is already restructuring.

Scarcely a month after the contract was awarded to Denel in 2013, Salim Essa, an affiliate of the Guptas, became a director of VR Laser.

A few months later, Essa registered VR Laser Asia in Hong Kong.

The cold war between Denel and Gordhan has raged on during the past week.

A salvo by Gordhan, and his finding that the agreement was illegal because it did not have the approval of the Treasury, was met with a terse response from Denel.

Vuyelwa Qinga, another Denel spokesperson, described Gordhan’s tirade as a “misunderstanding” that would soon be ironed out.

The joint venture with the Gupta company would therefore go ahead, according to Denel.

The awarding of the Hoefyster contract that has now come to light is causing concern among employees of Denel Vehicle Systems, which is going through a restructuring process because it does not have enough work.

Nevertheless, an outside company is now being brought in to help produce the combat vehicles.

Denel Vehicle Systems is in fact a bone of contention because in earlier years, it was part of Denel, but was sold to BAE Systems.

When BAE Systems made a huge success of it, Denel repurchased it for an astronomical price as a “strategic asset”, only to restructure it into a smaller company now.

The involvement of VR Laser in South Africa is attracting attention because of the controversial joint venture registered in Hong Kong.

Last week, Rapport obtained the registration documents of Denel Asia and VR Laser Asia.

The directors are Singhala, Denel acting CEO Zwelakhe Ntshepe, Denel Vehicle Systems CEO Johan Steyn and VR Laser CEO Pieter van der Merwe.

Denel Asia owns 51% of the shares in the joint venture, while VR Laser Asia has 49%. Essa is the sole shareholder of VR Laser Asia.

The Guptas’ business network is wide-ranging.

Three years ago, when Singhala had barely come of age, he was a co-director with Anil Kumar Gupta in a business in the Gupta family’s home town of Saharanpur in India.

Anil Kumar Gupta is a provincial minister of Uttarakhand in India, and it was his daughter, Vega, who got married at Sun City in 2013 after the Gupta plane landed at the Air Force Base Waterkloof.

Former Denel CEO Shaun Liebenberg, who was formerly in charge of the turnaround strategy, said the conclusion he drew from the registration documents for Denel Asia was that two of Denel’s most senior officials registered themselves electronically as directors of the joint venture partnership with VR Laser in Hong Kong.

“I believe they were instrumental in the negotiations over the partnership. Unless the two did it all on their own initiative, which I doubt, I think someone in Denel’s board introduced the deal and helped promote it,” Liebenberg said.

“While Denel still holds the controlling stake of 51% in the partnership, millions of rands will in fact be paid in commission to ‘marketers’ and ‘agents’ in Asia.

“This will, in turn, greatly reduce the partnership’s profits.

“Denel will, therefore, technically have the controlling share, while VR Laser’s agents will scoop off the profits. I reckon that could reduce Denel’s real profit to as little as 20%.” Additional reporting by Hindustan Times

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May 26 2019