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The board and management of Denel defended the decision to suspend
three high-ranking officials and insisted there was nothing inappropriate with
the joint venture it entered into with VR Laser Asia.
The state-owned entity appeared before Parliament’s oversight
committee on public enterprises today to give feedback on the reports in the
media about its internal affairs.
Acting chief financial officer Odwa Mhlwana explained at length the
process Denel followed with the establishment of the joint venture with VR Laser
Asia.
Denel has been mired in controversy over the past few months,
following allegations that it had not secured a Section 54 application of the
Public Finance Management Act, which allows state-owned companies to launch
partnerships and joint ventures.
Statements from Public Enterprises Minister Lynne Brown and the
national treasury have cast doubt on the rightfulness of the VR Laser agreement,
but Denel maintained the right processes were followed.
“We submitted a pre-notification to inform our shareholder [Brown]
and national treasury of our strategic rationale and approach. We informed them
as early as October 29 last year,” Mhlwana said.
He added that Denel did indeed submit the necessary application in
accordance with the act to the department of public enterprises and national
treasury.
“But because no response was received in a reasonable time
[regarded as 30 days] Denel went ahead and founded the joint venture.
“If you don’t hear from these departments you may deem that
approval has been granted,” Mhlwana said.
“We did not form the joint venture immediately, but waited 56 days
after the application. Due process was followed.”
Denel chairperson Daniel Mantsha weighed in on the suspension of
Denel’s chief executive Riaz Saloojee, as well as the chief financial officer
Fikile Mhlontlo and group company secretary Elizabeth Africa. The three
officials were suspended on September 25. Africa and Mhlontlo are facing
disciplinary action, while Denel decided not to extend Saloojee’s contract.
Last month, defence company BAE Systems announced that it had sold
75% of its Land Systems South Africa (LSSA) to Denel.
Denel took over the majority ownership stake for R641 million in
cash, although the complete acquisition cost Denel R855 million, because it also
bought the remaining 25% stake from BAE Systems’ partner DGD Technologies
“The suspension of these officials was mainly because of the BAE
LSSA transaction that compromised the liquidity of Denel,” Mantsha said.
According to him, the executives overcommitted the company by changing the terms
of a loan from five years to six months.
“We don’t have these funds and the board of Denel viewed this as
reckless lending.”
During question time, the Democratic Alliance’s Natasha Mazzone put
it to Mantsha that Denel’s utterances differed from what national treasury and
the public enterprises minister were saying.
In his response, Mantsha maintained that the pursuit of the joint
venture with VR Laser was authorised.
“But it’s not my space to say whether the ministers [Pravin Gordhan
and Brown] are lying.
“We’re not here to interpret the Public Finance Management Act. You
should ask yourself was there any violation in the law when Denel Asia was
formed? Yes, there may be a difference in interpretation, but that doesn’t
constitute a violation of the law.”
Mantsha said it was important that the joint venture made business
and legal sense.
“We have complied. You can look at the documents. National treasury
has the documents.” – Fin24
