Denel

Denel SOC Ltd is a South African state-owned aerospace and military technology conglomerate established in 1992.[3] It was created when the manufacturing subsidiaries of Armscor were split off in order for Armscor to become the procurement agency for the South African Defence Force (SADF), now known as the South African National Defence Force (SANDF), and the manufacturing divisions were grouped together under Denel as divisions. It is the largest of South Africa's state owned arms companies. The company had been experiencing major financial problems since 2015 and in 2021 it was announced in Parliament that Denel was on the brink of insolvency. The company stated that its woes were due to declining local defence budgets, weakened relationships with key customers and suppliers, the inability to retain or attract skilled personnel, ongoing salary disputes and a Fitch ratings downgrade.[4]

History

Financial difficulties

In 2004, Denel CEO Victor Moche informed parliament that the company was near bankruptcy after suffering a loss in the financial year 2003/4 of R358 million contributing to a mounting company debt of R1 billion. This was blamed on a lack of access to foreign markets and not being able to secure domestic arms procurement contracts.[10] State capture (2011/12 to 2017) had a debilitating effect on Denel and consequently the country's defence capability.[11][12][13] The Zondo Commission placed the blame specifically on the 2015 board of directors, who almost immediately after their appointment started to implement a slew of poor decisions which brought Denel to its knees.[14]

In 2016, it was revealed that Denel had entered into a controversial single source supplier deal for ten years with VR Laser.[15][16] The deal was controversial due to the generous terms of the contract and because VR Laser was owned by the Gupta family which had close ties to then South African president Jacob Zuma.[16] This contributed to Denel incurring a loss, the first in eight years, amounting to R1.7 billion putting the company in financial difficulty.[17] This led to Denel not being able to pay staff and company pensioners.[18] In 2017 the civil society group Organisation Undoing Tax Abuse (OUTA) (OUTA) stated that it had laid corruption charges against the company's chairman Daniel Mantsha.[19] In March 2019 Denel representatives gave testimony to the Zondo Commission about the company's deal with the Gupta owned VR Laser.[20] Department of Public Enterprises Acting Director-General stated that the deal resulted in up to R3 billion in lost revenue for Denel.[20] Following the conclusion of forensic investigations into allegations of corruption in Denel the company announced in July 2019 that it would seek to recoup misspent money by pursuing civil and criminal action against former company executives.[21]

From May 2020 through to January 2022 some of their employees were not paid, or were only paid a part of their salary, despite being expected to report for duty every day.[22] The state owned company's financial troubles continued into 2021, when in April Denel Land Systems stopped paying its employees their salaries.[23] Union UASA started legal proceedings in 2020 to recoup its members' salaries, while Solidarity achieved a victory in the Johannesburg Labour Court in February 2022, when Denel was ordered to pay out R90 million by March 8. Denel did not comply however, prompting Solidarity to seize its bank accounts, which facilitated the full payout by July.[24] Solidarity also vowed to bring to book those responsible for the supposed "fund mismanagement and looting".[22] Finance Minister Enoch Godongwana announced in his 2022 budget address that the National Treasury had assigned Denel R3 billion in bailouts for the 2021/22 financial year.[22] Despite bank guarantees by the government, Denel lost out on a R6 billion missiles deal (2022-2024) with Egypt, when South African banks cited ethical concerns and refused to extend a loan.[25]

type	State-owned enterprise
foundation	1992
location	Centurion, City of Tshwane, Gauteng, South Africa
key people	Michael Kgobe (CEO) ‡R1R‡ Carmen Le Grange (CFO)
area served	Worldwide
industry	Aerospace and Defence manufacturing
products	Missiles Cruise missiles Attack Helicopters Transport Helicopters UAVs Armoured vehicle turrets Glide bombs Artillery systems Ammunition
revenue	R 2.729 billion (FY 2020) ‡R2R‡
operating income	R -1.5 billion loss (FY 2020) ‡R2R‡
net income	R -1.9 billion loss (FY 2020) ‡R2R‡
equity	R 2.277 billion (FY 2020) ‡R2R‡
num employees	3,137 (FY 2020) ‡R2R‡
parent	Government of South Africa
homepage	denel.co.za

History

Divisions

Associated companies

Financial difficulties

External links

References