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Denel chair in conflict of interest

Lionel Faull

Appointment of board chair with ties to defence industry does not concern department.

Questions have been raised about at least two of Public Enterprises Minister Malusi Gigaba’s appointments to the board of state-owned military equipment manufacturer Denel.

The Mail & Guardian has established that Denel’s new chair, Zoli Kunene, heads a private company that trades in the defence sector, creating a potential conflict of interest, and another Denel board member has close ties to the Gupta brothers, controversial business associates of President Jacob Zuma’s family.

Kunene chairs Grintek Ewation, which specialises in communication systems and has been the electronic warfare specialist for the South African military for more than 35 years. Denel manufactures military hardware, including guns, missiles and unmanned aircraft.

Department spokesperson Makhosini Nkosi said that because “Denel and Grintek ... do not trade in competition to each other in either geographic or product market ... it is inconceivable that Kunene may, on any basis, be held to have any conflict of interest”.

But military software and hardware go hand in hand. Should Denel face a decision about whether to subcontract work and should Grintek bid for it Kunene would have to recuse himself.

He has also had a long business association with Swedish multinational Saab AB, which sold Gripen fighters to the South African Air Force and controversially secured a 30% share in Denel subsidiary Denel Aerostructures and part of its arms deal offset obligations.

Kunene did not respond to the M&G‘s queries this week.

Kunene was also identified by German investigators in 2001 as one of scores of South African business leaders and politicians who received discounted vehicles from the European Aeronautic Defence and Space (Eads) company, which bid for contracts in the arms deal. Although it claimed the discounts were innocent, questions remain about the company’s motives.

At the time, Kunene told News 24 that he had received one discounted vehicle, which he later traded in for a second-hand model, and two vehicles on behalf of a township self-help group. He said his company, Grintek Avitronics, had also been “in the queue [with Eads] for the arms contracts” and was therefore competing with, rather than benefiting from, Eads.

Meanwhile, growing sensitivity in government and trade union circles about the so-called ‘Guptarisation” of the state sector has been suggested as a reason for Cabinet’s refusal to endorse Iqbal Sharma as chair of state-owned Transnet last week.

Sharma is perceived to be an associate of the Gupta brothers, although he told the M&G last week that he was a friend of the family and not a business associate.

In the raft of changes to the Denel board last week, the appointment of Johannes “Sparks” Motseki, who holds a stake in a Gupta company, appears to have gone unnoticed.

As treasurer-general of the Umkhonto weSizwe Military Veterans’ Association, Motseki will have to juggle his decision-making powers on the board with the association’s tangled web of business investments and his ties to the Gupta family and their business protégé, Duduzane Zuma, President Zuma’s son.

In an interview in April, Motseki admitted he was a friend of Duduzane Zuma and had received a personal stake in a Gupta company that could have benefited impoverished rank-and-file veterans.

Motseki said he was first offered a stipend of between R20 000 and R50 000 by Tony Gupta, who discovered he was not receiving a salary from the association.

He turned the offer down but later accepted a personal 5% stake in Islandsite Investments 255, a subsidiary of Oakbay Investments, which owns Shiva Uranium. Two MK-linked war veterans’ associations were given a combined 5% stake in the same company.

Motseki did not respond to a request for an interview this week.

Nkosi said Motseki was appointed because “his military experience and intelligence training were considered valuable to Denel”.

“Motseki’s private businesses and personal relations, on their own, do not disqualify him for appointment as director of a state-owned enterprise.”

Other noteworthy appointments to the Denel board include those of Sonja Sebotsa, founder of women’s empowerment and advisory firm Identity Partners, and Mvuso Msimang, a former director general in the home affairs department.

The M&G Centre for Investigative Journalism, supported by M&G Media and the Open Society Foundation for South Africa, produced this story. All views are the centre’s. www.amabhungane.co.za.


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