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Denel sticks to its guns in dispute with Gordhan

Denel’s top executives on Wednesday denied any breach of regulations surrounding the company’s joint venture with VR Laser Asia, insisting that it had a right to read National Treasury’s failure to respond to notifications of intent as tacit approval for the deal.

CEO Daniel Mantsha told Parliament’s portfolio committee: “If you do not receive any response from the shareholder department you may deem that the approval has been granted after the expiry of 30 days. That 30 days expired on the 12th of January 2016.

“We did not establish Denel Asia on the 13th of January. We established Denel Asia on the 29th of January… at that date, it is important to note, we still had not heard nothing, neither from the shareholder department nor from National Treasury.”

He said the state arms procurement company had therefore waited 47 days before entering into the venture, which has been making headlines both for the Gupta family’s involvement in VR Laser and Finance Minister Pravin Gordhan’s insistence that Denel flouted public finance management rules.

Gordhan last week aimed a broadside at Denel, terming the company “arrogant and belligerent”. Public Enterprises Minister Lynne Brown has taken a softer approach, suggesting late last month that there may be different interpretations of compliance, but has stopped Denel Asia from trading until the dispute is resolved.

She also told reporters that the new board claimed the deal was initiated by the previous management.

This was advanced on Wednesday as well by Denel’s acting chief financial officer, Odwa Mhlwana.

He told MPs that former CEO Riaz Saloojee, who was paid some R3.4-million to leave the company, made a proposal to form Denel Asia to the current board on September 10.

However, questioned after the briefing to the committee, he conceded that at this point, there was no decision or proposal to partner with newly registered VR Laser Asia.

In a statement Denel added: “Four potential partners were considered before a decision was taken to select VR Laser Asia based on the company’s experience and track record of VR Laser working with Denel. VR Laser Asia is wholly-owned by Mr Salim Essa and the company is familiar with the industrial landscape in the world’s fastest growing defence market, specifically in India.

Mantsha had told MPs of VR Laser Asia: “They were the cheapest and technically the strongest.”

UPDATE:
Mantsha confirmed that Denel was due to meet with National Treasury soon to discuss the matter. Opposition MPs suggested that another meeting of the committee be scheduled and treasury officials be invited to attend.

The Democratic Alliance’s Natashe Mazzone demanded that Denel give the committee documents proving its compliance with financial management regulations, as well as clarity on how it came about that the repayment period for a R455-million loan from Nedbank to Denel had been changed from five years to six months. 

Denel representatives blamed Saloojee, and said this had been one of the reasons for his suspension. 

“If this is true, a serious investigation needs to be launched as a matter of urgency as at present Mr Saloojee is receiving over R3-million in pay-outs in lieu of completing his contracted work period,” Mazzone said. – ANA (Edited by Michelle Solomon)

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