Denel lands deep in Gulf crisis

The supermarket shelves in Doha, the capital of the tiny, gas-rich state of Qatar, are filled with Turkish goods. Until 16 months ago, they would have been filled with Saudi goods. But relations between Qatar and its neighbours, Saudi Arabia, the United Arab Emirates (UAE) and Bahrain have broken down entirely. The Saudi and UAE bloc have enforced a blockade cutting Qatar off from much of the peninsula.

Saudi Arabia recently put out a $750-million tender for digging a 60km canal to turn the Qatar peninsula into an island. Qatar has responded by buying the state-of-the-art Russian S-400 air defence system.

Now South African military technology and defence company Denel has landed in the middle of the Gulf crisis. In recent weeks Saudi Arabia’s interest in Denel has caused distress in the state-owned entity, which is on the brink of financial collapse.

But Saudi Arabia is not the sole bidder for a stake in Denel. News of government’s intention to sell a stake in Denel attracted huge interest in the Middle East, with Saudi Arabia, Qatar and the UAE vying for a stake in the cash-strapped arms manufacturer.

READ MORE: Cash-strapped Denel denies being approached by Saudi government for arms deal

Irate Denel board members believe “mischievous” behind-the-scenes lobbying and pressure through the media, by prospective investors Saudi Arabian Military Industries (SAMI), are being put into place to push Denel into a deal.

Insiders, speaking on condition of anonymity, said Denel’s precarious financial position — employees were asked to bring their own toilet paper to work and salaries and working hours have been cut — should not be used to push the company to ignore processes.

Whatever negotiations take place should follow proper procedures, underlined by diplomatic protocol, between governments and not Denel itself, they insisted.

This process involves concurrence from Denel’s government shareholder representative, the department of public enterprises, treasury, and the National Conventional Arms Control Committee. It would also require bilateral agreements between the two nations concerned, they added.

The committee is the statutory authority responsible for controlling South Africa’s trade in conventional arms and rendering foreign military assistance.

A Denel insider, who asked not to be named, said: “One thing that is clear for us and that is for us to survive into the future we do need partnership where there will be technology exchange and investment into Denel. We will be guided by National Conventional Arms Control Committee. There are people who want to put everyone under pressure and pretend it’s a done deal.

READ MORE: Government  ‘uncomfortable’  with Zuma meeting Qatar emir

“During bilaterals, issues such as IP [intellectual property] and others will be ironed out, and one cannot discount the role of Armscor [the owners of Denel’s IP]. We are all aware that they [SAMI] are interested. But in terms of sitting down and working on the detail and technicality that has not happened and cannot happen. It has to be a country to country kind of discussion.”

Another senior insider said: “SAMI can come and sit with us for discussions but can’t bully their way into Denel. There is an impression created that Denel is for sale, but that is not the truth; there is no way we can sell our national asset. The board must be properly informed if there is any transaction that is proposed.”

The source of the discontent inside Denel is an article by Reuters, which quoted SAMI chief executive Andreas Schwer as saying he hoped to conclude the first partnership deals with South African arms manufacturers by the end of year. Denel was reported to have said it was ready to talk to any interested party.

In response Denel issued a statement explaining its position. “With regard to the Saudi Arabian Military Industries company, because Denel is state-owned, with the shareholder representative being the department of public enterprises [DPE], if they wanted to have any talks it would have to be on a country-to-country basis. I understand they are also state-owned, so that suggests that the two countries would lead in such talks,” the statement, penned by Denel spokesperson Vuyelwa Qinga, read.

“The South African government’s regulatory framework would therefore dictate that approach and Denel’s response would then be guided by its board, the DPE and possibly national treasury, among relevant state institutions.”

Qinga on Thursday referred the Mail & Guardian to the statement.

Public enterprises spokesperson Adrian Lackay said there have been discussions “between the Saudi Arabian Military Industries ‎and various organs of state in South Africa about the company’s interest in South Africa’s domestic defence technology. At this stage it would be premature and speculative for the department of public enterprises to attempt to provide details of any specific transactions as none have been formally proposed, entered into or concluded.”

Paramount group communications head Nico de Klerk said the global defence and aerospace business — had no relations or business with Qatar, and never had any business with that country.

“Any suggestions that we do are simply malicious. It is in the public domain that Paramount Group has been in discussions with the Saudi authorities regarding potential projects,” De Klerk said.

International Relations Minister Lindiwe Sisulu was quoted last week, confirming the Saudi’s interest in Denel, but added that this would need to follow proper process. Yesterday, Denel chairperson Monhla Hlahla declined to comment.

A Denel insider said there has not been any engagement with the board about selling Denel since it took office early this year. “I have no idea why there is such a belief that there is an agreement. I have heard of a draft agreement with SAMI, but it has not been tabled before the board. Maybe that was done with the previous board.”

Subscribe to the M&G

These are unprecedented times, and the role of media to tell and record the story of South Africa as it develops is more important than ever.

The Mail & Guardian is a proud news publisher with roots stretching back 35 years, and we’ve survived right from day one thanks to the support of readers who value fiercely independent journalism that is beholden to no-one. To help us continue for another 35 future years with the same proud values, please consider taking out a subscription.

Thanduxolo Jika
Thanduxolo Jika

Thanduxolo Jika is an investigative Journalist and Co-Author of We are going to kill each other today:The Marikana Story. The Messiah of Abantu.

Sabelo Skiti

Sabelo Skiti is an investigative journalist.

Khadija Patel
Khadija Patel pushes words on street corners. She is the editor-in-chief of the Mail & Guardian, a co-founder of the The Daily Vox and vice chairperson of the Vienna-based International Press Institute (IPI). As a journalist she has produced work for Sky News, Al Jazeera, The Guardian, Quartz, City Press and the Daily Maverick, among others. She is also a research associate at WISER (Wits Institute for Social and Economic Research at the University of Witwatersrand) and has previously worked in community media. In 2017, she was among 11 people from across Africa and the diaspora who were awarded the inaugural Africa #NoFilter fellowship from the Ford Foundation and in 2018, she was awarded honorary membership of the Golden Key Society. She is passionate about the protection and enhancement of global media as a public good.

Related stories

War and Covid slow trade in Saluki dogs

Salukis, cousins of the greyhound, have been used for hunting for thousands of years in the Middle East and are some of the fastest canines.

SAA bailout raises more questions

As the government continues to grapple with the troubles facing the airline, it would do well to keep on eye on the impending Denel implosion

Khaya Sithole: What’s the state’s role in business?

State participation is valid when the market can’t deliver what’s needed, such as roads and rail networks and telecommunications. But banks and airlines are private enterprise concerns

US ‘brokered’ agreements on Israel: Wind of change or toxic blast of extortion?

The United States is negotiating with African countries that will see them exchange Palestinian people’s rights for improved economic and trade conditions

Where do Africans study abroad?

China is becoming the preferred destination for countries such as Ghana and Nigeria

Bank guarantees foil Denel’s R4.5-bn Egypt contract

Loss of work is the last thing the beleaguered state enterprise needs

Subscribers only

FNB dragged into bribery claims

Allegations of bribery against the bank’s chief executive, Jacques Celliers, thrown up in a separate court case

Dozens of birds and bats perish in extreme heat in...

In a single day, temperatures in northern KwaZulu-Natal climbed to a lethal 45°C, causing a mass die-off of birds and bats

More top stories

North West premier goes off the rails

Supra Mahumapelo ally Job Mokgoro’s defiance of party orders exposes further rifts in the ANC

Construction sites are a ‘death trap’

Four children died at Pretoria sites in just two weeks, but companies deny they’re to blame

Why the Big Fish escape the justice net

The small fish get caught. Jails are used to control the poor and disorderly and deflect attention from the crimes of the rich and powerful.

Koko claims bias before Zondo commission

In a lawyer’s letter, the former Eskom chief executive says the commission is not being fair to him

press releases

Loading latest Press Releases…