Denel’s R1.2bn loss from R6bn profit highlights dire state of state-owned companies

The decline of state-owned arms manufacturer Denel can be gleaned from how the company went from having a record R35-billion order book in 2015 to begging the treasury for R500-million last year just to stay afloat. 

These financial figures are in part two of the judicial commission of inquiry into the state capture commission report, which was released publicly on Tuesday. 

The report found that Denel, prior to its 2011 board being dissolved in 2015, increased its revenue from R3.2-billion in 2011 to R6-billion in 2015. 

The report implicated the Gupta family, through the family’s associate Salim Essa, in hollowing out the state-owned company that had previously been praised by parliament for its efficiencies and received successive clean audits from the auditor general’s office. 

The hollowing out of Denel, the report stated, was through the Gupta family’s company, VR Laser, which received preferential and exclusive contracts from Denel Land Systems and Denel Vehicle Systems. 

The report added that Denel had been functioning well under chief executive Riaz Saloojee, who was removed from his post for supposedly not bending to the whims of the Gupta family in giving business to VR Laser. 

The new board chairperson, Dan Mantsha, who later became former president Jacob Zuma’s personal lawyer, was appointed by former public enterprise minister Lynne Brown after being “struck off the roll of attorneys for a long list of acts of misconduct”. 

The report recommended that the appointment of board members and executive management at state-owned companies be moved away from politicians because of their “failure” to select people of integrity. 

“They [state companies] are all going down one by one and, quite often, they depend on bailouts,” according to the report. 

Denel has also not been immune to requiring bailouts, having received R5.9-billion from the treasury, including a R1.8-billion injection for the company’s turnaround strategy in the 2019-20 financial year. 

According to the report: “Denel recorded a loss of R1.2-billion as at the end of December 2020, and had forecasted a net loss of R1.6-billion by the end of March 2021.”

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Khaya Koko
Khaya Koko is a journalist with a penchant for reading through legal documents braving the ravages of cold court benches to expose the crooked. He writes about social justice and human-interest stories. Most importantly, he is a card-carrying member of the Mighty Orlando Pirates.

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