South Africa

Denelgate: DA calls for Gupta family to appear before Public Enterprises committee

By Marianne Thamm 20 April 2016

The suspension of three board members from state-owned defence conglomerate Denel shortly before a new board concluded a joint venture with a company linked to the Gupta family, without approval from Treasury, amounted to state capture, says the DA. The party now wants the Gupta family to appear before the Public Enterprises portfolio committee to answer for the Denel Asia and VR Laser deal and other issues around Eskom. By MARIANNE THAMM.

DA Shadow Minister of Public Enterprises, Natasha Mazzone, and the portfolio committee will have to wait until after Kamal Gupta’s four-day wedding that will take place at the Mardan Palace hotel in Turkey later this month if they hope to get any clarity from No 1’s BFFs with regard to their involvement in an arms deal brokered between VR Laser and Denel Asia.

The deal, announced by the Denel Group in January as a “bold step into the future”, has now been questioned. Former CEO Riaz Saloojee was suspended illegally in September 2015, along with CFO Fikile Mhlontlo and company secretary Elizabeth Africa, by the new Denel board, which later concluded a questionable joint venture with VR Laser, a company associated with the Gupta family.

It has come to light that the suspended CEO of Denel has been officially fired without being found guilty of any misconduct. The timing of his discharge is suspicious and lends credence to the notion that his dismissal was linked to his refusal to broker arms deals with the politically connected Gupta family,” Mazzone said in a statement on Monday.

Mazzone called on Minister of Finance Pravin Gordhan and the Minister of Public Enterprises, Lynne Brown, “to remain resolute against the deal proceeding until such a time as it has been established that all conditions set by National Treasury and Public Enterprises have been met and that the deal is free from political influence. The ministers are duty-bound to ensure that state resources are not compromised or captured through the deal with the Guptas.”

Salojee was reportedly placed under pressure from third parties to form arms deals during 2014 and 2015 as well as making appointments in Denel subsidiaries.

It is his refusal to bend to these politically motivated pressures that have likely led to his dismissal,” said Mazonne.

The party would be submitting questions to Brown as to why Salojee was fired and will also request that the Gupta family appear before the Public Enterprises portfolio committee to answer for the Denel Asia and VR Laser deal as well as other issues around Eskom.

Treasury has confirmed that the VR Laser deal with Denel did not have its approval. Gordhan said last week that the registration of Denel Asia was illegal and contrary to the Public Finance Management Act (PFMA).

Mazonne said the DA had been calling for the the portfolio committee to investigate the capture of a number of state entities by the Guptas but that committee chairwoman Dipuo Letsatsi-Duba had so far “blocked these requests”.

One can only conclude that she is attempting to protect President Zuma from harm. I have responded with a letter that spells out clearly why the Guptas must legally appear in Parliament and await a further response,” said Mazonne.

And while the Gupta family might have left South African shores, this did not mean they no longer wielded political influence.

They retain ownership of a number of companies linked to dubious state contracts. The need for a full investigation is only growing. We cannot allow billions in public funds to be used to prop up ailing state entities for the benefit of a few connected individuals with links to President Zuma.”

Denel spent R3.4-million to sideline Salojee without his being charged with an offence. His contract was terminated last week but he will still receive his salary until January next year. Brown has consistently maintained that she had not been briefed by the Denel board in relation to the suspensions. Meanwhile, Gordhan has warned Denel directors that they could be charged under the Public Finance Management Act if the deal was found to be irregular.

Denel has claimed that the officials were suspended as they had failed to comply with the Public Finance Management Act in the re-acquisition of BAE’s stake in Denel’s land systems business. This transaction, however, had received the all-clear from the Treasury, the Department of Defence and the Department of Public Enterprises.

Despite repeated requests to Denel to conduct a disciplinary hearing, a mediation – which was unsuccessful – was held instead.

Announcing the VR Laser-Denel deal in January, Denel said, “Denel is extending its footprint into the lucrative Asia-Pacific defence markets with the establishment of a joint-venture company in Hong Kong. Denel Asia is a partnership between the South African defence and technology group, Denel SOC and VR Laser, a company with 20 years extensive experience in defence and technology in South Africa.

This is a vitally important region for Denel to expand its business and find new markets for our world-class products, especially in the fields of artillery, armoured vehicles, missiles and unmanned aerial vehicles,” said Zwelakhe Ntshepe, Acting Group CEO.

Research and indicated, said Ntshepe, that by 2018 the Asia-Pacific nations will command more than half of global defence procurement outside of the United States and two-thirds of non-US defence research.

Denel Asia would be focusing its “marketing attention” on India, Singapore, Cambodia, Indonesia, Pakistan, Vietnam and the Philippines which had all announced intentions to “embark on major new defence acquisitions”.

An investigation by amaBhungane showed that VR Laser Asia was registered in Hong Kong after the Gupta family and associates acquired VR Laser Services, a Boksburg engineering firm, two years ago.

VR Laser Services specialises in steel cutting and processing. Its only apparent exposure to the defence industry is as supplier of components such as armour plate and armoured vehicle hulls. And although the Guptas themselves have done business in at least India and Singapore, VR Laser Services’ own footprint is local.”

The appetite for the Denel Asia/VR Laser partnership grew after Brown had appointed a new Denel board in late July, retaining only one member of the outgoing board, Johannes “Sparks” Motseki, “for purposes of continuity”.

Motseki, a former treasurer of the Umkhonto weSizwe Military Veterans Association, is a Gupta business partner. A company of which he is the sole director was allocated 1.3% in a Gupta-led consortium that bought a uranium mining company – now named Shiva Uranium – in 2010, amaBhungane found. These shares, if Motseki still has them, would now be worth about R80-million based on the claimed net asset value of Oakbay Resources and Energy, Shiva’s listed parent. DM

Photo: The New Age Board Chairman Atul Gupta and President Jacob Zuma and the First Lady MaNtuli Zuma at the Bidvest Wanderers Stadium for the T20 match between South Africa and India.30/03/2012.

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