South Africa

Operation Fix SoEs: Gordhan replaces Denel board

By Greg Nicolson 10 April 2018

Public Enterprises Minister Pravin Gordhan on Monday announced a new board for state-owned defence company Denel. The floundering Denel has been implicated in State Capture allegations and is the second State-owned-Enterprise targeted in President Cyril Ramaphosa’s efforts to clean up the sector. By GREG NICOLSON.

Public Enterprises Minister Pravin Gordhan, speaking at Denel’s Irene offices on Monday afternoon, announced a completely new board that he said must improve the company’s financial position, bring integrity back to its corporate culture and harness the skills of Denel’s 4,000 employees, many of whom are specialist engineers.

The changing of the board is the first step we’re taking as government. Clearly their role is to ensure, as the president indicated, that good governance is restored. Secondly, that to the extent that Denel was the victim of and participated in State Capture, that those processes be reversed,” said the minister, citing Ramaphosa’s commitment in his State of the Nation Address to reforming SoEs.

Gordhan said tackling Denel was the second step in achieving Ramaphosa’s goal after the then-deputy president, who was elected ANC president in December and become the country’s president in February, replaced the Eskom board in January. Ramaphosa also forced Eskom executives Matshela Koko and Anoj Singh, allegedly involved in dodgy deals, out of the company.

Monhla Hlahla was appointed Denel chairperson. She was the managing director of Airports Company South Africa (Acsa) for 10 years and sits on the boards of Royal Bafokeng Holdings, Liberty Holdings and Exxaro Resources. She has also acted as the chairperson of the Industrial Development Corporation.

Hlahla said the board’s priority is improving Denel’s financial position.

For the next few months this board will be focused on nothing else but getting the financial statements of 2017-18 right, getting to understand what the core business of Denel is about, getting to understand all the issues that the minister has articulated well, understanding some of the issues that the press has written about in the past, to really come up to a stepped approach to designing a solution as a team.”

In December, government had to issue a R580-million emergency loan guarantee for Denel to pay its staff. Gordhan, who visited two Denel divisions on Monday and met with unions and around 100 businesses supplying the arms manufacturer, said suppliers complained about struggling to get paid.

The previous Denel board was reported to have been heavily influenced by the Gupta family and the SoE came under scrutiny for partnering with VR Laser, owned by Gupta business partner Salim Essa. That deal ended in 2017. Previous Denel chairman Dan Mantsha, who resigned in March, had flown to India on the Gupta family jet and sent them his utility bills.

Parliament’s public enterprises committee’s State Capture probe has been busy investigating Eskom and will also look into Denel and Transnet. The State Capture commission of inquiry, led by Deputy Chief Justice Raymond Zondo, is also likely to gather information on allegations of corruption at Denel.

In addition to its deal with VR Laser, which saw Treasury and Denel at odds, the SoE worked with Gupta-linked company Trillian, which is at the centre of a number of corruption allegations, without a contract.

In January, it was reported that Denel owed suppliers R668-million and had significant debt outstanding. In 2017 the Auditor General said Denel’s “clean” audit relied on incorrect interpretations of irregular expenditure. When its auditors re-evaluated the company, Denel continued to present the incorrect findings to Parliament. Gordhan said the State Capture inquiry must hold implicated officials responsible and urged investigators to follow the money.

New Denel chair Hlahla said the board would first have to get to know the company and its executives before taking any decisions on whether to replace its management.

Asked whether Denel will face job losses, Gordhan said, “Rumours are rumours. Nobody has any plan that I’m aware of at this point in time.”

Other members of the new Denel board include: former chair Zoli Kunene, Professor Tshilidzi Marwala, Lieutenant General Themba Matanzima, Gloria Serobe, Sue Rabkin, Dr Sibusiso Sibisi, Talib Sadik, Cheryl Carolus, Nonzukiso Siyotula, Thami Magazi and Martin Mnisi. They will act as an interim board until approved by Cabinet. DM

Photo: Pravin Gordhan, former Minister of Finance of, speaking during the session ‘The G20 Agenda: Charting a New Course for Growth’ at the Annual Meeting 2017 of the World Economic Forum in Davos, January 19, 2017. Copyright by World Economic Forum / Jakob Polacsek

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