South Africa

DAYS OF ZONDO

Former Denel boss denies ‘passing the buck’ on VR Laser deal

Former Denel boss denies ‘passing the buck’ on VR Laser deal
Former Denel Land Systems CEO Stephan Burger testifies in Johannesburg before the Zondo Commission. (Photo by Gallo Images / Luba Lesolle)

Former Denel Land Systems CEO Stephan Burger has claimed he was acting in the company’s best interest when he disregarded warnings from procurement personnel and entered into an exclusive agreement with the Gupta-linked VR Laser.

Former Denel Land Systems (DLS) CEO Stephan Burger has deflected blame and claimed he didn’t understand the state-owned arms manufacturer’s procurement policies when DLS entered into a single-source agreement with VR Laser, partially owned by the Gupta family, in 2015 without considering other suppliers.

Burger returned to the State Capture inquiry on Tuesday to answer questions on why he supported the controversial deal despite warnings from the heads of supply chain management at both DLS and Denel.

“In today’s current scenario, we should have gone out on tender. We did not,” he admitted.

DLS had signed a memorandum of agreement (MOA) with VR Laser earlier in the year. In 2014, it had signed a R200-million deal with the company to build vehicle components for the ill-fated Project Hoefyster programme. Under the single-source agreement, DLS committed to placing orders with VR Laser for 10 years. VR Laser went into liquidation following State Capture revelations and DLS has suffered knocks to its reputation and finances.

DLS contract manager Celia Malahlela and Denel procurement executive Dennis Mlambo both opposed the single-source deal because the company had failed to consider other suppliers, which violated Denel’s procurement policy. Their objections were noted and set aside and then Denel CEO Riaz Saloojee eventually signed the agreement.

Burger, who worked at Denel for 36 years before resigning in 2018, claimed he didn’t have a strong understanding of procurement policies at the time and believed that the MOA may have taken precedence over Denel’s policies, meaning DLS would have had an obligation to pursue work with VR Laser. He claimed executives had a difference of opinion on the VR Laser deal, but most members of his team supported it and Saloojee had signed the deal.

“It’s all of these things that demonstrates that the initiative didn’t come from me,” said Burger.

“This single-source agreement was not a document that was kept in a dark corner and nobody knows about it. Every single body knew about this, including my boss at the time, and for that reason, if we did something unlawful and incorrectly there should have been action or there would have been action taken.”

Burger and Saloojee have blamed each other for pushing the deal with VR Laser.

“It was common knowledge that Mr Saloojee was, in general, under political pressure,” claimed Burger, without mentioning specifics. 

When Malahlela and Mlambo objected to the contract, Burger failed to seek further advice on his procurement specialists’ warnings or whether the MOA could override the company’s procurement policies.

“You can’t hide behind ignorance, surely, Mr Burger,” said evidence leader Paul Kennedy SC.

“There was a lot you rather naively, to put it mildly, seem not to have realised at the time,” he added.

Burger said he had heard of corruption allegations against the Gupta family, widely reported in the media at the time, but he wanted to ignore “political” issues and do what was best for the company, which the collective agreed was awarding a plum deal to the Gupta family business.

“It just seems [you’re] sort of passing the buck back and forth, isn’t it Mr Burger?” asked Kennedy.

Burger admitted DLS violated Denel’s procurement policies, but maintained that he was doing what he thought best at the time.

“I cannot take away the feeling I had then and I still have today that all things being equal VR Laser was a good company to form a single-source agreement with,” said Burger, claiming VR Laser was the only company with the capacity to perform the necessary work.

Denel-owned company LMT was a competitor with VR Laser, but its capacity was limited. Multiple Denel employees have testified that DLS should have kept the deals in-house and built LMT’s capacity rather than agree to deals with VR Laser, which was surrounded by controversy shortly after Gupta associate Salim Essa took a majority stake in 2013.

DLS didn’t give LMT a chance to bid on the single-source deal, despite recommendations from his own staff members.

“We went through a process where the highest authority in the company supported this, gave instructions to do this, and for all the reasons that I’ve given, we thought it was a good idea.”

“Obviously, I wish I could turn back the clock and say, ‘Let’s try and do it in a different way.’ ”

DLS, a state-owned entity, had a turnover of R3-billion when Burger retired, but the former CEO claimed that until recently he believed regulations under the Public Finance Management Act (PFMA) were open to interpretation.

“What I’ve come to learn in the last weeks and months is that I was wrong. I was wrong in the sense that the PFMA isn’t so flexible, the PFMA is actually fairly clear,” he told the inquiry.

Burger deflected personal responsibility, but claimed he was appearing at the commission to convey the truth.

“The problem here is that it’s so much easier to distance yourself from this mess and I would not be able to live with myself to say, ‘It wasn’t me, it was my boss that instructed me to do it. I didn’t want to do it but it was him that instructed me,’ and by doing that clear my name. I’m trying to bring across what actually happened,” he said.

Kennedy said there are two more witnesses due to testify on Denel-related issues. It’s unclear when they will testify.

On Wednesday, the commission will hear from ENS head of forensics Steven Powell about his investigation into corruption at IT company EOH. 

On Thursday and Friday, the commission will hear evidence related to Gupta-linked Regiments Capital, including testimony from Johannesburg Mayor Geoff Makhubo. DM

Gallery

Comments - Please in order to comment.

  • Desmond McLeod says:

    “..he didn’t understand the state-owned arms manufacturer’s procurement policies….” does he think the SA public are all fools? He understood all too well, and more importantly, fully understood the political pressures being applied. He decided “if you cant beat them, join them”.

  • Alley Cat says:

    Ignorance of the law is no defense. A man in his position should know better. Conversely, if he is / was ignorant, he shouldn’t have been there in the first place..

  • Helen Swingler says:

    “In today’s current scenario we should have gone out on tender…” Read: “We thought we’d get away with it so we played hard and fast with rules, regulations and procurement policies.”

  • Frans Ferreira says:

    Did the honorable Mr Burger get paid by Denel or by the Guptas?

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