DA to seek meeting with interim Denel CEO to discuss turnaround strategies for the embattled SOE
24 August 2020
The Democratic Alliance (DA) will write to Denel’s interim CEO, Talib Sadik, to seek a meeting with him and his team to discuss turnaround plans for the beleaguered state-owned defence industrial.
Mr. Sadik is reportedly working with the board on a turnaround strategy for the entity. However, these cannot just be repetitions of plans that have been trotted out ad nauseam by successive state-owned entities (SOE), to no particular positive consequence or impact.
Denel is in dire straits and like most SOEs appears to be unable to survive without bailouts from government – bailouts which will not be forthcoming. Even if it wanted to, the finance ministry says it cannot amend Denel’s bailout terms before the October budget.
The embattled entity needs to pay outstanding salaries and honour its pension fund obligations. To add insult to injury, the company has now failed to provide a guarantee for a R4.5 billion contract to supply the Egyptian navy with surface-to-air missiles, resulting in its cancellation.
The harm done to Denel’s reputation by this cancellation is considerable and will affect all future contracts necessary for the entity’s survival.
Denel used to be a more than viable company in the state’s collection of public enterprises, providing useful revenues and cutting-edge intellectual property and technology in the development of complex navigation systems and integrated air defence solutions.
It is becoming increasingly clear though that in the absence of yet another bailout, the loss of contacts, the delays in the delivery of Project Hoefyster (delayed by four years due to Denel’s inability to perform), salary backlogs and outstanding pension fund obligations, and the poaching of engineering skills by parties in the Middle East, the writing is on the wall for Denel.
Government needs to embrace a radical restructuring of the country’s defence industry along with aspects of privatization and partnerships that may provide the wherewithal for the survival of an important industry.
In this regard Denel should additionally engage Armscor whose mission is “to become the premier defence technology and acquisition service provider for the South African Government and its allies on the African continent and in the world” to investigate opportunities from economies of scale and efficiencies that impact international competition, investment in research and development, as well as diversification.
The DA is looking forward to a fruitful engagement with the Denel leadership that will bring about urgent reforms that are needed to restructure the state-owned defence industrial group. A return to profitability will require an open mind to privatization and partnerships for the survival of an important industry.
We need to put a lid on the misuse of SOEs, like Denel for political gain - the country’s patience is wearing painfully thin – as is its money.
Issued by Ghaleb Cachalia, DA Shadow Minister of Public Enterprises, 24 August 2020
