Government admits Denel cannot continue to exist without bailouts
28 September 2020
In response to a Democratic Alliance (DA) parliamentary question, Defence and Military Veterans Minister, Nosiviwe Mapisa-Nqakula, said Denel cannot continue to exist in its current form: “[it] is clear, without a significant bailout by government, Denel will not be able to exist in its current form and will not be in a position to meet its contractual obligations to Armscor.”
Interim Denel Chief Executive,Talib Sadik, is on record as saying that Denel would not seek any government equity injections to stay afloat: “[at] this stage it is not in our plan.” Sadik is reported as saying in an interview, when asked if Denel would approach government for further bailouts; “[our] view is we need to fix our own house, because what we have is a bit of moral hazard”.
That said, Denel received R1.8 billion from government in 2019 and expects R576 million from this year’s budget, which is coming in tranches. With R3.4 billion of government guaranteed listed debt is payable this month and little likelihood of any prospect of honouring it, Denel will have to go into business rescue.
Minister Mapisa-Nqakula says both Armscor and the Department of Defence “developed alternative options” as regards the future of Denel which still have to considered by “decision makers in government.” However, almost every request by the DA to have a discussion of turnaround plans or alternative options with the interim CEO in Parliament has seemingly been blocked by the Minister of Public Enterprises , Pravin Gordhan. Leaving South Africans in the dark about this failing State Owned Enterprise (SOE).