The Editor
PoliticsWeb
Dear Sir,
FACTUAL INACCURACIES IN ARTICLE ON PARASTATAL PRIVATISATION BY TIM HARRIS
I would like to clarify Denel's position regarding the recapitalisation amount of R3.5 bn the group has received from Government, as referred to in my previous letter of 24 November 2009 (see here).
The comprehensive outline of all payments received below should be read alongside the detailed disclosure made in the annual reports in the financial years concerned under the share capital note to the annual financial statements. Denel stands by its statement of 24 November 2009, and wishes to clarify the following:
· The state's investment in the organisation's turnaround strategy has amounted to R3.5 bn to date. In analysing the details of all factual events since 2005 (regarding financial instruments and the amounts involved) below, it must be noted that not all of these events constitute financial payments to Denel.
- The other events as detailed in the summary below remain contingent liabilities of the government towards Denel, but cannot be seen as cash disbursed. There should be clear distinction between cash disbursed and contingent liabilities, so as to avoid misleading the public in this regard.
- The detailed schedule kindly provided by Tim Harris for Denel's further analysis in response to my letter contains instances of material double counting.
The below table describes the details of each amount in question. I have listed them in the same order used by Mr Harris (see here).
|
FINANCIAL YEAR |
INSTRUMENT ISSUED |
AMOUNT INVOLVED |
REMARKS |
RECAPITALISATION |
|
2005/06 |
Government guarantee document concluded to enable raising of debt in the open market. |
R1.515 billion |
There was no financial payment made to Denel by the Shareholder in this regard. The guarantee document was issued, remained in force for a year and later expired. The underlying debt raised from open market was repaid by Denel. |
- |
|
2005/06 |
Capital injection |
R2.0 billion |
Portion of recapitalisation received from the Shareholder. An application for a capital injection of R5.2billion was made in the 2005/06 financial year. |
R2.0 billion
|
|
2006/07 |
Indemnity agreement entered into with the Shareholder regarding financial performance of specific contracts. |
R1.6 billion |
Indemnity agreement entered into regarding financial performance of specific contracts - not a financial payment to Denel. This is a contingent liability at issue. |
- |
|
2006/07 |
Recapitalisation |
R567 million |
Portion of the recapitalisation amount received from the Shareholder. An application for a capital injection of R5.2billion was made in the 2005/06 financial year. |
R567 million |
|
2007/08 |
Recapitalisation |
R933 million |
Portion of the recapitalisation amount received from the Shareholder. An application for a capital injection of R5.2billion was made in the 2005/06 financial year. |
R933 million |
|
2007/08 |
Indemnity payment to Denel Saab Aerostructures (DSA) |
R221 million |
Payment against (R1.6bn) specific indemnified contract costs, thus achieving break-even status on contracts concerned. |
-
|
|
2008/09 |
Indemnity payment to DSA |
R260 million |
Payment against (R1.6bn) specific indemnified contract costs, thus achieving break-even status on contracts concerned. |
-
|
|
2009/10 |
Government guarantee document concluded to enable raising of debt in the open market. |
R1.85 billion |
There was no financial payment made to Denel by the Shareholder in this regard. The guarantee document was issued, and this guarantee remains in force. The document has been used to back loans raised from the financial market. |
- |
|
TOTAL |
|
R8.816 billion |
|
R3.5 billion |
I trust that this information will assist your readers and the general public in better understanding Denel's recapitalisation to date.
We would additionally like to thank Mr Harris for his continued interest in Denel, and for engaging with us on this important issue.
Yours sincerely,
ZWELAKHE NTSHEPE
Group Executive: Business Development & Corporate Affairs
Issued by Letsema Communications on behalf of Denel, December 3 2009
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