Denel grilled over Gupta-linked joint venture

Cape Town - Denel’s top management insisted on Wednesday that no law has been broken and that all its decisions and activities on the controversial VR Laser joint venture deal took place within the Public Finance Management Act (PFMA).

Denel chairperson Daniel Mantsha told MPs in the Select Committee on Communications and Public Enterprises that Denel would meet with Public Enterprises Minister Lynne Brown to discuss its failure to secure a Section 54 application for a joint venture.

According to media reports, Brown said the joint venture between Denel and VR Laser - which is partly owned by President Jacob Zuma’s son Duduzane and Rajesh Gupta - has not been approved and is, therefore, in contravention of the PFMA.

Legislation requires a state-owned company to hand in a Section 54 application if it wants to enter into a joint venture.

Presenting its annual report for 2014/15, Denel faced a grilling from MPs about the controversial deal. Cathleen Labuschagne from the Democratic Alliance asked the state-owned company to explain why it had not reported on the controversial deal in its annual statements.

Acting chief financial officer Odwa Mhlwana responded that Denel never reports on transactions that are still in the making, such as the said joint venture.

“Our business model works as follows: if strategic compensations haven’t come to fruition we refer to them as growth markets. We completed the drafting of the annual report in middle May and to be issued at end of June. At that stage the conversation about the joint venture was still at a technical level,” Mhlwana said.

Denel also had to explain why three of its top officials had been suspended, and if this had anything to do with the joint venture.

Chairperson Daniel Mantsha said three employees - the chief executive and chief financial officer as well as the secretary - had been suspended in September. “The suspensions had nothing to do with Denel Asia (the name of the joint venture). These officials were in breach of the law and they failed to observe the legal requirements under the PFMA,” Mantsha said.

“A disciplinary process is under way and Denel will inform this committee of the outcome.”

Denel defended its move to go into a joint venture with VR Laser and dismissed allegations that the company did not have any experience in military equipment.

“We didn’t just pick up VR Laser from the streets,” Mhlwana said.

“We’ve been doing business with them for more than 10 years. The relationship is not only starting now.”

Ellen Prins, who chairs the Select Committee on Communications and Public Enterprises, asked Denel for a full report explaining its controversy in the media.

"We acknowledge you’re one of the top 100 companies in the world. But in the past six months you’ve been in the news for all the wrong reasons. You’re doing well, but you owe this committee a report on all the things that we are reading in the media. We want to understand what’s going on.”

Fin24

This article first appeared on News24 – see here.