Hidden Denel financials reveal true state of its dismal affairs

14 December 2018

The Department of Public Enterprises has tried to sneak Denel’s financials under the radar with a Parliamentary Announcements, Tabling and Committee Report (ATC) notice buried on page 70 of ATC 188. There is no mention of the financials on the contents page and with Denel’s website being down, this clandestine move would have kept the financial mess at Denel “hidden away” from public scrutiny.

It has become a December tradition of the failing ANC to try and sneak bad news past us.

The reason for this stealthy manoeuvre is quite clear: the independent auditor was unable to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these consolidated and separate financial statements. Basically, there were too many glaring issues to provide an audit opinion.

With finance costs of R359 million, losses of R1.7 billion, accumulated losses of R5.2 billion and possible irregular expenditure of R1.9 billion, Denel is in a financial tailspin. The DA reiterates its call that Denel and other struggling state-owned entities be placed under business rescue in preparation of partial or full privatisation to suitable partners.

According to the independent auditor, Denel and its subsidiaries did not include any fruitless and wasteful expenditure in the notes to the financial statements, as required by section 55(2)(b)(i) of the Public Finance Management Act 1 of 1999 (PFMA).

Denel’s financials have been delayed for over three months. We have actively tried to force the release of these numbers, with charges laid in October in terms of the PFMA for failure to submit the financials within five months.

Denel have been struggling to pay salaries for a few months now and are facing a cash crunch. The entity is currently looking at a mix of commercial bonds, government guarantee increases and equity partners to keep it afloat. It recently listed a commercial bond of R4 billion on the JSE.

State Capture has ripped the heart of this once proud and profitable entity with the DA having laid numerous charges in this regard.

Denel requires an urgent and swift intervention to prevent another bailout which is one Christmas present South Africans cannot afford.

Issued by Natasha Mazzone, DA Shadow Minister of Public Enterprises, 14 December 2018