Minister of Public Enterprises Pravin Gordhan on Monday announced the appointment of a new interim board for cash-strapped arms manufacturer Denel.
The new board is led by former Airports Company South Africa (Acsa) CEO Monhla Hlahla and packed with business heavyweights. It was under Hlahla’s leadership that Acsa successfully executed an ambitious capital expansion programme before the Fifa Soccer World Cup in 2010.
Other board members include Zoli Kunene who previously served as chairman of Saab Grintek, business woman Gloria Serobe, struggle stalwart Cheryl Carolus and former Denel CEO Talib Sadiq.
Gordhan said after several resignations only two of the previous Denel board members were left and none of them were retained.
The new board will become permanent after being confirmed at the next cabinet meeting, Gordhan said. It has to lead a new chapter at Denel and focus on cleaning up governance, reverse state capture and restore the once strong arms manufacturer that still has 4 000 staff members, including a number with top engineering skills, Gordhan said.
It will review all major contracts, review the effectiveness of the management team, review Denel’s financial position with a view to restoring sustainability and consult all stakeholders, Gordhan said.
Hlahla said having taken over right after the end of the previous financial year, the new board will immediately focus on finalising the 2017/18 financial statements and understanding all the issues. It will then take a stepped approach to finding solutions. She asked for patience to allow the new board to do its job.
Denel currently owes suppliers R350 million in overdue payments.
Gordhan also met with about 100 of these suppliers on Monday and asked for their patience as the board comes to terms with the problems of the group and leads the turnaround. He said it would take a further three to six months before the situation could start to normalise.
He also met with the five labour unions represented at Denel and said there are currently no plans to retrench staff. The board will have to find its feet and will act in consultation with the unions, he said.
Gordhan said Denel is a strategic asset to the country that should contribute to national security, technological and economic development. It constitutes 45% of the local defence industry and sources 70% of its inputs from local suppliers.
He said between 2010 and 2016 Denel experienced phenomenal growth at an average of 15% per annum. Its revenue grew from R3 billion to R8 billion over that period. It was winning export contracts and the order book peaked at R30 billion, he said.
In 2015/16 Denel’s commercial paper was oversubscribed and it had an AAA Fitch Rating.
“This positive storyline has deteriorated significantly because of bad decisions. The Denel Asia saga in 2016 deeply tarnished the Denel brand. The insistence by the previous board to proceed with the venture, despite evidence showing it was a bad strategic move means Denel now faces the real threat of collapse unless far-reaching decisions are taken urgently,” Gordhan said.
Those implicated in the problems at Denel will have to face consequences. Over and above the judicial state enquiry into state capture there are criminal charges that have been laid by one of the unions represented at Denel. “We have also started discussing how to hold to account even those who have left,” Gordhan said. The board will also track down the money that was lost and take steps to recover it, he added.
Denel is the second out of six state-owned companies reporting to the Department of Public Enterprises that he has intervened in since his appointment to this portfolio.
Steps will follow with regard to the others as Gordhan is executing his mandate to root out corruption, restore good governance and ensure financial sustainability to the companies.
The full new Denel board:
Monhla Hlala – chairperson
Prof Tshilidzi Marwala
General TT Matanzima
Dr Sibusiso Sibisi
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