Public Enterprises Minister Pravin Gordhan has announced a shake-up of the Board of troubled defence parastatal Denel, as the latest target of his clean-up of State Owned Enterprises (SOEs).

He announced a new Board, which still needs to be approved by Cabinet. It will be chaired by former CEO of ACSA, Monhla Hlahla, who is also a former IDC chairman

The Board will also include: Zoli Kunene, Prof Tshilidzi Marwala, General Themba Matanzima, Gloria Serobe, Talib Sadik, Sue Rabkin, Dr Sibusiso Sibisi, Cheryl Carolus and Nonzukiso Siyotula.

Gordhan said Denel’s previous good reputation had been tarnished by recent leadership, and the Board therefore needed to be changed.

“For government, Denel is a strategic national asset - for national security and for technology- and economic development. Denel alone constitutes over 45 percent to the local defence industry and sources approximately 70 percent of input from local suppliers,” said the Minister.

”Between 2010 and 2016 Denel experienced phenomenal growth, averaging over 15 percent per annum, with revenue growing from just over R3 billion to over R8 billion in 2016. The company was winning significant export contracts and the order book peaked at R30 billion.

”The capital market was also responsive and ready to support the growth as evidenced by the over-subscription on Denel commercial paper in the 2015/16 fiscal year and AAA Fitch Ratings. This positive storyline has deteriorated significantly because of bad decisions.

“The Denel Asia saga (involving the Guptas) 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.

“Denel now faces the real threat of collapse unless far-reaching decisions are taken urgently.
I have decided to appoint an interim Board of directors to steer Denel onto a new path. The new interim Board will be required to move with speed on some of the areas that need urgent attention.”

These are:

- to restore sound corporate governance;

- to review the effectiveness of the management team;

- to review major contracts;

- to review the company’s financial position with the view to creating sustainability;

- and to consult all stakeholders

The news was celebrated by OUTA, which has been campaigning against corruption in government.

“At last, decisive action is taking place, after the country begged the previous Minister, Lynn Brown, to appoint competent, dedicated and incorruptible directors at the SOEs,” said Rudie Heyneke, OUTA Portfolio Manager for Transport.

“We look forward to seeing the same decisive action at other SOEs that were captured and have been used as vehicles to syphon-off state funds - like SAA, Transnet and PRASA.

“Instead of being drivers of the economy and helping creating employment, under the shadow of state capture and the Guptas, these entities were a drain on our economy and created a crisis that will take many years to eradicate.

“It is sad that people entrusted to safeguard state assets actively worked to destroy them. We can only hope that their departure does not equate to evading prosecution.”

OUTA said it hoped that the new Denel board will review the business processes, focus areas and the key individuals in the organisation.

“This organisation may need some major surgery after the effects of the Guptas are exposed and analysed,” it warned.

“Under Minister Brown and the outgoing board, Denel’s debt was a staggering R3.265 billion by the end of the 2016/17 financial year and, in December, it needed an emergency government loan-guarantee of R580 million to pay its 4 000 employees and suppliers.

“In September, five of the 10 outgoing board members resigned. On 2 March, that Board’s chairman, Daniel Mantsha, resigned days before he was due to meet Minister Pravin Gordhan.  Mantsha’s resignation coincided with the change of guard in the Presidency and the Public Enterprises Ministry.”

Said Heyndke: “If he thought this will bring him (Mantsha) respite, we have some bad news: he will not escape justice. OUTA will ensure that he has his day in court, next to people such as Lynn Brown and her director general Richard Seleke.

“OUTA provided former Minister Brown with evidence of Mantsha’s misdeeds, corruption and involvement with the Gupta family, but she preferred to turn a blind eye and not act. OUTA laid a complaint at the Law Society of the Northern Provinces against Mantsha for unethical and unprofessional behaviour, which is being investigated.

”OUTA laid charges of corruption against Mantsha on 30 August 2017. OUTA is in contact with the Hawks and we believe this case is making progress.

“OUTA calls on the new Denel board to investigate the activities of the old guard at Denel.”

The DA gave a cautious welcome to the news.

“South Africans need a full account of the circumstances that saw the Gupta brothers gain undue influence on some of the company’s high level business decisions,” said Natasha Mazzone, Shadow Minister of Public Enterprises.

“Denel had fallen prey to gross mismanagement and a carefully orchestrated plan of state capture that saw the state armaments company fail to pay its employees and suppliers, forcing government to shore it up with a R580 million guarantee.

“The new interim board has to ensure that it extricates Denel from undue political influence, as an essential first step in restoring the company’s tattered corporate image.

“The DA hopes the new interim board will be open, transparent and accountable to Parliament and the people of South Africa on whose behalf they execute their mandate.“

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