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Cape Town - Denel on Wednesday contradicted reports that Finance Minister Malusi Gigaba had ordered the state-owned arms manufacturer to dissolve its controversial joint venture with VR Laser Asia, a company linked to the Gupta business empire, and withdraw its litigation against National Treasury for refusing to approve the deal.

Denel's chairman Daniel Mantshe told Parliament's portfolio committee on public enterprises that executives had met with Gigaba and that the long-standing row with National Treasury over the venture would be resolved favourably. "The matter will be resolved and it will be resolved to the interest of Denel and the interest of National Treasury," he said, adding that Gigaba would meet with Public Enterprises Minister Lynne Brown to discuss the matter.

MPs, including former finance minister Pravin Gordhan, then pointed to recent press reports that Gigaba had instructed Denel to walk away from the deal and to drop a legal challenge against National Treasury's refusal to approve the joint venture with VR Laser Asia to form a new company called Denel Asia. The Sunday Times quoted Gigaba's spokesman Mayihlome Tshwete as saying the minister had voiced concern that the venture "didn't make business sense to the National Treasury". Mantshe replied that top officials at Denel had an "exploratory, informal" meeting with Gigaba where the minister expressed concern about the VR Laser Asia matter.

"He wanted to understand why this impasse was happening and how it is being resolved. We can say that the minister is concerned about the impasse and wants it resolved yesterday," he said. "The minister undertook to say he was going to meet with the minister of public enterprises where the matter is going to be finalised."

He added that he could not account for all that was written in the newspapers and said that Denel had fallen victim to "fake news" more than once. Democratic Alliance public enterprises spokeswoman Natasha Mazzone surmised that Gigaba had inherited a water-tight rationale from Gordhan for blocking the joint venture with VR Laser Asia.

It was set up in 2015 but National Treasury declared it illegal and Brown decreed that the company could not trade until the agreement of National Treasury was secured. Gordhan on Wednesday again noted that National Treasury received an application for approval of the venture in December 2015, just ahead of the Christmas holidays, and demanded a response within 30 days.

The timing suggested Denel had been "manipulative", he said, while the sacking of senior executives fit a pattern inherent in state capture of firing people to replace them with others more "compliant". Mantshe insisted that former CEO Riaz Saloojee was forced out for incurred debt Denel could not afford and said repeatedly: "We are not captured." Salim Essa, a business associate of the Gupta brothers, is the sole shareholder of VR Laser Asia.

Mantshe and acting chief financial officer Odwa Mhlwana reiterated their contention, voiced in earlier meetings with the committee, that it was the company best suited to help Denel regain entry to the Asian market and shrugged off questions about Essa having been flagged as a "politically exposed person". MPs said they needed answers to specific questions, including the financial state of Denel's local steel products supplier VR Laser, and the Dentons probe into Denel's affairs.


The first question drew on a court affidavit submitted by former director-general of finance, Lungisa Fuzile, who described VR Laser as technically insolvent and said it did "not appear to be in a position to obtain the necessary loans for the joint venture”. Mhlwana said he was in no position to comment on VR Laser's finances or whether it still operated bank accounts and informed Gordhan that the Dentons probe was shelved.

The committee resolved to call Denel back, along with National Treasury to enable the latter to respond directly to the board's claims. Gordhan asked that the meeting be availed of both Denel's minutes of the meeting with Gigaba and those of National Treasury so that these could be compared.

AFRICAN NEWS AGENCY