Denel loses missiles deal after banks turn a deaf ear

Denel recently lost out on a R6 billion missiles deal with Egypt after local banks turned them down for funding, despite the government providing bank guarantees to facilitate the deal, acting chief executive William Hlakoane told. Picture: Werner Beukes/SAPA

Denel recently lost out on a R6 billion missiles deal with Egypt after local banks turned them down for funding, despite the government providing bank guarantees to facilitate the deal, acting chief executive William Hlakoane told. Picture: Werner Beukes/SAPA

Published Mar 2, 2022

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STRUGGLING state armaments manufacturer Denel recently lost out on a R6 billion missiles deal with Egypt after local banks turned them down for funding, despite the government providing bank guarantees to facilitate the deal, acting chief executive William Hlakoane told.

The deal could have gone a long way in helping the government-owned entity gain financial stability as it struggles with a plethora of court judgments from workers owed salary arrears and provided it with capital to undertake further projects.

Hlakoane said Denel had lost out on the deal as it could not secure funds locally and by the time an Egyptian bank offered assistance, the order had been cancelled.

“We lost the contract to a French company. If you snooze you lose. Denel is not like companies in the transport sector that might have a monopoly, in this business we are competing with the best in the world, our integrity has been eroded,“he said.

Hlakoane said the reason given by local banks was they they would not finance transactions in the defence industry for ethical reasons.

The Banking Association South Africa failed to comment by the time of going to print.

Hlakoane said Denel's efforts failed even after it had been granted an extension by the buying entity.

“I cannot say the government let us down, it is the banks that did,” he said.

Hlakoane said Denel was targeting a R30 billion order book over the next three years, which was in the pipeline and that the current prospective orders amounted to about R11bn.

“We need to partner with the private sector. They have the connections. We must move away from the reliance on local banks,” he said.

The news of the failed deal comes as Business Report questioned Hlakoane on whether Denel stood to gain as the world armed up in the wake of Russia's invasion of Ukraine.

However, Hlakoane said Denel was unlikely to secure business from the ongoing Russia/Ukraine conflict as European countries tended to monopolise business among themselves.

“It is not a question of capacity. It is a very monopolised industry, it is a question of preference. It is mostly the Middle East and Asia that are open to us.

“Our capacity is mainly in the missiles business. We do have the fighter aircraft, but they are most suited for conditions in Africa,” he said.

This comes as parliamentarians, according to military publication, DefenceWeb, have expressed concern about Denel not being allowed to fail as it represents an important chapter of the country's defence capabilities.

Parliament's Joint Standing Committee on Defence pointed to risks posed by the current and seemingly ongoing parlous state of affairs at Denel as potentially impacting on the operational capability of the South African National Defence Force (SANDF).

Cyril Xaba, the committee co-chairperson, along with Mamagase Nchabeleng, said they were concerned that South African defence technology development could grind to a halt.

They stressed the importance of defence technology and its applications in the national interest, saying that risks posed by continued challenges on the Denel front could impact on the operational capacity of the SANDF.

In another matter, Hlakoane said Denel was working flat out to comply with a recent court order giving it 10 days to pay up R90 million in arrears for its staff that is owed since the middle of last year.

The Johannesburg Labour Court last week ordered Denel to pay up R90 million within the next 10 days to members of the trade union, Solidarity.

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