Denel suffered a net loss of R1.8bn in the 2017/18 financial year due to a significant decline in revenue from R8bn the previous year to R5bn. File Photo: IOL

JOHANNESBURG - State-owned aerospace and military technology company Denel said on Wednesday the issues raised by Fitch in downgrading its credit rating would be resolved through the implementation of a recently approved strategy that includes getting rid of non-core assets. 

Fitch on Monday cut Denel's national long-term rating to 'B(zaf)' from 'AA-(zaf)' and national short-term rating to 'B(zaf)' from 'F1+(zaf)' and placed it on negative watch, citing weaker government support. 

On Wednesday, Denel's new group CEO Danie du Toit said the government was cognisant of the fact that the company was in need of additional liquidity to rebuild its business.

In the 2019 budget review last month, finance minister Tito Mboweni announced a contingency reserve of R13 billion for 2019/20. Denel said it was preparing to submit a funding application.

"The board has taken far-reaching steps to restore good corporate governance. We have a new experienced management team, with a number of executive positions currently being filled as we speak," Du Toit said.

"We have a new strategy and a management structure that has recently been approved to stabilise Denel and achieve long-term growth.”

As part of the new strategy, Denel will dispose of non-core assets including under-utilised properties and enter into equity partnerships in some of its businesses to strengthen market access and enable the development of new technology.

The company has put systems and processes in place to strengthen governance, improve programme management and grow revenue.

“We are confident that the outlook for Denel will be further improved once the implementation of the new strategy and operational plan are in place and all corporate governance issues have been successfully dealt with,” Du Toit said.

Denel has established a team to investigate all cases of possible irregular expenditure and recommend corrective action. 

Du Toit said there would be consequences for executives implicated in corruption, including disciplinary and legal action. The arms company is cooperating with the Zondo judicial commission looking into state capture as well as investigations by the Special Investigating Unit and other state agencies.

Du Toit said key issues identified by the auditor general in the last assessment of its financial statements were being addressed.

“The board has committed to growing the confidence of our stakeholders and ensure that Denel once again becomes attractive to customers,” he said.

- African News Agency (ANA)