Denel has instituted several legal challenges against former clients and employees to recover funds from deals gone sour and is pursuing criminal investigations for the theft of Intellectual Property (IP) taken at the height of state capture into the parastatal. Picture: Reuters/Siphiwe Sibeko
Denel has instituted several legal challenges against former clients and employees to recover funds from deals gone sour and is pursuing criminal investigations for the theft of Intellectual Property (IP) taken at the height of state capture into the parastatal. Picture: Reuters/Siphiwe Sibeko

Denel to Scopa: We are using all means to recoup assets

By Banele Ginindza Time of article published Aug 25, 2021

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Denel has instituted several legal challenges against former clients and employees to recover funds from deals gone sour and is pursuing criminal investigations for the theft of Intellectual Property (IP) taken at the height of state capture into the parastatal.

Acting chief executive William Hlakoane and board chairperson Gloria Serobe were at pains to emphasise before Parliament's standing committee on public accounts (Scopa), chaired by Mkhuleko Hlengwa, that all means to recoup assets were being pursued.

However, they said Denel needed "urgent recapitilisation" from the government to continue operations while it implemented a five-year turnaround plan to raise at least R1.5 billion to boost liquidity.

Hlakoane said among legal initiatives, some being pursued by the Special Investigating Unit (SIU) along with the Hawks, included a letter of demand for $720 000 (R10.8 million) paid to technical adviser Philippe Solomon in commission; a court application to challenge the validity of R356m worth of contracts for the now cancelled Laser Group deal and an ENNE 7 R69m Fundudzi Forensic Services Disciplinary action report, which recommended action against current employees as well as steps against Khampha Attorneys Incorporated on a R10m investigation for money paid and no services rendered.

There is also a R6m claim against Telspace Systems following SIU concluding its report.

There are investigations to the extension of loans of up to R300m, inclusive of interest, by Denel to supplier LMT Holdings following the finalisation of a PwC Report, which had been presented to the audit committee and would be legally reviewed for implementation of the recommendations once finalised.

Hlakoane said because of lack of funds, Denel could not act on recommendations of investigators – consultancy company PwC and law firm ENS Africa – for the recovery of money from the clandestine arrangements entered into by prior administration.

Serobe said the nature of the investigations, particularly into the theft of the IP, was sophisticated and sensitive and needed to be handled with care.

SIU lead Investigator Zodwa Xesibe confirmed to Parliament that Denel had strong standing in the matters being investigated and that a local company had been interdicted, after investigations, from continuing with the use of the IP.

Hlakoane also told MPs that an arrangement had been made for Denel to render pay as you earn (PAYE) dues by the end of the current month to get a waiver on the rest of the money owing.

Hlakoane said despite having an order book close to R11 billion, Denel could not execute the work as it lacked financial capacity with suppliers now demanding payment in advance.

"We no longer are able to get credit from our suppliers and cannot negotiate for lower prices," he said.

The parastatal currently derives about 60 percent of its income from maintenance work for the SA National Defence Force (SANDF) from whom it hopes to make about R11bn over the next three years.

Denel also announced exiting a joint venture partnership with Rheinmetall Denel Munition (RDM) in which it held a 49 percent stake because it had no significant dividends coming in despite the deal having scored about R50bn in sales over the past 10 years.

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