PARLIAMENT - State arms manufacturer Denel on Tuesday pleaded for an equity injection as it briefed MPs on its results for the past year, but former finance minister Pravin Gordhan flatly countered that the company's dire financials were linked to its dealings with the Gupta family believed to have corrupted key parastatals.
Gordhan said these allegations had dented business confidence around Denel, and cash alone could not fix the problem.
"The story of state capture has impacted on confidence," Gordhan said as members of Parliament's portfolio committee on public enterprises responded to the financial report.
"A new board needs to be appointed with no emails linked to them, or visits to Dubai. Otherwise we keep asking the CFO and the CEO to do the impossible," he said, adding that in the current financial climate it was hard to see where the funds for a bailout would be found.
Earlier Gordhan remarked that the defiance shown towards him in his capacity as finance minister by Denel chairman Daniel Mantsha around a partnership with close Gupta associate Salim Essa had been unprecedented.
"Mr Mantsha was very vocal in 2016-17, precisely at the time when the Gupta emails indicated he had a close relationship with the Guptas, particularly at the time when Denel Asia was at play," he said.
Gordhan was referring to a joint venture Denel sought to pursue with Denel-Asia, fronted by Essa, in the absence of approval from National Treasury, which eventually shut down the deal.
"No CEO has ever challenged a sitting minister as he did, and that was as a result of his relationship with the Gupta family, which impacts on his credibility."
Mantsha said the impasse between National Treasury and Denel had been resolved, to which Gordhan replied that lawmakers needed to know the details of how that happened as it related to management which in turn impacted on the company's financial health.
"We are speaking in generalities. Financials cannot be separated from some issues I have mentioned. We cannot put a Chinese wall between the two."
Documents submitted to the committee by Denel said it needed a R3 billion capital injection.
Chief financial officer Odwa Mhlwana said the company's cash flow crisis was due in part to lenders cancelling agreements, forcing it to repay R756 million "in the last few months" that had been designed as five-year loans.
It severely hampered its ability to pay suppliers, who were now demanding cash transfers before delivery, he added.
Mhlwana said company's order book had declined to R19 billion and needed to be at R35 billion for Denel to be a sustainable business.
"Our cash levels are absolutely inadequate," he told the committee.
"We are still a far cry from where we need to be to make this business sustainable. The profitability level needs to increase between eight and 12 percent."
- African News Agency (ANA)