Cape Town - Finance Minister Pravin Gordhan has cracked the whip on state arms manufacturer Denel, warning it will be guilty of financial misconduct if it pushes ahead with a joint venture with a company linked to the Gupta family without the necessary permission.
Last week Denel claimed the deal had gone ahead after all the legally required processes had been followed.
But in a statement on Wednesday evening the Treasury sought to “clarify facts relating to the transaction” and said it was speaking directly to Denel about the matter.
In a shot across the parastatal’s bows, Gordhan warned that a public entity would be committing financial misconduct under the Public Finance Management Act if it failed to comply with the legal requirements relating to the forming of a company, which include getting the permission of the finance and public enterprises ministers.
Failure to comply would result in disciplinary action, Gordhan warned.
He reminded Denel that President Jacob Zuma said on December 11, two days after firing Nhlanhla Nene and in response to the massive public outcry and economic damage that followed, that “there is no state-owned entity that can dictate to government how it should be assisted”.
This was taken as a reference to SAA, whose run-ins with Nene over a proposed aircraft acquisition was believed to have contributed to his axing.
Zuma also said at the time “no chairperson of a board of a state owned company has the power to tell a government Department to which the entity reports, how to support or lead them”, Gordhan pointed out.
He said Denel had submitted its application for approval for the deal to the Treasury on December 10, the day after Nene was fired, but had been asked to provide further information which was still outstanding.
Questions have been raised over the joint venture with a company, VR Laser Asia, which has limited experience in the sophisticated arms trade.
VR Laser Asia is owned by Gupta associate Salim Essa.
In the meantime, the confusion continues over the status of disciplinary steps against three Denel executives, CE Riaz Saloojee, chief financial officer Fikile Mhlontlo and company secretary Elizabeth Africa, suspended by its new board.
ANC insiders believe the three were removed to smoothe the passage of the VR Laser deal, but a date has yet to be set for their hearing.
Public Enterprises Minister Lynnne Brown told Parliament’s oversight committee on her portfolio last week the executives themselves had asked for more time, but they have denied this.
They also dispute her comments to Independent Newspapers in February that Denel had repeatedly failed to get permission required under the Public Finance Management Act for the establishment of joint ventures.
She told the committee among the issues of concern was the reflection of an amount of R1bn as profit, when it was a ring-fenced amount for the Hoefyster infantry vehicle project.
This has also been disputed.
Brown gave initial pre-approval for Denel to explore the joint venture under section 51 of the PFMA, but set conditions including a cost-benefit analysis and due diligence of the company, but these were not met.
She said in February she could not sign off on the deal before the Treasury had given its approval.
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