File Photo: IOL
File Photo: IOL

Inquiry hears Denel Asia joint venture didn't make 'strategic sense'

By Zintle Mahlati Time of article published Mar 19, 2019

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Johannesburg - The Zondo commission has heard how the Denel board appointed in 2015 lacked critical skills needed to manage the state-owned arms manufacturer. 

Former Denel board chairperson Martie van Rensburg told the commission that the new board lack skills such as having a person with a financial background. 

Auditing firm Deloitte had also recommended that someone with financial experience should be included in the composition of the board, but this recommendation was ignored. 

Van Rensburg formed part of the board that served from 2010 to mid-2015. 

On Monday, the commission heard how former public enterprises minister Lynne Brown appointed an entirely new board for the parastatal despite the fact that previous board had done a successful job in turning around the company's poor financial position. 

The deputy director general at the department of public enterprises Kgathatso Tlhakudi said the new board failed to achieve targets in the first year that it took over. 

Van Rensburg told the commission that her board wrote to Brown advising her that it was not a good idea to completely change the board without keeping some members of the old board for continuity.

"As the board, we acknowledged the right of the shareholder to rotate board members but we had to register our concerns that the lack of continuity in the board may put Denel at risk. A 90% change board membership increases the risk of instability and diversion of focus on the critical period of Denel's turnaround," said van Rensburg. 

She also spoke briefly about the controversial Denel Asia deal. Van Rensburg's board did not approve the deal. 

She was asked what she thought of the new board's decision to entertain and approve the deal within six months after taking over. 

The creation of Denel Asia was set to be a joint venture between Denel and VR Laser Asia, a company controlled by Gupta linked Salim Essa. The company was meant to be a vehicle for Denel to sell arms to India. The deal did not succeed after it failed to receive approval from the National Treasury. 

Van Rensburg said the deal was not ideal and beneficial for Denel as it would have only benefited VR Laser. 

"I think the new board assumed their functions by the end of July. It was a relatively short period that transpired and I don't know what information that decision was made. My understanding was that the joint venture with VR Laser that it did not have a footprint in Asia and in India specifically. 

"It did not make commercial sense or strategic sense," said van Rensburg. 

The inquiry continues with the testimony of former VR Laser shareholder Benny Jiyane. 

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