Denel asks for R2.8bn cash injection from the government
The arms company’s CEO says recovery efforts are progressing well and Denel could win R30bn of deals if it receives help for liquidity constraints
State defence company Denel has asked the government for a R2.8bn cash injection to help it emerge from a financial crisis and secure lucrative export deals, its CEO says.
Denel, a cornerstone of the country’s defence industry, is one of several state-owned enterprises (SOEs) whose finances were damaged by years of mismanagement during former president Jacob Zuma’s tenure. It produces military equipment from ammunition and armoured vehicles to missiles and attack helicopters for the SA armed forces and for export.
CEO Danie du Toit, appointed late last year to oversee a turnaround plan, said recovery efforts are progressing well and Denel could win R30bn of deals in the next two years if it received help to overcome acute liquidity constraints.
“We have an excellent return on investment potential on recapitalisation,” he said in an interview at Denel’s offices outside Pretoria.
Last month it emerged that Denel could only pay 85% of salaries for June due to cash-flow problems. Du Toit had said in a statement at time that management was working “tirelessly” to pay the rest of the salaries.
However, public enterprises minister Pravin Gordhan later said during a debate on the state of the nation address (Sona) in parliament that a lender had come to the assistance of Denel “and full salaries will now be paid”. Gordhan’s spokesperson Adrian Lackay said the terms of the loan, which was granted by a commercial bank, were confidential.
Du Toit said that he hoped the cash injection would be announced in July and that the funds would arrive in September or October. He added that Denel would not sell equity in any of its divisions to Saudi Arabia’s state defence firm SAMI, which made a $1bn bid last year for a broad partnership with Denel.
Under President Cyril Ramaphosa, public finances are stretched by the need to rescue other ailing SOEs such as Eskom and SAA, which have both already received cash injections.
Denel recorded a loss of nearly R2bn in the past financial year. In the 2017/2018 financial year it suffered a net loss of R1.8bn on a 38% decline in revenue to R5bn from R8bn the previous year.
Reuters with staff writer