A Denel company logo is seen at the entrance of their business divisions in Pretoria. Picture: REUTERS/SIPHIWE SIBEKO.
A Denel company logo is seen at the entrance of their business divisions in Pretoria. Picture: REUTERS/SIPHIWE SIBEKO.

Cash-strapped arms manufacturer Denel will soon start taking legal action against former managers following several forensic investigations into alleged fraud and misappropriation of funds. 

Denel was one of the state-owned entities that was embroiled in allegations of state capture and slipped into such a severe financial crisis that in December 2017, it needed a government guarantee to enable it to pay its workers and suppliers.

Almost two years later and the company is still in a dire financial position and struggling to pay salaries because of cash-flow problems.

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In October 2018, the Denel board announced that it had appointed a panel of forensic investigators to probe procurement irregularities and was working with the Special Investigating Unit (SIU) to identify and root out any corruption in the company.

The legal action follows the same route taken firstly by Transnet, which is suing former officials Siyabonga Gama, Anoj Singh and Brian Molefe, and then Eskom, in a bid to recover money looted during the state capture years.

Denel did not say which former managers it would be taking legal action against. 

Gupta connections

Former Denel chair Daniel Mantsha and former Denel group CEO Zwelakhe Ntshepe have both been implicated in allegations of state capture in a tranche of leaked Gupta e-mails.

Mantsha, who is now former president Jacob Zuma’s lawyer, was a well-known Gupta associate and the leaked e-mails showed how he had liaised with the controversial family when taking certain decisions at Denel.

The e-mails also revealed what appeared to be highly damaging correspondence between Mantsha and the Gupta family about the establishment of Denel Asia, a joint venture between the group and associates of the Guptas.

Other damning e-mails showed Mantsha sending the Gupta family his personal bills. It is not known if they were paid.

Mantsha was appointed Denel board chair in 2015 and resigned a few days after public enterprise ministers Pravin Gordhan was appointed by President Cyril Ramaphosa in 2018.

Ntshepe resigned in May 2018 after disclosures that Denel had given former North West premier Supra Mahumapelo’s son a questionable R1.1m bursary to become a pilot.

On Wednesday, Denel CEO Danie du Toit said he had already received several reports concerning improper transactions, irregular appointments and potential fraud while other investigations were in advanced stages.

He said the reports were referred to independent legal firms to review the evidence and assist Denel with the implementation of recommendations. 

Du Toit said that as a result of the forensic reports, Denel had already taken a number of steps, which included taking civil action against some former executives to recover monies lost through the irregular awarding of pilot bursaries.

He said a statement would soon be submitted to police to lay complaints against former executives identified in the forensic reports, and an application would soon be launched in the high court to review the contracts concluded between Denel and VR Laser. 

Trade union Solidarity said it would be taking legal action against Denel for not paying the unemployment insurance levy and taxes that had been deducted from employees’ salaries. It also launched a process in terms of section 165 of the Companies Act to investigate the mismanagement and corruption of former Denel board members with a view to possible prosecution.

Du Toit said the company had kept all stakeholders including Solidarity up to date with the action it had been taking. 

“It is completely untrue to allege that Denel has not taken action to investigate transgressions and recover the money,” he said.

“We are in an advanced stage of investigations and there is no need to compel us to act through court actions.”