A former supply chain management executive at Denel Land Systems, Celia Malahlela, has alleged the state owned arms manufacturer failed to follow due process when appointing VR Laser, a company linked to the Gupta family, as preferred supplier for steel components and fabrications.
Testifying before the Zondo commission into state capture on Tuesday, Malahlela said her attempts to stop the Gupta family from capturing the state-owned entity were ignored and that her superior, Denel CEO Stephan Burger, brushed aside her complaint about the awarding of contracts to the company.
“I am struggling to turn a blind eye to this phenomenon. I would like to reiterate that it is my humble opinion that Denel failed to follow due process when appointing VR Laser as preferred supplier for steel components and fabrications. Among other irregularities there was no RFQ [request for quotations] or tender issued for the award of this contract,” she said.
Malahlela further said that in was unusual for a CEO to be involved in procurement issues and that Burger wanted regular updates from her on the procurement process for the tender.
The first contract mentioned was in 2014 where Burger supported the appointment of VR Laser to supply over 200 Badger armoured vehicles for the SA National Defence Force (SANDF) for over R262 million, which Burger could not approve without going to the board because the amount was above his threshold for approval.
Malahlela said the order was later reduced to 183 for an overall price of R192.15 million because contracts over R200 million require the approval of the board.
“It was not ordinary for the CEO to come to my office and ask me about procurement issues. He demanded regular updates and asked me to give him feedback on a regular basis.”
“I sent him an email and he responded that he was prepared to defend VR Laser as they were number one in point scoring,” she said.
Malahlela said what made her uncomfortable about the awarding of the tenders to the Gupta-linked company was the reputational risk and potential damage that Denel would face.
“I would also like to bring it to your attention that the current CEO of VR Laser has acknowledged their ties with the Gupta family and the president’s son (through indirect shareholding).”
“Denel is a strategic asset of this country and I am proud to be associated with it. It gives me great pleasure to wake up every morning to serve this country. We are no doubt a great company. However, with the rate at which this controversy is unfolding, I am not certain this company will survive long enough for my children to see it. We ought to be proud of what we have accomplished. Equally so, we should do whatever it takes to protect this great legacy,” she said.