Denel defends suspensions, insists VR Laser jv above board

Suspended Denel CEO Riaz Saloojee.
Suspended Denel CEO Riaz Saloojee.
Puxley Makgatho

Cape Town - The board and management of Denel defended the decision to suspend three high-ranking officials and insisted there was nothing untoward with the joint venture it entered into with VR Laser Asia.

The state-owned entity (SEO) appeared before parliament’s oversight committee on public enterprises on Wednesday to give feedback on the negative reports in the media about its internal affairs.

Acting chief financial officer Odwa Mhlwana, explained at length the process Denel followed with the establishment of the joint venture with VR Laser Asia.

Denel was mired in controversy over the past few months, following allegations that Denel had not secured a Section 54 application of the Public Finance Management Act (PFMA), which states which allows state-owned companies to launch partnerships and joint ventures.

READ: Denel grilled over Gupta-linked joint venture

Statements from public enterprises minister Lynne Brown and National Treasury have cast doubt on the rightfulness of the VR Laser agreement, but Denel maintains the right processes were followed.

“We submitted a pre-notification to inform our shareholder (Brown) and National Treasury of our strategic rationale and approach. We informed them as early as 29 October last year,” Mhlwana said.

He added that Denel did indeed submit the necessary application in accordance with the PFMA to the department of public enterprises and National Treasury. “But because no response was received in a reasonable time (regarded as 30 days) Denel went ahead and founded the joint venture.

“If you don’t hear from these departments you may deem that approval has been granted,” Mhlwana said. “We did not form the joint venture immediately, but waited 56 days after the application. Due process was followed.”

Denel chairperson Daniel Mantsha weighed in on the suspension of Denel’s chief executive Riaz Saloojee, as well as the chief financial officer Fikile Mhlontlo and group company secretary Elizabeth Africa.

The three officials were suspended on September 25 2015. Africa and Mhlontlo are facing disciplinary action, while Denel decided not to extend Saloojee’s contract.

“The suspension of these officials was mainly because of the BAE LSSA transaction that compromised the liquidity of Denel,” Mantsha said.

According to him, the said executives overcommitted the company by changing the terms of a loan from five years to six months. “We don’t have these funds and the board of Denel viewed this as reckless lending.”

READ: Denel fires suspended CEO, Gupta links questioned

During question time, the DA’s Natasha Mazzone put it to Mantsha that Denel’s utterances differed from what National Treasury and the public enterprises minister were saying.

In his response, Mantsha maintained that the pursuit of the joint venture with VR Laser was authorised. “But it’s not my space to say whether the ministers (Gordhan and Brown) are lying.

“We’re not here to interpret the PFMA. You should ask yourself was there any violation in the law when Denel Asia was formed? Yes, there may be a difference in interpretation, but that doesn’t constitute a violation of the law.”

READ: VR Laser, Denel go back 15 years - Brown

Mantsha said it was important that the joint venture made business and legal sense. “We have complied. You can look at the documents. National Treasury has the documents.”  

                  
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