Gigaba halts Denel's deal with Gupta-linked firm - report

Cape Town – Finance Minister Malusi Gigaba has reportedly halted a multi-billion transaction between state-owned arms manufacturer Denel and Gupta-linked VR Laser Asia. 

According to a report in the Sunday Times, Gigaba “summoned” Denel board chairman Dan Matsha to Durban – where the World Economic Forum on Africa took place – to raise concerns about the intended deal.
Gigaba allegedly also told Mantsha to withdraw Denel’s high court application against National Treasury which under former finance minister Pravin Gordhan did not want to authorise Denel’s joint venture with VR Laser Asia. 

Denel is challenging Treasury in court over its blocking of the intended joint venture with VR Laser.

READ: Denel tears into Gordhan, defends Guptas 

The Gupta’s business associate Salim Essa is the sole shareholder of VR Laser Asia as well as a director of VR Laser RSA – VR Laser – a company with close ties to the Gupta-family and President Jacob Zuma’s son, Duduzane.

Both Mantsha and Gigaba’s spokesperson Mayihlome Tshwete confirmed to the Sunday Times that the meeting had taken place. 

“The Minister raised a concern with the board chairperson that the joint venture didn’t make business sense to the National Treasury,” the Sunday Times quoted Tshwete as saying. He added that the financial implications of the deal is a “matter of serious concern”. 

VR Laser, which supplies steel products to South African state-owned steel maker Denel, has been the subject of controversy since January last year when it emerged that the company registered a controversial joint venture with Denel Asia in Hong Kong.

READ: Denel grilled over Gupta-linked joint venture 

National Treasury subsequently declared the agreement illegal because it hadn’t been authorised by then finance minister Gordhan. 

In 2013, VR Laser landed a lucrative contract from Denel for 238 Badger vehicles to the value of R10bn, City Press reported.

During the course of last year, the board and senior management of Denel repeatedly defended the intended joint venture with VR Laser, maintaining that the transaction was above board, and fiercely criticised National Treasury’s blocking of the deal. 

READ: Denel fires suspended CEO, Gupta links questioned 

At a parliamentary briefing last year, Denel acting chief financial Odwa Mhlwana explained the process Denel followed with the establishment of the joint venture with VR Laser Asia. 

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

He added that Denel did indeed submit the necessary application in accordance with the Public Finance Management Act (PFMA) to the department of public enterprises and National Treasury. 

READ: Denel defends suspensions, insists VR Laser jv above board 

“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.”

Read Fin24's top stories trending on Twitter:

Brent Crude
All Share
Top 40
Financial 15
Industrial 25
Resource 10
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Please select an option Oops! Something went wrong, please try again later.
I'm not really directly affected
18% - 1851 votes
I am taking a hit, but should be able to recover in the next year
23% - 2420 votes
My finances have been devastated
34% - 3600 votes
It's still too early to know what the full effect will be
25% - 2590 votes