State capture: 'Glaring' lack of compliance at limping Denel, inquiry hears

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Arms manufacturer Denel has been grappling with governance and financial issues.
Arms manufacturer Denel has been grappling with governance and financial issues.
  • Denel has been on a downward spiral in the past three years and has been crippled by financial and governance issues.
  • The state-owned weapons manufacturer has approached the Department of Defence for a R683-million bailout. 
  • Former board member Nonyameko Mandindi said meetings would often include items that were not part of the agenda.

Poor governance at Denel took centre stage at the commission of inquiry into state capture on Monday, as current board chairperson Monhla Hlahla painted a picture of an organisation where compliance had taken a back seat. 

Hlahla is one of the state-owned defence company’s 12 interim board members appointed by public enterprises minister Pravin Gordhan in 2018 to turn the beleaguered entity around.

'Very glaring'

"The general lack of appreciation of the need to comply is very glaring, and you were not sure whether it is because everyone is stressed - they don’t know whether or not they are going to get paid, or is it just the way things are at Denel?" said Hlahla, describing the state of the company when the new board came in.

She explained that staff had not been doing tasks that every SOE should be acquainted with, such as meeting with the Treasury monthly to ensure that the Denel stayed financially compliant. 

"There was almost a general lack of awareness and therefore accountability."
- Monhla Hlahla

Denel has been on a downward spiral in the past three years and has been crippled by financial issues, poor governance and allegations of involvement in state capture. Just this month, it approached the Department of Defence for a R683-million bailout. 

There have also been various criminal and forensic investigations on the company by law firms ENS Africa, Dentons, Bowmans, BDO, Ngidi, the South African Police Service and the Special Investigating Unit. 

Hlala said the state-owned entity was in a deep liquidity crisis when the new board came in with staff in limbo about whether or not their salaries would be paid. She added that the employees had turned to the board for a solution on how the company had found itself in dire straits and how it would get itself out.

The chairperson explained that one of the challenges at Denel relate to its lack of information management, like keeping up-to-date minutes that makes it impossible to learn from the past.

Earlier on Monday, the inquiry had heard from former board member Nonyameko Mandindi, who was appointed in May 2015 and resigned in July 2016. Mandindi told the inquiry that the company’s meetings would include issues that had not been tabled for discussion and not prepared for.

One was the audit risk committee’s request in September 2015 that the assess then group CEO Rias Saloojee’s competence as well as that of then CFO Fikile Mhlontlo and company secretary Elizabeth Africa. Mandindi said the move seemed to be hasty since the request was just a few months after the board was appointed and it was too soon for it to make a judgment on the trio.

She said she had raised her issues around the expectation that the board would assess and perhaps make a decision on whether the executives should be suspended, but never got a response to her letters and emails.

The inquiry will continue on Tuesday.  

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