Brown in the dark on why Denel wastes millions to axe CEO

Public Enterprises Minister Lynne Brown wants answers. (Jan Gerber)
Public Enterprises Minister Lynne Brown wants answers. (Jan Gerber)

Cape Town – Former Denel CEO Riaz Saloojee is expected to challenge his recent dismissal, while the state-owned arms company board is yet to explain to its minister and Parliament why it decided to spend around R3.4m to end his contract, reports revealed on Tuesday.

The respected leader, who will be paid his full salary until January 2017, according to Business Day, was given the chop amid a disciplinary process in which he was never officially charged.

Public Enterprises Minister Lynne Brown told the Parliamentary Portfolio Committee on Public Enterprises two weeks ago that following the suspension of Saloojee, chief financial officer Fikile Mhlontlo and group company secretary Elizabeth Africa in 2015, they were investigated for irregularities in the arms manufacturer’s profit statement.

READ: Minister reveals why Denel suspended execs

“This charge has never been put to them and is contested by the previous board, which says Brown failed to read the balance sheet correctly,” Business Day reported on Tuesday.

Brown said she is yet to be briefed by Denel about why it decided to terminate Saloojee’s contract, the report revealed.

Saloojee confirmed he was consulting his lawyers about his next move, according to Business Report on Tuesday. Its report questioned the controversial make-up of the Denel board, whose members are allegedly tied to the Guptas.

The dismissal comes as Denel pushes ahead with its Gupta partnership despite Finance Minister Pravin Gordhan having declared it illegal, and as the Guptas appear to have landed a further highly profitable Denel deal.

READ: Denel deal with Gupta firm not yet approved

Rapport and Netwerk24 disclosed on Sunday that Denel has now awarded the contract for cutting steel for the army’s new combat vehicles to VR Laser, a Gupta-associated company. Kamal Kant Singhala (24), Ajay Gupta’s eldest son, is a director of VR Laser.

READ IN CITY PRESS: Denel-Gupta deal will go ahead (and there’s a second for R10bn)
IN CITY PRESS: Axing at Denel has Gupta link

Denel spokesperson Pam Malinda told Rapport that Denel Vehicle Systems would be responsible only for the construction of the vehicles, while VR Laser would do the steel cutting.

This follows news that VR Laser registered a controversial joint venture with Denel Asia in Hong Kong at the end of January.

The contract for 238 Badger vehicles to the value of R10bn, Project Hoefyster, was awarded to Denel in November 2013.

Gordhan said last week that the registration of Denel Asia was illegal and contrary to the Public Finance Management Act. "The Minister of Finance is still considering this application, and further information has been requested from Denel," the Treasury said in a statement.

Another Denel spokesperson, Vuyelwa Qinga, told Rapport that Gordhan’s stance is a “misunderstanding” that would soon be ironed out. The joint venture with the Gupta company would therefore go ahead, according to Denel.

The awarding of the Hoefyster contract which has now come to light is causing concern among employees of Denel Vehicle Systems, which is going through a restructuring process because it does not have enough work, Rapport disclosed.

Former Denel CEO Shaun Liebenberg said millions of rands will be paid in commission to ‘marketers’ and ‘agents’ in Asia, which will greatly reduce the partnership’s profits.

“Denel will, therefore, technically have the controlling share, while VR Laser’s agents will scoop off the profits. I reckon that could reduce Denel’s real profit to as little as 20%,” he told Rapport.

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