Denel board next in line for reshuffle

2018-02-21 14:25 - Lameez Omarjee
A Denel aeroplane.

Cape Town – State arms manufacturer Denel’s board is the next state-owned company (SOC) up for review, Finance Minister Malusi Gigaba has confirmed.

Gigaba was speaking to journalists at a briefing ahead of the Budget Speech on Wednesday.

Gigaba highlighted that the financial sustainability of SOCs including Denel are of concern and drastic decisions have been taken to improve the issue.

This includes the rotation of boards. “The Denel board is next in line for review, so we should have a new board announced for Denel in a short space of time,” he said.

Liquidity crisis

The contingent liability for Denel is capped at R2.43bn over the medium term and at R2.31bn for 2017/18.

The company generated a profit of R333m in 2016/17, but has struggled to generate positive cash flows, the budget review read. In the past, the company had successfully accessed funding from capital markets, but lenders have become cautious given lapses in corporate governance, the budget review explained.

The SOC experienced a liquidity shortfall in December 2017 and government extended a R580m guarantee on condition that the company improves corporate governance.

In January, the CEO of Denel Zwelakhe Ntshepe told Parliaments portfolio committee on public enterprises that the state defence company has a liquidity crisis and has never made “serious money”.

“The issue of liquidity at Denel is a serious matter, it didn’t start now,” he said.

He and CFO Odwa Mhlwana assured the committee that the company is capable of paying staff their salaries, this following reports in 2017 that the company would not be able to pay out 13th cheques to employees.

“As far as salaries and creditors are concerned, we had some relief in December in taking care of the issues but that does not give a lasting solution to the problem and we are working on it,” said Mhlwana.

Ntshepe added that the public enterprise prioritises how it pays its monies. The company would never default on bank loans, nor would it fail to pay employee salaries.

* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER