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Denel’s mooted partner probed

Oct 02 2016 06:53
Erika Gibson

A prospective shareholder in one of Denel’s companies is being probed by the Special Investigating Unit for alleged tender fraud.

The proposed business relationship will mean that Kwane Capital (previously Laman Financial Services) will buy 49% of shares in the weapons manufacturer LMT Holdings – shares that do not currently belong to Denel.

Kwane Capital’s CEO is controversial businessman Mcebisi Mlonzi.

The relationship hasn’t been finalised yet, but DefensePaq, of which Mlonzi is the chairperson, is already hawking LMT’s weaponry on the internet.

Denel this week said it was consulting with its legal department after Rapport, City Press’ sister newspaper, brought to Denel’s attention that DefensePaq was not only marketing LMT vehicles on its website, but was also promoting selling the Rooivalk attack helicopter.

Denel is responsible for its own marketing.

According to its website, DefensePaq has “more than 7 000 employees” and is a “leading international weapons manufacturer”. The website indicates that DefensePaq is part of Ritam Holdings and that Mlonzi is the group chair.

Vuyelwa Qinga, Denel’s spokesperson, however, said Denel had no ties with the dealer.

“Until we received Rapport’s inquiry, we were not aware that our products were being marketed by this company. It does not have permission or the right to use information or products in any form of marketing,” Qinga said.

“Our legal department will have to decide if we’re going to take action against the broker to put an end to this or any other similar marketing.”

Denel also said it wasn’t aware of the fraud investigation when Kwane and Ritam offered to buy the minority shareholding in LMT.

READ: Denel tears into Gordhan, defends Guptas

This development happened after Denel began encountering difficulties with the current minority shareholders, who had earlier brought a court application in which they alleged that Denel, through alleged misrepresentations, convinced them to sell 51% of LMT to Denel for R100 and that they were now being held hostage in the undertaking, which they began.

LMT’s founders said they were persuaded by Denel’s promise that LMT would get contracts to the value of R1 billion over a period of 10 years as part of the army’s Project Hoefyster.

Hoefyster is the defence force’s project to acquire new armoured vehicles.

But Stefan Nell, one of the company’s founders, alleged in court that the project was then awarded to VR Laser, a company with ties to the Gupta family.

The minority shareholders’ application was dismissed and Nell has since resigned.

Mlonzi confirmed to Rapport that his group was ready to purchase the 49% share. But it is still subject to certain regulatory conditions, such as approval from the Competition Commission.

READ: Denel and Treasury still at war over VR Laser deal

Mlonzi said his negotiations with DefensePaq were not yet final.

Mlonzi and DefensePaq’s ties allegedly became common knowledge during the recent Africa Aerospace and Defence exhibition, but the website was this week under construction.

It is still unclear how the Rooivalk fits into Mlonzi’s marketing strategy.

There is renewed interest in this helicopter after it achieved previously unknown successes in the Democratic Republic of Congo over the past few years.

Denel confirmed during that defence exhibition that it was looking at the development and marketing of a modern version of the Rooivalk.

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