Gigaba: Denel on recovery path

2012-07-19 17:48

Pretoria - State-owned arms manufacturer Denel's revenue-generating ability is improving, Public Enterprises Minister Malusi Gigaba said on Thursday.

The company posted a modest profit of R41m for the financial year ending March 2012, he told reporters in Centurion after meeting the Denel board.

"This company is in a turnaround process and we are encouraged with the progress made so far. I am happy with the company's performance at this stage, though there is still a lot of work to be done."

Despite the positive financial results, Gigaba said the government was considering giving the parastatal further financial assistance.

"As the shareholder, we are committed to the turnaround of Denel. We are looking at mechanisms that make it possible for Denel to attain its goals," he said.

"The allocated R700m recap will relieve some of Denel's solvency and liquidity [issues] and pressures in the short term. Additional support, post that, is being considered carefully."

Gigaba said he had instructed the parastatal's board to explore ways to expand into the African market.

"Denel must position itself to penetrate the African market. We will be looking to other sectoral departments like defence and international relations to leverage Denel's capabilities in that target market," he said.

"That calls for strong and active shareholder support to facilitate government-to-government relations to overcome challenges in acquiring orders."

Gigaba said arms manufacturers across the world were suffering because of a general decline in military expenditures in Europe and North America.

"It is anticipated that we are going to be in this situation in the foreseeable future. That decline is, however, counter-balanced by rising military expenditure in China, India and the Middle East."

To that effect, Gigaba said Denel needed to divert its focus towards African and eastern markets.

Denel board chairman Zoli Kunene said the company was being re-structured to align its operations to the changing export market.

"We are quite happy as the board. The new chief executive [Riaz Salojee] has presented his transformation plans to the board. We think that we will be able to retain another positive profit next year," said Kunene.

The Denel Group and its associates employ over 6700 people. The company is one of the major arms suppliers for South Africa's defence department.

According to a statement from the company, in the 2011/12 financial year it secured approximately R5bn in export orders, which would be executed over the next five to seven years.