Denel

Last updated

Denel SOC Ltd
Type State-owned enterprise
Industry Aerospace and Defence manufacturing
Founded1992
Headquarters Centurion, City of Tshwane, Gauteng, South Africa
Area served
Worldwide
Key people
Michael Kgobe
(CEO) [1]
Carmen Le Grange
(CFO)
Products Missiles
Cruise missiles
Attack Helicopters
Transport Helicopters
UAVs
Armoured vehicle turrets
Glide bombs
Artillery systems
Ammunition
RevenueDecrease2.svg R 2.729 billion (FY 2020) [2]
Decrease2.svg R -1.5 billion loss (FY 2020) [2]
Decrease2.svg R -1.9 billion loss (FY 2020) [2]
Total equity Decrease2.svg R 2.277 billion (FY 2020) [2]
Number of employees
Decrease2.svg3,137 (FY 2020) [2]
Parent Government of South Africa
Website denel.co.za

Denel SOC Ltd is a South African state-owned aerospace and military technology conglomerate established in 1992. [3] It was created when the manufacturing subsidiaries of Armscor were split off in order for Armscor to become the procurement agency for South African Defence Force (SADF), now known as the South African National Defence Force (SANDF), and the manufacturing divisions were grouped together under Denel as divisions. It is the largest of South Africa's state owned arms companies. The company had been experiencing major financial problems since 2015 and in 2021 it was announced in Parliament that Denel was on the brink of insolvency. The company stated that its woes were due to declining local defence budgets, weakened relationships with key customers and suppliers, the inability to retain or attract skilled personnel, ongoing salary disputes and a Fitch ratings downgrade. [4]

Contents

History

Denel was established as a state-owned industrial company under the Department of Public Enterprises in April 1992. It inherited most of Armscor's production and research facilities, and over 15,000 employees. At the time of its formation, Denel restructured and reorganised the former Armscor subsidiaries into a number of divisions and subsidiaries within five industrial groups: systems, manufacturing, aerospace, informatics, and properties and engineering services. [5]

Denel has developed a number of notable products, such as:

The Overberg Test Range is used for advanced aerial testing of missiles by Denel and other clients such as NASA, EADS and BAE Systems.

Though Denel's market share is increasing, it still has not signed significant international contracts that will bring a real market return for its investments in development and research costs. In 2006, Denel signed a contract with the Finnish Navy for the Umkhonto air defence missile; this was a significant step, since it was the first significant sale to a western nation. The Swedish defence force was also interested in the Umkhonto missile, but due to budget constraints had to put its purchase on hold.

Although Denel has comparable quality products, at lower prices, it has struggled to attract buyers, with the Rooivalk attack helicopter being a prime example of this. After being developed at a cost of R1 billion, [6] no sales were made as the contract from Turkey for $2 billion was lost. The development of the Rooivalk, which could be Denel's most profitable project, also threatens to result in its largest loss ever. [6]

In 2009 and 2010 RheinMetall Denel, a Denel subsidiary, advertised artisan training programmes and study bursaries which excluded white applicants, but relented after a meeting with trade union Solidarity. [7]

Divisions

The following divisions form part of Denel

Associated companies

Companies part-owned by Denel. [8]

Financial difficulties

In 2004, Denel CEO Victor Moche informed parliament that the company was near bankruptcy after suffering a loss in the financial year 2003/4 of R358 million contributing to a mounting company debt of R1 billion. This was blamed on a lack of access to foreign markets and not being able to secure domestic arms procurement contracts. [10] State capture (2011/12 to 2017) had a debilitating effect on Denel and consequently the country's defence capability. [11] [12] [13] The Zondo Commission placed the blame specifically on the 2015 board of directors, who almost immediately after their appointment started to implement a slew of poor decisions which brought Denel to its knees. [14]

In 2016, it was revealed that Denel had entered into a controversial single source supplier deal for ten years with VR Laser. [15] [16] The deal was controversial due to the generous terms of the contract and because VR Laser was owned by the Gupta family which had close ties to then South African president Jacob Zuma. [16] This contributed to Denel incurring a loss, the first in eight years, amounting to R1.7 billion putting the company in financial difficulty. [17] This led to Denel not being able to pay staff and company pensioners. [18] In 2017 the civil society group Organisation Undoing Tax Abuse (OUTA) (OUTA) stated that it had laid corruption charges against the company's chairman Daniel Mantsha. [19] In March 2019 Denel representatives gave testimony to the Zondo Commission about the company's deal with the Gupta owned VR Laser. [20] Department of Public Enterprises Acting Director-General stated that the deal resulted in up to R3 billion in lost revenue for Denel. [20] Following the conclusion of forensic investigations into allegations of corruption in Denel the company announced in July 2019 that it would seek to recoup misspent money by pursuing civil and criminal action against former company executives. [21]

From May 2020 through to January 2022 some of their employees were not paid, or were only paid a part of their salary, despite being expected to report for duty every day. [22] The state owned company's financial troubles continued into 2021, when in April Denel Land Systems stopped paying its employees their salaries. [23] Union UASA started legal proceedings in 2020 to recoup its members' salaries, while Solidarity achieved a victory in the Johannesburg Labour Court in February 2022, when Denel was ordered to pay out R90 million by March 8. Denel did not comply however, prompting Solidarity to seize its bank accounts, which facilitated the full payout by July. [24] Solidarity also vowed to bring to book those responsible for the supposed "fund mismanagement and looting". [22] Finance Minister Enoch Godongwana announced in his 2022 budget address that the National Treasury had assigned Denel R3 billion in bailouts for the 2021/22 financial year. [22] Despite bank guarantees by government, Denel lost out on a R6 billion missiles deal (2022-2024) with Egypt, when South African banks cited ethical concerns and refused to extend a loan. [25]

Related Research Articles

<span class="mw-page-title-main">Denel Rooivalk</span> Attack helicopter by Atlas Aircraft Corporation, later Denel Aviation

The Denel Rooivalk is an attack helicopter manufactured by Denel Aviation of South Africa. Rooivalk is Afrikaans for "Red Falcon", which refers to the lesser kestrel. Development of the type began in 1984 by the Atlas Aircraft Corporation, its development is closely connected to the Atlas Oryx transport helicopter, both aircraft being based on the Aérospatiale SA 330 Puma and having started development at the same time.

Eskom Hld SOC Ltd or Eskom is a South African electricity public utility. It was established in 1923 as the Electricity Supply Commission (ESCOM) and was also known by its Afrikaans name Elektrisiteitsvoorsieningskommissie (EVKOM). Eskom represents South Africa in the Southern African Power Pool. The utility is the largest producer of electricity in Africa, and was among the top utilities in the world in terms of generation capacity and sales. It is the largest of South Africa's state owned enterprises. Eskom operates a number of notable power stations, including Matimba Power Station and Medupi Power Station in Lephalale, Kusile Power Station in Witbank, Kendal Power Station, and Koeberg Nuclear Power Station in the Western Cape Province, the only nuclear power plant in Africa.

<span class="mw-page-title-main">South African National Defence Force</span> Military of South Africa

The South African National Defence Force (SANDF) comprises the armed forces of South Africa. The commander of the SANDF is appointed by the President of South Africa from one of the armed services. They are in turn accountable to the Minister of Defence and Military Veterans of the Defence Department.

<span class="mw-page-title-main">Mokopa</span> Air-to-surface

The ZT-6 Mokopa is a South African air-to-ground anti-tank guided missile. As of 2005, it is in its final stages of development, and is being integrated onto the South African Air Force's Rooivalk attack helicopters. The missile is produced by Denel Dynamics, formerly Kentron. The current version uses semi-active laser (SAL) guidance, requiring the target to be illuminated by a laser designator either on the launch platform or elsewhere; though there are alternative guidance packages available including a millimetre-wave radar (MMW) seeker and a two-colour imaging infrared (IIR) seeker.

<span class="mw-page-title-main">Armscor (South Africa)</span> Arms procurement agency and former manufacturer

Armscor, the Armaments Corporation of South Africa is the arms procurement agency of the South African Department of Defence. It was originally established in 1968 as an arms production company, primarily as a response to the international sanctions by the United Nations against South Africa due to apartheid which began in 1963 and were formalised in 1977.

<span class="mw-page-title-main">Umkhonto (missile)</span> Short to medium range surface-to-air missile

The Umkhonto is a family of vertical launch system, surface-to-air missiles developed by Denel Dynamics. Umkhonto is designed to be a modern, short to medium-range missile, with an all-weather launch capability. Operating at supersonic speeds, the Umkhonto utilises infrared homing technology to provide point and limited local air defence against multiple attacks of aircraft and missiles.

<span class="mw-page-title-main">Malusi Gigaba</span> South African politician

Knowledge Malusi Nkanyezi Gigaba is a South African politician who served as Minister of Home Affairs of the Republic of South Africa appointed by President Cyril Ramaphosa from 27 February 2018 until his resignation on 13 November 2018. He also held the post from 25 May 2014 to 31 March 2017 as appointed by former President Jacob Zuma. He previously served as Deputy Minister of Home Affairs, Minister of Public Enterprises and Minister of Finance in the government of South Africa. He is currently a member of the National Executive Committee of the African National Congress.

<span class="mw-page-title-main">ZT3 Ingwe</span> Anti-tank guided missile

The ZT3 Ingwe (Leopard) is a modern South African multi-role laser beam riding anti-tank guided missile (ATGM) manufactured by Denel Dynamics.

Denel Aeronautics is the aviation and aerospace division of the state-owned Denel corporation of South Africa. It is one of the successors of the South African aviation company Atlas Aircraft Corporation.

<span class="mw-page-title-main">Corruption in South Africa</span> Institutional corruption in the country

Corruption in South Africa includes the improper use of public resources for private ends, including bribery and improper favouritism. Corruption was at its highest during the period of state capture under presidency of Jacob Zuma and has remained widespread, negatively "affecting criminal justice, service provision, economic opportunity, social cohesion and political integrity" of South Africa.

<span class="mw-page-title-main">Emfuleni Local Municipality</span> Local municipality in Gauteng, South Africa

The Emfuleni Local Municipality, founded in 1999, is one of three local municipalities comprising the Sedibeng District in Gauteng, South Africa. It is the westernmost local municipality in the District, and covers an area of 987 km2 at the heart of the Vaal Triangle. It is located in the former industrial heartland of Gauteng which created employment and wealth for Sebokeng, Vanderbijlpark, Vereeniging and Sharpeville. Its head offices are located at the corner of Klasie Havenga St and Frikkie Meyer Blvd, Vanderbijlpark.

Duduzile "Dudu" Cynthia Myeni is a South African businesswoman, a former chairperson of South African Airways SOC Limited, and former executive chairperson of the Jacob Zuma Foundation since September 2008.

The Denel SARA is a projected 24-passenger turboprop regional airliner with rough field capabilities. The project was announced at the Africa Aerospace and Defence exhibition in September 2014, by the state-owned defence industrial group Denel. The project has a goal of permitting landings at fields with runways shorter than 1,000m, of which there are more than 460 in South Africa alone.

Mosebenzi Joseph Zwane was the Minister of Mineral Resources of South Africa in the Second Cabinet of former President Jacob Zuma serving from 2015 until 2018. A controversial figure, Zwane resigned on 25 February 2018 following allegations of state capture and in particular his role in the Vrede Dairy Project, which helped bankroll the Gupta Family wedding.

In South Africa the Department of Public Enterprises is the shareholder representative of the South African Government with oversight responsibility for state-owned enterprises in key sectors. Some companies are not directly controlled by the Department of Public Enterprises, but by various other departments. Further, not all state owned entities are registered as companies.

<span class="mw-page-title-main">Zondo Commission</span> Public inquiry

The Judicial Commission of Inquiry into Allegations of State Capture, Corruption and Fraud in the Public Sector including Organs of State, better known as the Zondo Commission or State Capture Commission, is a public inquiry established in January 2018 by former President Jacob Zuma to investigate allegations of state capture, corruption, and fraud in the public sector in South Africa.

<span class="mw-page-title-main">Organisation Undoing Tax Abuse</span>

Organisation Undoing Tax Abuse (OUTA) is a registered non-profit Civil Action Organisation, located in Johannesburg, South Africa. The anti-corruption advocacy organisation focuses on tackling government corruption and misappropriation of public funds. It is crowd funded by the public and businesses within the Republic of South Africa.

The South African defence industry is the most advanced in Africa and one of the most advanced and largest in the world with over 20 defence companies. The defence industry provides weapons and equipment to the South African National Defence Force (SANDF) and for export customers. The South African defence industry develops weapons and combat systems such as rifles, armored fighting vehicles, tanks, artillery, military aircraft, navy ships and missiles.

References

  1. ↑ "New CEO, CFO for Denel". News24. 1 September 2022.
  2. 1 2 3 4 5 "Denel 2020 Annual Report" (PDF).
  3. ↑ "History". ArmsCor. Retrieved 23 July 2018.
  4. ↑ "Denel at risk of collapse as money runs out". 17 February 2021.
  5. ↑ "Conversion: The Case of Denel". Peter Batchelor (International Development Research Centre). 26 November 2006. Archived from the original on 24 November 2006.
  6. 1 2 "What went wrong with Rooivalk?".
  7. ↑ "Whites to qualify for Denel bursaries". news24.com. News24. 4 May 2010. Retrieved 2 March 2022.
  8. ↑ "Associated Companies | Denel SOC Ltd". Denel.co.za. 1 September 2008. Retrieved 29 September 2015.
  9. ↑ "Company Profile". LMT. Archived from the original on 21 July 2015. Retrieved 29 September 2015.
  10. ↑ Pressly, Donwald (8 September 2004). "Denel 'at doorstep of bankruptcy'". The M&G Online. Retrieved 3 August 2019.
  11. ↑ Cornelissen, Christel (18 February 2022). "Net een uit vier lugmagvliegtuie 'diensbaar'". maroela.co.za. Maroela Media. Retrieved 18 February 2022.
  12. ↑ Staff Writer (17 February 2022). "Only a fraction of South Africa's airforce is operational right now". businesstech.co.za. BusinessTech. Retrieved 20 February 2022.
  13. ↑ Gibson, Erika (6 February 2022). "The defence force is seriously wounded, and state capture of Denel played a big role". timeslive.co.za. TimesLive. Retrieved 2 March 2022.
  14. ↑ AmaShabalala, Mawande (2 February 2022). "Khumbudzo Ntshavheni in Zondo's firing line over Denel dismissals". Politics. timeslive.co.za. TimesLive. Retrieved 4 March 2022.
  15. ↑ Paton, Carol (16 February 2016). "BusinessLIVE". BusinessLIVE. Retrieved 3 August 2019.
  16. 1 2 "Denel Asia could be unlawful". defenceWeb. 17 February 2016. Retrieved 3 August 2019.
  17. ↑ Bavier, Joe; Alex; Winning, er; Reuters (30 November 2018). "'Severe crisis': Denel urgently needs partnership to survive". CityPress. Retrieved 3 August 2019.{{cite web}}: |last4= has generic name (help)
  18. ↑ Liedtke, Simone (12 July 2019). "Denel's liquidity crisis plunges employees into new financial crisis". Engineering News. Retrieved 3 August 2019.
  19. ↑ "OUTA charges Denel board chairman with corruption". defenceWeb. 4 September 2017. Retrieved 3 August 2019.
  20. 1 2 "Denel at the Zondo Commission". defenceWeb. 18 March 2019. Retrieved 3 August 2019.
  21. ↑ "Denel is going after bosses to get back 'misspent' money". TimesLIVE. 31 July 2019.
  22. 1 2 3 Larkin, Philippa (25 February 2022). "Denel ordered to pay R90m to Solidarity members or face asset seizure". iol.co.za. IOL. Retrieved 2 March 2022.
  23. ↑ Martin, Guy (19 April 2021). "Denel Land Systems unable to pay April salaries". defenceWeb. Retrieved 20 April 2021.
  24. ↑ Solidariteit Nuuskantoor (31 July 2022). "Oorwinning – Solidariteit wen armdruk teen staatsinstelling Denel". Solidariteit. solidariteit.co.za. Retrieved 7 August 2022.
  25. ↑ Ginindza, Banele (2 March 2022). "Denel loses missiles deal after banks turn a deaf ear". iol.co.za. IOL. Retrieved 20 March 2022.
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