State-owned defence industrial group Denel’s acting group CEO Michael Kgobe assured the Parliamentary Portfolio Committee on Public Enterprises on Wednesday that the new Denel board was carrying out comprehensive actions against corruption and dubious transactions, as well as to reinforce governance and re-establish the group’s credibility and reputation. He pointed out that the new board had, when it was appointed in April, been given a clear mandate to eliminate corruption, restore the group’s reputation and restore its profitability.
He reported that the new turnaround plan for governance was now being implemented. This was intended to establish an ethical governance culture, recreate credibility with stakeholders and restore the group’s position as an industry leader and national asset.
Already, Denel management had identified more then R315-million in irregular expenditure over the past two financial years. And R1.3-billion in other “irregularities” were being examined. He stated that a panel of forensic investigators would soon be appointed by the board to investigate irregular procurements. Irregular appointments of staff and partner businesses were also being looked into.
“Denel suffered serious reputational damage, lost credibility and the support of shareholders,” Kgobe observed. The result was that it had had to repay its debts at a faster rate, while finding it difficult to obtain credit facilities from financial institutions.
In order to return the group’s capital structure to normal, and ensure it had enough liquidity, the board had asked the government to extend its current R3.3-billion guarantee to Denel, which was due to expire at the end of September. It had also asked for a further R1-billion guarantee, so that it could pay its creditors and “unlock” its operations.
The group had been implicated in the massive "State capture” corruption scandal, in the 'State of Capture Report' issued by the Public Protector. This report included evidence of contracts that were dubious and lossmaking.
Controversial subsidiary Denel Asia (which occupied a prominent place in the Public Protector’s report) was being unwound. The process to appoint a permanent Group CEO had commenced. And a revised corporate plan had been put to the Department of Public Enterprises. Senior Group managers would be subjected to lifestyle audits. Whistle-blowing processes would be strengthened, he affirmed.