The new Board of Denel has initiated wide-ranging steps to combat corruption, strengthen governance, investigate dubious transactions and restore the organisation’s reputation and credibility.
Acting Group CEO, Michael Kgobe, told Parliament’s Portfolio Committee on Public Enterprises today that a new governance turn-around plan is already in place to rebuild credibility with stakeholders, instil an ethical governance culture and restore its position as a national asset and industry leader.
The new Board was appointed in April with a firm mandate to root out corruption, return the business to profitability and rebuild the reputation of the defence and technology company.
A revised corporate plan has already been presented to the Department of Public Enterprises and the process to appoint a new, permanent Chief Executive Officer for the group has started.
Mr Kgobe said “Denel suffered serious reputational damage, lost credibility and the support of stakeholders” following reports of lapses in governance and increased irregular expenditure. Denel was implicated in the Public Protector’s “State of Capture Report” and evidence of dubious and loss-making contracts that were exposed in the public.
This contributed to a situation where the company was forced to repay loans at an accelerated rate and funding institutions are unwilling to extended credit facilities to Denel. The company is subsequently experiencing a liquidity crisis which is having a material impact on operations and delays on a number of key contracts.
One of the Board’s priorities is to normalise the company’s capital structure and inject sufficient liquidity into the business. It has requested Government to extend its current guarantee of R3.3bn when it expires at the end of September and provide an additional R1bn guarantee to pay creditors and unlock its operations.
Management has already identified irregular expenditure of more than R315m for the past two financial years while further irregularities to the value of R1.3bn are being investigated.
Mr Kgobe elaborated that the Board of Directors will be appointing a panel of forensic investigators shortly to probe procurement irregularities while a process is underway to unwind Denel Asia, the company that featured prominently in the Public Protector’s report.
Senior executives at Denel will undergo lifestyle audits and irregular appointments of employees and business partners are being investigated. Steps are being taken to strengthen processes for whistle blowing and a comprehensive campaign will be launched to make employees aware of the need to comply with policy and regulatory requirements.
The Chairman of the Board, Ms Monhla Hlahla led the Denel delegation.
For further information, contact:
Group Executive: Communication & Public Affairs
Cell: +27 (0) 79 511 6257
Tel: +27 (0) 12 671 2662