Denel’s board said Finance Minister Pravin Gordhan’s accusation that the board and executives are “arrogant and belligerent … are unsubstantiated, baseless and unfounded”.

Gordhan made the accusation during his Treasury budget debate in Parliament on Wednesday.

This follows a statement in April, in which Gordhan said the registration of Denel Asia was illegal and contrary to the Public Finance Management Act (PFMA).

The joint venture, to be called Denel Asia and based in Hong Kong, would manufacture a variety of steel products for defence, mining, rail and transport industries and would be 51% owned by Denel and 49% owned by VR Laser Services, Reuters explained.

"The Minister of Finance is still considering this application, and further information has been requested from Denel," the Treasury said.

Denel engaging with Treasury

“Denel executives have in recent weeks met with National Treasury officials twice, addressing the misunderstanding relating to the establishment of Denel Asia,” it said in a statement on Thursday.

“During the two meetings, amongst other things it was agreed that neither National Treasury nor Denel would unilaterally make public statements on these matters until such time discussions are concluded.”

It said the establishment of Denel Asia was done in compliance with section 51(1) (g) and section 54 (2) and (3) of the PFMA Act.

Denel made headlines recently with the axing of its CEO and investigation into three senior officials, as well as allegations the company has links to the Gupta family.

Denel probe of a sensitive nature

Odwa Mhlwana, Denel’s acting group financial director, on Thursday confirmed the board’s position with regards to three executives who were put on suspension, pending an investigation.

“At the core of the allegations against these officials are issues related to the BAE LSSA transaction,” he said.

“The matters are not concluded yet and are essentially matters of a sensitive nature between an employer and an employee, so we are not at liberty to provide more detail until the matter is concluded.”

Denel is proceeding with disciplinary action against the other two officials, after it fired CEO Riaz Saloojee.

Why were trio really suspended?

Saloojee, chief financial officer Fikile Mhlontlo and group company secretary Elizabeth Africa were suspended in 2015, while the board investigated a variety of issues, including recent business acquisitions made by the state-owned company.

Public Enterprises Minister Lynne Brown told the parliamentary portfolio committee on public enterprises that the three were being investigated for irregularities in the arms manufacturer’s profit statement.

"It is widely speculated that the suspension of the three is related to the influence of the Gupta family in Denel’s business," City Press reported recently.

Fin24 sister publication Rapport has learnt that, before his suspension, Saloojee was repeatedly approached in 2014 and 2015 by other parties to become involved in arms deals, but he was not interested.

It was also learnt that there were attempts to put pressure on him to make “prescribed” appointments in Denel’s subsidiaries, and that his unwillingness to comply with these demands was the real reason for his suspension.

Denel retains Fitch rating

In another statement on Thursday, Denel said Fitch ratings agency had kept the company’s long-term ratings status as AAA (zaf) and affirmed its current short-term rating and outlook.

“So much has happened in the global and domestic economy since 2014, yet Denel has been able to more than hold its own – against all odds,” said Mhlwana.

Denel had an R815m three-year bond that matured in January. “Under the guidance of the board and in support of Denel’s growth, it was decided to re-finance the bond for a 12-month and 18-month period”.

“Denel’s bond issue was twice oversubscribed, which is a confirmation of the investor confidence in Denel,” Mhlwana said.

“It’s clear that we are on the right track, and we are confident that investor sentiment was boosted even further with the recent affirmation by the Denel board of its commitment to good corporate governance”.