State-owned Denel on Tuesday said it was dead set on expanding its business in Asia-Pacific markets, despite an affidavit, lodged by former Treasury director-general Lungisa Fuzile, stating that its joint venture (JV) partner is a technically insolvent company.
The aerospace and defence technology conglomerate in 2015 entered a multibillion-rand deal with Gupta-linked VR Laser Asia, which led to the creation of Denel Asia.
However, Public Enterprises Minister Lynne Brown last year stated that Denel had not applied for permission for the transaction, with the deal facing further opposition from the South African Communist Party and former Finance Minister Pravin Gordhan, who refused to approve the JV.
“The Asia-Pacific market is critical for any progressive global defence company,” Denel said in a statement on Tuesday, adding that it had chosen its JV partner though a rigorous process, which started with two major defence businesses.
It added that VR Laser Asia’s proposition was found to be the best opportunity given the financial commitment made risk-free to Denel, a demonstrable defence adjacent industry network, as well as direct links to defence capabilities.
Denel acting CEO Zwelakhe Ntshepe added that the financial commitment was adequately embedded into the shareholders agreement with the necessary default clauses to deal with the unlikely event that the commitment is not fulfilled.
He added that, since its inception, Denel Asia has not traded and that this was on instruction from Brown and the Denel board to allow the engagement process with the National Treasury which is currently under way.
“Given the competitiveness of our environment, this delay and negative publicity around Denel Asia has cost us some valuable time in positioning Denel appropriately for export opportunities that would have been of huge advantage to our developmental agenda as a nation. There are, however, still a number of opportunities opening up this market which we are resolute in chasing.
“The East-Asia market, and India, in particular, is the fastest-growing defence market in the world. This is an important region for Denel to expand its business and find new markets for our world-class products, especially in the fields of artillery, armoured vehicles, missiles and unmanned aerial vehicles,” said Ntshepe.
The parastatal further argued that research has shown that, by 2018, the Asia-Pacific nations will command more than half of global defence procurement outside of the US and two-thirds of non-US defence markets.
“We need a firm foothold in this region and the establishment of Denel Asia was meant to give us a strong presence and the ability to pursue the desperately needed opportunities in that region,” said Ntshepe.