Public Enterprises Minister Malusi Gigaba has instructed the board of State-owned Defence industrial group Denel to develop a strategy to increase its sales in Africa. He pointed out that government wanted Denel to be a global player, including supplying South Africa and Africa.
“The global economic downturn has continued to impact on the growth opportunities of many industries across the world, including defence. However, emerging markets’ defence expenditure is expected to be resilient,” he pointed out at the recent Denel defence industrial group 2012/13 financial results presentation. “In pursuit of African business, I’ve directed the [Denel] board to develop a comprehensive African strategy and align it with the Department of [Public Enterprises’] own strategy, so the company can leverage off the government’s diplomatic policy in the continent.”
In answer to a question from a journalist, Gigaba affirmed: “[W]e believe in Africa. We believe we need to become a significant player in Africa – Africa not only as a buyer of our products but also as a partner in our programmes. We believe that we have technical skills and other skills that we can use in partnership with Africa . . . [and] leverage in developing partnerships between Africa and the world. Africa as a whole is a good platform for us to grow our leverage and power.”
He affirmed that this did not mean that there was going to be any neglect of the Middle Eastern or Brics (Brazil, Russia, India, China and South Africa group) markets. He noted that the company was doing well in Africa but he wanted it to do even better. “We have an ambitious agenda,” he stated. “We do not want foreign countries, whether they come from Asia, Europe or South America, to dominate Africa.”
At its results presentation, State-owned Denel announced that it had posted a profit for the third consecutive year. Unveiling its results for the 2012/13 financial year, the group reported that it had increased its revenues by 10% over the previous financial year. Net profit came to R71-million. This success was attributed to a 34% rise in exports, from R1.329-billion to R1.783-billion. Exports had increased to all of the group’s target markets – Asia-Pacific, the Middle East and South America. The domestic market accounted for 55% of total revenue, or R2.135-billion.
“I am encouraged by the company’s financial performance in the year under review,” said Gigaba. “I am, however, the first to admit the company is not out of the woods.” Denel board chairperson Zoli Kunene noted that these were “pleasing results”.
“The board welcomes the improvement in the operational and financial performance of the company. It demonstrates the robust- ness of Denel’s turnaround strategy. The board is proud of Denel’s contribution to broader national development, particularly in advanced manufacturing and technology.”
“Denel has earned an international reputation in a number of niche areas,” highlighted group CEO Riaz Saloojee. These included missiles, unmanned air vehicles, demining and artillery systems. He reported that the group had newly concluded contracts worth R22-billion over the next seven to ten years.
For the future, the company had invested R528-million, including R142-million of its own funds, in research and development in the last financial year. At least R46-million had been spent on skills development, parti- cularly in the technological and engineering disciplines.
The group has successfully restructured its R1.185-billion short-term debt into a mixture of short-term debt and three-year and five-year bonds. Denel expects to remain profitable and to achieve significant revenue growth in the medium term. Ratings agency Fitch has upgraded Denel’s long-term rating from negative to stable.