State-owned South African defence industrial group Denel is preparing an application for funding from the R13-billion contingency reserve announced by Finance Minister Tito Mboweni in his 2019/20 Budget speech. “We know that [the] government is cognisant of the fact that Denel is in need of additional liquidity to rebuild its finances,” stated Denel Group CEO Danie du Toit.
This is one of the reasons why the group is confident that the issues raised about it by international ratings company Fitch will be successfully dealt with. Fitch ratings recently cut Denel’s national long-term rating from AA– (zaf) to B(zaf).
In addition, the new board and management has carried out a strategic business review and has developed a turnaround and growth strategy. This has included the determination of the scale and correct timing of government support.
The new strategy also involves the creation of strategic equity partnerships for some of its business units, and the disposal of noncore assets, including under-used sites. The strategic equity partnerships would serve to strengthen access to markets and support the development of new technologies.
“The board has [also] taken far-reaching steps to restore good corporate governance,” highlighted Du Toit. “We have a new experienced management team, with a number of executive positions currently being filled as we speak. We have a new strategy and a management structure that has recently been approved to stabilise Denel and achieve long-term growth.”
Furthermore, the group has created an investigation team, to look into all occurrences of “possible irregular expenditure” and to recommend corrective actions. “There will be consequences for those executives implicated in irregularities including disciplinary and legal action taken against the individuals,” he assured.
“The board has committed to growing the confidence of our stakeholders and ensure that Denel once again becomes attractive to customers,” he affirmed. The group is capable of securing its order pipeline and delivering its high quality defence products to both local and international customers.