Denel, the State-owned armaments manufacturer whose primary mandate is to equip South Africa's armed forces, says it is appointing an executive team to lead the organisation and bolster its efforts to improve governance, restructure and stabilise the organisation to fulfil its mandate.

On Wednesday Gloria Tomatoe Serobe, the interim chair of Denel, told Parliament's Standing Committee on Public Accounts (Scopa) that the process to appoint a group chief executive, a chief financial officer (CFO) and a chief audit executive would be completed during the current financial year.

These critical positions are currently occupied by interim appointments.

While Serobe was telling the committee of Parliament about attempts to recruit permanent executives to the group's executive, some MPs were amused when her own status on the board came into question. The Deputy Minister of Public Enterprises, Obed Bapela, who led the Denel delegation to the meeting, did not know whether Serobe was a permanently appointed chair, or was interim chair of the board. 

The board is appointed by the minister of public enterprises.

Serobe explained that she was acting as chair, as the previous chairperson had resigned and left the board.

The board itself is down to six members, less than half its full strength of 13 board members, in terms of the memorandum of incorporation.     

This, however, did not affect the ability of the board to play its oversight role, according to Serobe, who said:

I'm quite comfortable that you can't have a better board than this, in terms of the mixture of hardcore skills.

Denel has had no fewer than seven acting and permanent chief executives over the past seven years. The current acting chief executive, Michael Kgobe, was appointed into the position in September 2022. The current chief financial officer has also been in an acting capacity since 2021.

The instability in the executive and board levels of Denel came to a head during 2015 when then-chief executive officer Riaz Saloojee was suspended by a newly appointed board led by Daniel Mantsha, together with the then-finance director and company secretary.

Saloojee later testified to the Zondo Commission of Inquiry into State Capture that he had declined and objected to improper advances by members of the Gupta family and then-Public Enterprises Minister Malusi Gigaba to award business deals and partnership to entities linked with the family. 

The group has been struggling to pay the salaries of its staff and has been unable to pay its suppliers and service its debt for the better part of the past five years. It has run out of orders for its equipment, depleting revenue streams, and has not been able to fully supply the primary equipment for the South African National Defence Force.

Up until 2015, Denel was a profitable, well-run enterprise that had just under R2-billion in cash, as well as an order book in excess of R35-billion. It also had five years of clean audits.

The last financial statements Denel published were for the year ended March 2020.

"We do have a financial issue at Denel. And we have concentrated on solving that and have made great progress over the past three years," said Serobe.

In March, Denel received R1.8 billion in funding assistance from National Treasury. The group is also in the process of selling some of its remaining non-core assets as part of its turnaround plan.

"On the issue of the CEO and the CFO, both are acting at the moment. Now that we are in a better position, the process to source the CEO and CFO has actually started. The board committee is busy with that," said Serobe, who added that previous attempts to recruit suitable candidates did not attract the correct quality of applicants. 

Kgobe explained in a statement that other critical senior management vacancies in the organisation are planned to be filled by September 2023.

Kgobe admitted Denel had lost a lot of engineering skills as more than 100 of its senior engineers have been recruited by foreign companies over the past year.

Denel currently employs 1 670 people across the group, down from 2 500 last year, said Thandeka Sabela, interim chief financial officer.  

Kgobe said he was confident the group will be able to win some new contracts during next year.