Gordhan lauds improvement at Denel
PUBLIC Enterprises Minister Pravin Gordhan has commended board members at Denel for their efforts to help the entity recover from the damage caused by state capture.
According to Gordhan, the board has made significant inroads in restructuring the entity. He however emphasised that there was no “quick fix” for corruption.
The new board was appointed in 2018 after the minister’s appointment to the portfolio. At the time, he said the birth of the board was to stabilise the state-owned entity, restore its financial standing, and root out corruption.
In response to questions by the DA’s Michéle Clarke, Gordhan indicated that one of the successes which Denel saw was the cumulative cost savings in excess of R1 billion from April 2018 to September 2020.
He said this was mainly driven by a 27% reduction in employee numbers.
In 2019, the board approved Denel’s turnaround plan with the aim to refocus the business to reduce duplications and dispose of non-core assets.
Gordhan said in addition to the recovery plan there was the exit of loss-making subsidiaries which could result in an expected annualised saving of about R260 million.
He said there was the doing away with onerous contracts and a 43% forecasted reduction in operating expenditure in the 2020/21 financial year.
Gordhan Denel would see improvements to governance and would co-operate with the Commission of Inquiry into State Capture and the Special Investigating Unit (SIU).
In a briefing to the standing committee on public accounts last week, Denel’s acting chief executive William Hlakoane said the stated-owned company was technically insolvent because it was unning on a R360m budget deficit, while the revenue budget was at risk, at R3.7bn, due to liquidity.
The committee heard that Denel owed R636m to its employees in salaries, pension funds and medical aid schemes, and R900m to suppliers.
Earlier this month, Hlakoane announced that the recovery plan included reducing Denel’s operating divisions (plus one subsidiary) from six to two.
Hlakoane estimates that the sale of non-core or non-profit making assets would realise a value of about R1.5bn over the next five years.
“However, much still needs to be done to reposition Denel and return it to functionality and profitability. A challenging road will have to be traversed to get to this point. Recovery from the huge damage done to these institutions by state capture is a challenging task. There is no ‘quick fix’ in this regard,” Gordhan said.