Denel gets state bailout

State arms manufacturer latest SOE to receive money from government.
Denel's finances were hit by mismanagement under previous management. Picture: Moneyweb

State arms firm Denel said on Friday it had received a R1.8 billion cash injection from the government after a liquidity crunch left it struggling to pay salaries and suppliers in recent months.

The government will also consider a request for a further R1 billion recapitalisation in its budget for the 2020/21 fiscal year, the company said.

Read: Denel struggling to pay wages

Denel, a pillar of the country’s once-mighty defence industry, had asked the finance ministry for a R2.8 billion bailout to bolster a turnaround plan based on selling non-core assets and agreeing strategic equity partnerships, its chief executive Danie du Toit told Reuters in July. But funds weren’t initially forthcoming.

South Africa’s public finances are stretched by the need to rescue other ailing state firms such as loss-making power company Eskom and airline South African Airways, which have both already received cash injections.

“There is strong agreement that Denel is a strategic national asset that adds great value to the defence and security sectors,” the company said in a statement. It cited CEO du Toit as saying the National Treasury had imposed conditions for the bailout that Denel would follow.

Denel, whose finances were hit by mismanagement under previous management, produces military equipment from ammunition and armoured vehicles to missiles and attack helicopters. While it is a supplier to the South African armed forces, the bulk of its business comes from exports.

Saudi Arabia’s state defence firm SAMI made a $1 billion bid last year for a broad partnership with Denel, but the approach was rebuffed.

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COMMENTS   9

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It was said about the pre-war Brittish government, but it aptly describes our current government:

“Decided only to be undecided, resolved to be irresolute, adamant for drift, solid for fluidity, all-powerful to be impotent.” – Winston Churchill

No taxation without representation.

The trouble with SA Inc is that the taxpayers get to have zero say as to how their money is spent. If they did, all the waste, corruption and bailouts would be shut down with vigour.

Most of the voters don’t pay tax, and many many more are grant recipients. Ask them how they feel about Denel and you’ll get a blank stare if you’re lucky.

This point of yours is actually the reason why private companies are efficient and governments are not. Shareholders have skin in the game, so they elect representatives (board members) that will deliver the goods. Democracy implies that voters who do not have skin in the game may determine policy. This will be catastrophic if the majority does not own property, as we see in South Africa.

The anc are a national and economic disgrace!

State bailout implies the State is a productive entity whereas in reality it is destructive force like we’ve never seen before. The correct term is ‘TAXPAYER BAILOUT’ and we’re sick of it.

“Thanks SA taxpayer for topping us up with another R1.8 billion that we can steal.”

HAS ONE SINGLE PERSON been charged or jailed because of the thieving at Denel? No.

I fear the article’s title is misleading.

Please change it to “Denel gets TAXPAYER bailout”

(…Denel being a “strategic asset” my foot! What’s the point of having a defence industry, when one’s OWN Govt steals/wastes its own citizens’ funds?)

Another bailout another get out of prison card..Watch this space when the NHI becomes a reality, adding another bailout burden to this inefficient useless Government

Denel is a small SOE, wait for the new NHI, it will also be bailed out every month, every year, always, just as all other SOE’s forever.

End of comments.

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