Denel

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Denel SOC Ltd
TypeState-owned enterprise
IndustryAerospace and Defence manufacturing
Founded1992
HeadquartersCenturion, City of Tshwane, Gauteng, South Africa
Area served
Worldwide
Key people
Talib Sadik
(CEO)[1]
Carmen Le Grange
(CFO)
ProductsMissiles
Cruise missiles
Attack Helicopters
Transport Helicopters
UAVs
Armoured vehicle turrets
Glide bombs
Artillery systems
Ammunition
RevenueDecrease R 2.729 billion (FY 2020)[2]
Decrease R -1.5 billion loss (FY 2020)[2]
Decrease R -1.9 billion loss (FY 2020)[2]
Total equityDecrease R 2.277 billion (FY 2020)[2]
Number of employees
Decrease3,137 (FY 2020)[2]
ParentGovernment of South Africa
Websitewww.denel.co.za

Denel SOC Ltd is a South African state-owned aerospace and military technology conglomerate established in 1992.[3] It was created when the manufacturing subsidiaries of Armscor were split off in order for Armscor to become the procurement agency for South African Defence Force (SADF), now known as the South African National Defence Force (SANDF), and the manufacturing divisions were grouped together under Denel as divisions. The company had been experiencing major financial problems since 2015 and in 2021 it was announced in Parliament that Denel was on the brink of insolvency. The company stated that its woes were due to declining local defence budgets, weakened relationships with key customers and suppliers, the inability to retain or attract skilled personnel, ongoing salary disputes and a Fitch ratings downgrade.[4]

History[]

Denel was established as a state-owned industrial company under the Department of Public Enterprises in April 1992. It inherited most of Armscor's production and research facilities, and over 15,000 employees. At the time of its formation, Denel restructured and reorganised the former Armscor subsidiaries into a number of divisions and subsidiaries within five industrial groups: systems, manufacturing, aerospace, informatics, and properties and engineering services.[5]

Denel has developed a number of notable products, such as:

  • The Rooivalk attack helicopter.
  • The Atlas Oryx utility helicopter.
  • The Umkhonto vertical launched air defence missile.
  • Mokopa tandem warhead anti-tank guided missile, with a range of 10 km.
  • Together with Gerald Bull, the G6 self-propelled howitzer and G5 towed howitzer, the longest ranged guns in their class worldwide, supported with base bleed, VLAP and the advanced fuzing technology.
  • The 5th generation A-Darter air-to-air missile, currently in the final phases of development.

The Overberg Test Range is used for advanced aerial testing of missiles by Denel and other clients such as NASA, EADS and BAE Systems.

Though Denel's market share is increasing, it still has not signed significant international contracts that will bring a real market return for its investments in development and research costs. In 2006, Denel signed a contract with the Finnish Navy for the Umkhonto air defence missile; this was a significant step, since it was the first significant sale to a western nation. The Swedish defence force was also interested in the Umkhonto missile, but due to budget constraints had to put its purchase on hold.

Although Denel has comparable quality products, at lower prices, it has struggled to attract buyers, with the Rooivalk attack helicopter being a prime example of this. After being developed at a cost of R1 billion,[6] no sales were made as the contract from Turkey for $2 billion was lost. The development of the Rooivalk, which could be Denel's most profitable project, also threatens to result in its largest loss ever.[6]

Divisions[]

The following divisions form part of Denel

Associated companies[]

Companies part-owned by Denel.[7]

  • (Airbus Defence and Space owns 70% and Denel holds 30% of the shares)
  • Rheinmetall Denel Munition (Rheinmetall holds 51% and Denel holds 49% of the shares)
  • (Turbomeca owns 51% and Denel holds 49% of the shares)
  • (Denel holds 51% of the shares)[8]

Financial difficulties[]

In 2004 Denel CEO Victor Moche informed parliament that the company was near bankruptcy after suffering a loss in the financial year 2003/4 of R358 million contributing to a mounting company debt of R1 billion. This was blamed on a lack of access to foreign markets and not being able to secure domestic arms procurement contracts.[9]

In 2016 it was revealed that Denel had entered into a controversial single source supplier deal for ten years with VR Laser.[10][11] The deal was controversial due to the generous terms of the contract and because VR Laser was owned by the Gupta family which had close ties to then South African president Jacob Zuma.[11] This contributed to Denel incurring a loss, the first in eight years, amounting to R1.7 billion putting the company in financial difficulty.[12] This led to Denel not being able to pay staff and company pensioners.[13] In 2017 the civil society group Organisation Undoing Tax Abuse (OUTA) (OUTA) stated that it had laid corruption charges against the company's chairman Daniel Mantsha.[14] In March 2019 Denel representatives gave testimony to the Zondo Commission about the company's deal with the Gupta owned VR Laser.[15] Department of Public Enterprises Acting Director-General stated that the deal resulted in up to R3 billion in lost revenue for Denel.[15] Following the conclusion of forensic investigations into allegations of corruption in Denel the company announced in July 2019 that it would seek to recoup misspent money by pursuing civil and criminal action against former company executives.[16]

The State owned company's financial troubles continued into 2021. In April 2021 Denel Land Systems was unable to pay its employees their salaries.[17]

References[]

  1. ^ "New CEO, CFO for Denel". FIN24. 26 October 2017.
  2. ^ a b c d e "Denel 2020 Annual Report" (PDF).
  3. ^ "History". ArmsCor. Retrieved 23 July 2018.
  4. ^ "Denel at risk of collapse as money runs out". 17 February 2021.
  5. ^ "Conversion: The Case of Denel". Peter Batchelor (International Development Research Centre). 26 November 2006. Archived from the original on 24 November 2006.
  6. ^ a b "What went wrong with Rooivalk?".
  7. ^ "Associated Companies | Denel SOC Ltd". Denel.co.za. 1 September 2008. Retrieved 29 September 2015.
  8. ^ "Company Profile". LMT. Archived from the original on 21 July 2015. Retrieved 29 September 2015.
  9. ^ Pressly, Donwald (8 September 2004). "Denel 'at doorstep of bankruptcy'". The M&G Online. Retrieved 3 August 2019.
  10. ^ Paton, Carol (16 February 2016). "BusinessLIVE". BusinessLIVE. Retrieved 3 August 2019.
  11. ^ a b "Denel Asia could be unlawful". defenceWeb. 17 February 2016. Retrieved 3 August 2019.
  12. ^ Bavier, Joe; Alex; Winning, er; Reuters (30 November 2018). "'Severe crisis': Denel urgently needs partnership to survive". CityPress. Retrieved 3 August 2019.
  13. ^ Liedtke, Simone (12 July 2019). "Denel's liquidity crisis plunges employees into new financial crisis". Engineering News. Retrieved 3 August 2019.
  14. ^ "OUTA charges Denel board chairman with corruption". defenceWeb. 4 September 2017. Retrieved 3 August 2019.
  15. ^ a b "Denel at the Zondo Commission". defenceWeb. 18 March 2019. Retrieved 3 August 2019.
  16. ^ "Denel is going after bosses to get back 'misspent' money". TimesLIVE. 31 July 2019.
  17. ^ Martin, Guy (19 April 2021). "Denel Land Systems unable to pay April salaries". defenceWeb. Retrieved 20 April 2021.

External links[]

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