How deep does the looting go?

Deeper than we think or would like to believe if you consider the hastily issued press statement sent out by the state-owned Denel Group on the 15th December 2017 confirming to its employees that it would pay the December 2017 salaries, as well as the outstanding 13th cheque payments. The announcement came after a week of intense engagements the company held with its shareholder representative, the Department of Public Enterprises, and the National Treasury, about its severe liquidity challenges.

Denel was forced to issue the statement after meeting with representatives from Trade Union Solidarity, who in turn issued the following statement quoting Solidarity’s deputy secretary general Deon Reyneke: “This is yet another telling example of a state-owned entity that is suffering severe losses as a result of mismanagement while its workforce – and the entire South Africa for that matter – have to suffer the consequences. The company is still short of around R130 million just to make its December salary payments. This is in addition to the huge amounts of debt which its creditors are now demanding.”

In addition, the union has declared a dispute with Denel because, Solidarity affirms, the company “squandered money” that should have been ring-fenced for its employees, to pay their annual bonuses (13th cheque). This money formed part of the workers’ “cost packages”.

“Not only could Denel employees go without pay this month but the company, without having obtained the necessary permission to do so, has also exhausted the money workers have paid themselves to receive a thirteenth cheque. That is unheard of,” asserted Reyneke.

“Solidarity will not hesitate to do the necessary should Denel not fulfill its contractual obligations towards its employees.”

If you go back to September 2015 it was revealed that Denel Group CEO Riaz Saloojee, chief financial officer Fikile Mhlontlo and group company secretary Elizabeth Africa were suspended, while the board investigated what they called a variety of issues, including recent business acquisitions made by the state-owned company.

Saloojee said later in 2016: “It was Denel chairman Daniel Mantsha’s board who verbally told me on September 10 last year my contract will, without a doubt, be extended for another five years. Two weeks later he suspended us.” This was in response to Saloojee finding out in April 2016 that he had been officially fired without being found guilty of any misconduct. The timing of his discharge was suspicious and lent credence to the notion that his dismissal was linked to his refusal to broker arms deals with the politically connected Gupta family. Our erstwhile Public Enterprises Minister Lynne Brown linked the firing to “discrepancies with a profit declaration”.

However, at the same time the “dodgy” VR Laser/Denel joint venture that planned to set up a company, Denel Asia, in Hong Kong were also disclosed. Denel did exit this deal in 2017, as the joint venture hadn’t operated because of ‘differences of opinion with South Africa’s National Treasury’.

More recently the Sunday Times newspaper claimed that it has been informed by a reliable source that the government of Qatar is negotiating with Jacob Zuma about possibly buying a majority share in Denel.

Denel was among the state entities bailed out last year to prevent a call on its government-guaranteed debt. This list includes South African Airways, the South African Post Office and the South African Broadcasting Corp. which all may require further intervention, the National Treasury said in its mid-term budget report.

I have been told that Denel’s creditors have not been paid since October 2017 and are not expected to get payment in the near future. Brown has even admitted to this. So how deep does the looting of SOEs continue to go unabated? It seems like the money is starting to run out. Where next will the attack come from?