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By Rene Vollgraaff
(Bloomberg) — South Africa’s state-owned arms company Denel SOC Ltd. has exited a joint venture with VR Laser Asia, which has been linked to the Gupta family who announced the sale of their media companies and coal business this week.
Since its establishment in 2016, the joint venture hasn’t operated because of differences of opinion with South Africa’s National Treasury “at times based on perceptions and not fact,” Pam Malinda, a spokeswoman for Denel, said in an emailed statement at the release of its 2017 financial results on Friday.
“The Denel Asia JV became the focus of negative attention from the media to the detriment of the Denel brand, both locally and internationally,” she said.
The Treasury threatened court action to stop the venture, saying it was established unlawfully, and Finance Minister Malusi Gigaba, who replaced Pravin Gordhan in the post in March, said he was opposed to the deal given Denel’s fragile financial position. While the Guptas’ Oakbay Investments said in February 2016 it owns an indirect minority stake in VR Laser Services in South Africa, but no shareholding in VR Laser Asia, their business associate Salim Essa owned the Asian entity, according to Denel.
The Gupta family are selling their assets in South Africa to little-known companies as their access to banking facilities dries up. They face a backlash from politicians and civil-society groups over allegations they used a friendship with President Jacob Zuma and a business relationship with one of his sons to secure deals from the government and state companies.
Denel’s profit for the year to March was 333 million rand ($25 million) compared with 395 million rand in 2016, it said Friday.