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The wheels of the State bus go round and round, to mangle a popular children’s ditty, but heck why aren’t we moving? That sums up the explanation Denel gave parliament for going ahead with its joint venture with the Gupta and Duduzane Zuma– linked company, VR Laser Asia. It complied with the Public Finance Management Act by filing an application with Treasury and the Public Enterprise ministry. Denel says both ministries took longer than the required 30 days to respond (after which approval is deemed as granted). In fact, they took 56 days, so they went ahead and with the venture. There are two givens. One is that our government’s administration is pretty dysfunctional. The other is that anything vaguely linked with a Gupta-owned company must be treated as potent radioactive material. The clicks of radioactivity must have been deafening, so why did Denel still go ahead? Now we have the new Finance Minister Malusi Gigaba backing up his predecessor by not only questioning the deal but ordering Denel’s board chairman to withdraw a court interdict against Gordhan, who blocked it. Gigaba may be a Zuma man, but he’s guarding the contents of the coffers. – Chris Bateman.
By Liesl Peyper, Fin24
According to a report in the Sunday Times, Gigaba “summoned” Denel board chairman Dan Matsha to Durban – where the World Economic Forum on Africa took place – to raise concerns about the intended deal.
Gigaba allegedly also told Mantsha to withdraw Denel’s high court application against National Treasury which under former finance minister Pravin Gordhan did not want to authorise Denel’s joint venture with VR Laser Asia.
Denel is challenging Treasury in court over its blocking of the intended joint venture with VR Laser.
The Gupta’s business associate Salim Essa is the sole shareholder of VR Laser Asia as well as a director of VR Laser RSA – VR Laser – a company with close ties to the Gupta-family and President Jacob Zuma’s son, Duduzane.
Both Mantsha and Gigaba’s spokesperson Mayihlome Tshwete confirmed to the Sunday Times that the meeting had taken place.
“The Minister raised a concern with the board chairperson that the joint venture didn’t make business sense to the National Treasury,” the Sunday Times quoted Tshwete as saying. He added that the financial implications of the deal is a “matter of serious concern”.
VR Laser, which supplies steel products to South African state-owned steel maker Denel, has been the subject of controversy since January last year when it emerged that the company registered a controversial joint venture with Denel Asia in Hong Kong.
Gigaba has told Denel to can planned billion rand deal with Gupta linked company saying it does not make financial & fiscal sense : S. Times
— Sure Kamhunga (@sure_kamhunga) May 7, 2017
National Treasury subsequently declared the agreement illegal because it hadn’t been authorised by then finance minister Gordhan.
In 2013, VR Laser landed a lucrative contract from Denel for 238 Badger vehicles to the value of R10bn, City Press reported.
During the course of last year, the board and senior management of Denel repeatedly defended the intended joint venture with VR Laser, maintaining that the transaction was above board, and fiercely criticised National Treasury’s blocking of the deal.
At a parliamentary briefing last year, Denel acting chief financial Odwa Mhlwana explained the process Denel followed with the establishment of the joint venture with VR Laser Asia.
IMHO, Malusi Gigaba's "cancellation" of the Gupta-Denel deal was stage-managed to make him look decisive
— Public Protester (@Pasco_e) May 7, 2017
“We submitted a pre-notification to inform our shareholder (Public Enterprises Minister Lynne Brown) and National Treasury of our strategic rationale and approach. We informed them as early as 29 October last year,” Mhlwana said at the time.
He added that Denel did indeed submit the necessary application in accordance with the Public Finance Management Act (PFMA) to the department of public enterprises and National Treasury.
“But because no response was received in a reasonable time (regarded as 30 days) Denel went ahead and founded the joint venture.
“If you don’t hear from these departments you may deem that approval has been granted,” Mhlwana said. “We did not form the joint venture immediately, but waited 56 days after the application. Due process was followed.”
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