Denel stands naked on the battleground – PIC battalion called up

CAPE TOWN — Denel was once a thriving, proud producer of world-class weapons and munitions, with combative and/or threatened countries beating down it’s door to get their hands on long range artillery pieces or cleverly designed armoured patrol and mine-resistant vehicles. Today, thanks to sustained jiggery-pokery during the Zuptoid years (and mismanagement before and after), Denel, together with Armscor, SafAir, Eskom, the SABC and several other SOEs are being bailed out to the tune of billions – just to keep going. The IMF estimates that the total debt of the SOEs would add 13.5% to our overall national debt. Mismanagement and corruption at Denel required a government guarantee of R850 million this last December, simply to pay salaries and suppliers. Since then it’s got worse. Yet again, the Public Investment Corporation, PIC, comes to the rescue, risking the retirement savings of an estimated 2.1 million civil servants. We’re a nation of burgeoning pen-pushing bureaucrats funding still-dodgy state enterprises. Nice work if you can get it – just a pity about the long-term financial security of civil servants. – Chris Bateman

By Colleen Goko

(Bloomberg) – South Africa’s state-owned arms manufacturer Denel SOC Ltd. has a multi-billion rand debt problem and no plan as yet on how to tackle it.

Denel has R2.34 billion ($186 million) of bonds maturing in September, a tough ask for a company in the midst of a liquidity crisis. The Pretoria-based company, beset by allegations of mismanagement and corruption, required a government guarantee of R850 million in December to to raise money to pay salaries and its suppliers.

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The company said it’s in talks with the National Treasury and hoped to have a plan in place by the end of June to deal with its debt obligations. They would also “attempt to develop long-term solutions to the current liquidity challenges,” Vuyelwa Qinga, group executive for communication and public affairs, said in an emailed response to questions.

Denel paid about R30 million in coupons due on two of the bonds on Monday and would meet other interest payments still outstanding, Qinga said.

The majority of Denel’s debt is held by the Public Investment Corporation, which oversees about R2 trillion of state employees’ retirement savings. Those benefits are guaranteed by the government and in the case of lower-than-projected investment returns, taxpayers ultimately have to fund the shortfall.

Public Enterprises Minister Pravin Gordhan appointed a new board for Denel in April.