The world is changing fast and to keep up you need local knowledge with global context.
Salim Essa, a man now credited with having successfully stolen public funds from Eskom and Transnet, set his sights on Denel in 2015. Essa’s modus operandi was simple, partner with a powerful family that has political connections, in this case, the Guptas and Jacob Zuma’s son, Duduzane. Then, take over an existing company like VR Laser that is knee-deep in government tenders and inflate contract bids to score a hefty payday. Together with Rajesh Gupta and Zuma, Essa allegedly influenced the firing of Denel’s CEO, CFO and company secretary to appoint officials who would overlook procurement processes in favour of VR Laser. The rot runs deep as executives at Denel have testified they were in the dark about who the real shareholders of VR Laser were. It was only after insisting the directors share their identities for tender evaluation that Zuma, Gupta and Essa come forward, the Zondo commission heard – Bernice Maune.
A Denel project required a company that could manufacture and supply platform hulls. LNT, an in house supplier that was majority owned by Denel was the logical choice to provide the platform hulls. It already had a stellar reputation and could readily manufacture the goods. However, it had to go through a closed tender which would put it up against two other bidders, one of which was VR Laser.
Although it was no young contender – VR Laser had been doing business with Denel for 15 years – it had new ownership and had no experience in manufacturing platforms hulls.
When the bids were in for the contract, VR Laser quoted R100m more than LNT which set it’s price at R195m. Yet Stephan Burger, then CEO of Denel Land Systems, was intent on awarding the contract to VR Laser. Former Group Supply Chain Management Executive Dennis Mlambo told Judge Ray Zondo it was clear Burger wanted no one else but VR Laser.
His statement was also affirmed by Cecelia Malahlela, a manager in the procurement department at Denel. Malahlela said Burger would check in with her daily to find out how the procurement process was doing. This was strange as a person who was about two levels her senior would not follow up with her directly.
“It just didn’t make sense why people were so anxious to pay R100m more which would actually erode the bottom line of DLS. It was preposterous to me.
“There was a conflict of interest between the ownership and adjudication team. VR Laser was a 100% black-owned company but they didn’t interrogate that the individuals were not specified,” said Mlambo.
When asked to submit a document with the list of directors, VR Laser handed in one that was not certified by the CPIC.
“The document submitted, was supposedly a list of directors. It wasn’t a valid CPIC document. In my view it was a fake document. People who had submitted a conflict of interest were not really the shareholders. It was the COO of VR Laser, Mr Arora. The other people who were critical, people like Salim Essa had not submitted a declaration of interest.”
Mlambo says he only became aware of all the shareholders after chasing the COO of VR Laser for full details of all shareholders. He was shocked to find that Essa owned 75% and the other 25% was held by Zuma and other associates. There was a claim of the company being black woman-owned but there was no evidence. In addition, LNT was disregarded for the contract even though it was cheaper, because it scored lower on points.
“It actually defied logic that companies that had never manufactured platform hull were given a higher score, where the other company was given a lower score. It later turned out they relied on unrelated aspects to score the company.
“VR Laser was given a higher maximum technical score. Forty-five points were the maximum amount of points but VR Laser got 50 point something. I said to myself this is a real farce.What got me hot behind the collar was that the leadership at DLS was prepared to pay a R100m more,” said Mlambo.
Powerless to stop the contract from being awarded, Mlambo says his office would never have allowed VR Laser to even bid. He asked for an independent assessor to evaluate the tender process but his calls were ignored as Burger said it was a fair and objective process.
According to Mlambo, negotiations were happening with VR Laser during the tender process which was also suspicious and against supply chain policy.
Cyril Ramaphosa: The Audio Biography
Listen to the story of Cyril Ramaphosa's rise to presidential power, narrated by our very own Alec Hogg.