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State capture: Witness breaks down explaining how Guptas captured Denel

Mawande AmaShabalala Political journalist
Denel Land Systems' former chief executive allegedly aided and abetted the capture of the state-owned company by the Gupta family. File photo.
Denel Land Systems' former chief executive allegedly aided and abetted the capture of the state-owned company by the Gupta family. File photo.
Image: REUTERS/Siphiwe Sibeko

Former contracts manager at Denel Land Systems (DLS), Celia Malahlela, was in tears at the state capture inquiry on Tuesday when she recalled how the Gupta family captured the state-owned company.

Malahlela was testifying about three contracts the company had awarded to VR Laser, a company linked to the Guptas and former president Jacob Zuma’s son Duduzane Zuma.

She said she was forced to leave DLS, which is a subsidiary of the state-owned weapons manufacturer Denel, because her attempts to stop Gupta capture were ignored.

She testified how then DSL chief executive Stephan Burger watered down her complaint about how continued awarding of contracts to the Gupta-linked company would reverse the good work they had done.

This was despite Malahlela, in an e-mail to Burger complaining about the Guptas, having sung praises to Burger for turning DLS from a division with an annual turnover of R300m to more than R2bn.

According to her, this great work was being undone by Burger, who looked the other way and aided irregularities for the benefit of VR Laser.

She highlighted three contracts awarded to the company in three successive years.

The first was in 2014, with a potential value that was first estimated at R365m but because that amount could not be approved by Burger without going to the board, it was reduced to R192m.

VR Laser, for this contract, was appointed even though LMS, a company which had also submitted a bid and was majority owned by Denel, quoted R100m less.

Malahlela said Burger was determined that the contract be given to VR Laser and was obsessed with getting updates from her as an official at supply chain management.

“It was not ordinary for the CEO to come to my office and ask me about procurement issues. He demanded regular updates and asked me to give him feedback on a regular basis,” said Malahlela.

“I sent him an e-mail and he responded that he was prepared to defend VR Laser as they were number 1 in point scoring,” she said.

In 2015, VR Laser was again favoured for another contract, this time for steel components.

In this instance, DLS employed the “sole supplier” approach to avoid going out on open tender. This was done even though Malahlela, as contracts manager at SCM, advised that the tender be open to other suppliers.

That was not her only advice ignored as she had also said the contract must be limited to three years.

In the end, Burger and others went behind her back, signing an agreement with VR Laser for 10 years without the process going on open tender.

However, group executive for supply chain management Dennis Mlambo refused to sign it off.

The last straw, Malahlela testified, was in 2016 when the third contract was awarded to the Gupta-linked company.

This job had already been given to LMS the year before but was cancelled after it failed to meet time frames, occasioned by DLS changing the specifications after the order had been issued and accepted by LMS.

It was to be awarded to VR Laser in 2016, forcing Malahlela to throw in the towel in her fight to point out the flouting of processes.

Malahlela broke down in tears when her evidence got to the point of reading an e-mail she wrote to Burger complaining about Gupta capture, forcing a short break to collect herself.

When the inquiry resumed, she read the email dated April 20 2016, which in part reads: “Hi Stephan [Burger]. With you having signed the preferred supplier agreement with VR Laser and Denel having been in the media for its strategic alliance with VR Laser.

“Having read several media reports about allegations of state capture by the Gupta family, more concerns are raised about the viability of the partnership and the risk Denel will be exposed to should it continue with its alliance with VR Laser.

“I am struggling to turn a blind eye to this phenomenon. I would like to reiterate that it is my humble opinion that DLS failed to follow due process when appointing VR Laser as preferred supplier for steel components and fabrications. Among other irregularities there was no RFQ [request for quotations] or tender issued for the award of this contract,” she read.

“I would also like to bring it to your attention that the current CEO of VR Laser has acknowledged their ties with the Gupta family and the president’s son (through indirect shareholding). In light of all these facts, I would like to request that DLS carefully reconsiders VR Laser as a preferred/strategic supplier.

“Denel is a strategic asset of this country and I am proud to be associated with it. It gives me great pleasure to wake up every morning to serve this country. We are no doubt a great company. However, with the rate at which this controversy is unfolding, I am not certain this company will survive long enough for my children to see it. We ought to be proud of what we have accomplished. Equally so, we should do whatever it takes to protect this great legacy.”

Malahlela concluded her testimony on Tuesday afternoon.


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