Throwing billions at 'money pit' Denel won't fix it, says the DA's Natasha Mazzone
Throwing billions at Denel won’t fix the troubled state-owned arms manufacturer which is in need of an overhaul, says the DA’s Natasha Mazzone.
She was responding to the news that the government had extended a R1.8bn bailout to Denel which she referred to as a “money pit”.
“We are of the view that this billion rand bailout for a defunct state-owned entity is not sustainable.
“Simply throwing money at Denel won’t fix it. The arms manufacturer needs an overhaul,” Mazzone said.
She added that an “incredulous amount of the people’s money” had been spent on SOEs, yet the public was getting very little in return.
“It is no longer rational or feasible for government to have full ownership of Denel and it should be partially privatised. There are many defence companies in the world that would be interested in buying off shares and government should explore these possibilities,” Mazzone said.
She said bailouts provided temporary relief to state-owned entities but caused permanent damage to the national fiscus.
“By privatising this entity, we will reduce the impact of government guarantees on the fiscus, promote competitiveness, improve efficiency and stimulate job creation,” she added.
Denel, which has been struggling to pay salaries, said it had received R1.8bn from the government to help it stay afloat while it developed a long-term survival strategy, BusinessLIVE reported.
“We are grateful for the unwavering support that we receive from our shareholder, the government, and the National Treasury,” it quoted CEO Danie du Toit as saying in a statement on Friday. “It demonstrates a confidence at high level for the measures taken by the new board and management and a commitment to support us through the next stages of the turnaround.”
According to BusinessLIVE, Denel, which is one of several state-owned enterprises (SOEs) whose financial distress after years of mismanagement and corruption has put the country’s last remaining investment-grade rating at risk, had asked for R2.8bn. Denel said the other R1bn would be considered during the process of preparing the 2020/2021 budget process.
Du Toit was quoted as saying the company, which sold R50m worth of two-year floating-rate notes this month, had received the funding after satisfying the Treasury that it was making progress in restructuring its business, entering new strategic partnerships, and finding new markets for its technology.
Denel, which fell into an operating loss of R1.7bn in the 2017/2018 fiscal year, had been promised funds from the Treasury contingency reserve and was rescued by banks in June, BusinessLIVE said.
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