MPs have raised concerns that Denel may be trading recklessly — but the country’s insolvent arms manufacturer's chairperson, Gloria Serobe, says this is not the case.

Denel appeared before parliament's public accounts watchdog committee Scopa to account for its 2019/20 annual report.

Denel had incurred irregular expenditure of R3.2bn during the period under review, an increase of 10% from 2018/19 when irregular expenditure was R2.9bn. The company also incurred debt of R3.4bn as of March 31, 2020 and losses of R1.9bn in the period 2019/20.

Their total assets amounted to R8.1bn while their total liabilities amounted to R10.4bn.

This prompted ANC MP Bheki Hadebe to ask whether the company was trading recklessly.

Serobe, who was recently appointed to chair the Denel board, responded that while the company's balance sheet was weak, it was certainly not trading recklessly.

She attributed its struggle to pay salaries to “hiccups, troubles and challenges”.

“But we are not at that stage where this board is saying Denel is trading recklessly,” she said. In fact, she took exception to Hadebe raising the matter at a public meeting, saying the question had the potential to create more anxiety.

“It's quite a big statement to make, so I can say, today, absolutely not,” she said.

Serobe said the board would do the right thing and follow all the required processes with creditors, unions and the shareholder if the company was trading recklessly. She said while Denel looked distressed financially, they had plans that they say are doable to deal with that financial distress. One of them is getting rid of their noncore assets, she said.

In the meantime, she said the company needed the support of the shareholder, referring to government, and that the gaps were a result of legacy issues which were being dealt with at the Zondo commission.

Serobe had repeatedly decried the fact that Denel did not receive a government bailout last year, saying the company cannot trade itself out of its financial problems, at least not in the short term, especially as its market was being tampered with by Covid-19.

“It was quite overwhelming for us that almost every entity has had to look up to the shareholder for support because these were abnormal periods, but for Denel even worse because of the nature of the business we have.

“It was quite overwhelming for the board to see no support from the Treasury ... ” she said.

MPs from across the political party spectrum were angered by her response to the trading recklessly question. They lashed out, accusing her of seeking to prescribe what questions to ask, saying that as Scopa they don't ask sweetheart questions or sugar-coat issues.

The basis of their concern was that SAA had been in a similar position at some point, they said. “Denel's financial position is speaking volumes for itself,” said Hadebe.