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For the first time since 2016/17 arms manufacturer Denel has posted a profit before interest and tax (EBIT) of R390 million in the financial year ending March 31 2023. The entity, which has not produced financial statements since 2020 to date, is finally in the black after being hollowed out by corruption and fraud during the state capture years.
In 2019, it posted a loss of R1.9 billion and another R1.5bn loss in 2020. It's understood to have made a loss of R859 m in 2021 and another loss of R747 m in 2022.
READ: Denel restructuring continues despite allegations of malfeasance
Tryphosa Ramano, a board member and member of the audit and risk committee, told Members of Parliament’s standing committee on public accounts (Scopa) on Wednesday that the entity was in the black following government cash injection in March of R3.4 bn and the sale of its non-core assets to the tune of R1.8bn. Denel was also able to access the surplus funds held in its medical benefit trust raising nearly R1 bn to help resolve its liquidity problems.
Acting group CFO Thandeka Sabela said:
She said the company’s 2020/21, 2021/22 and 2022/23 financial statements have now been submitted to the Auditor-General, and auditing had commenced after delays because of liquidity challenges.
“We had to table a payment plan to the AG. We’ve started making payments to the AG and since then, the AG has commenced with the audits. We’ve submitted financials for the March 2023 year-end. The expectation is that they will audit these concurrently. We are waiting for the final date when all those audits would be completed at which date we will be able to table both the outstanding annual reports and the annual report for 2023.”
Sabela said irregular expenditure had dropped by 98% with investigations of legacy irregular expenditure set to be pursued in the current financial year.
Acting CEO Michael Kgobe said the arms manufacturer, armed with a new operational model, was now in a phase of sustaining the stability in its finances and resolving the issue of non-payment of salaries to staff members. He added:
Denel, currently in a race to appoint a permanent CEO and CFO by October, has lost over 800 employees and its board is now down to six non-executive members with Gloria Serobe as an acting chairperson.
MPs took both the board and the deputy minister of public enterprises Obed Bapela to task about the seeming instability created by not filling crucial positions with permanent staff.
READ: Denel group CEO accused of leaking information and selling technology for bargain prices
Serobe said the process to appoint a permanent chief executive with the requisite skills and experience was under way, while Bapela assured MPs that additional board members were being sought and the issue of the chairperson would be finalised speedily.
The Special Investigating Unit (SIU), which has been tasked with investigating the corruption that ensued at the entity, also briefed MPs alongside Denel and said investigations were for the most part concluded.
SIU head Andy Mothibi said civil litigation would be pursued, including seeking delinquency declarations for previous board members who neglected their fiduciary duties.
