Returning Denel to profitability and bringing stability to the defence parastatal are two of the top priorities of Shaun Liebenberg, its chief executive designate.

Public enterprises minister Alec Erwin announced on Friday that Victor Moche, Denel's chief executive since May 2003, would be replaced by Liebenberg, the chief executive of defence and telecommunications manufacturer Grintek, at the end of May.

Denel reported a loss of R378 million in 2004 and has reported a profit only once in the past six years.

Liebenberg said Denel's financial results had not been great but there was not a short-term solution. Denel would have to look at a number of issues, including securing four or five of its big projects that involved local and international partners.

"Consolidation of the defence industry around the world is happening at a frightening pace, and Denel has to be part of that consolidation," he said. Liebenberg said this could take various forms and could be equity or project based.

"But it's more than signing a piece of paper. We have to make some bold commitments to the partners locally and internationally.

"Liebenberg said Denel's balance sheet remained a concern and they would have to look at ways to strengthen it."I can't speculate on some of the government commitments and don't want to use the word 'recapitalise'. But the sense I have is that there has to be some form of assistance to ensure a stronger balance sheet.

"Liebenberg said another priority was to stabilise the company and get its staff to give it their support. Other priorities were to package the skills and competencies in Denel better and to focus on government-to-government trading alliances, such as that between Brazil, India and South Africa.

In a statement, Grintek and its key shareholders, Kunene Brothers Holdings and Saab of Sweden, said Liebenberg's appointment had their support.

His departure would not affect Saab's proposal to buy out minority shareholders in Grintek as a precursor to the company delisting and becoming a privately held partnership between Kunene Brothers and the wholly owned local subsidiary of the Swedish manufacturer, they added.There has been a mixed reaction from trade unions to the appointment.

Leon Grobler, the chief operating officer of Uasa, the majority union at Denel, welcomed the replacement of Moche, adding that the union had been pressing for his removal for some time because of mismanagement.

"We have analysed the CV of Liebenberg and he seems an excellent choice. He has a knowledge of the armaments industry and of Africa."However, Grobler said Uasa also knew that "any new chief executive sweeps clean" and that there would be restructuring, which by its nature would not be positive for workers.

Jaco Kleynhans, a spokesperson for Solidarity, said the union hoped Liebenberg's appointment would encourage Denel to resolve two years of disputes with trade unions about its failure to implement wage increases.

Kleynhans said Denel had suspended some employees in the past year following a "witch-hunt", but many of these people had not been charged due to lack of proof.

He questioned whether the new management would rectify this situation and allow suspended staff who had not been charged to return to their positions.

Dumisa Ntuli, the spokesperson for the National Union of Metalworkers of SA (Numsa), expressed concern that while other unions had been consulted about the appointment, Numsa had not.

Ntuli claimed managers at Denel were resisting transformation.

"There are people at the company who seriously resist change and transformation, particularly when it comes from a black person ... This resulted in the dismissal of Victor Moche, who has been doing a very good job.

"Even with the new appointment, he won't be able to make changes in the future unless there is proper investigation into how managers conduct themselves. He can't fight the battle alone if he doesn't get support."

With acknowledgements to Roy Cokayne and the Business Report.