Despite a capital injection of R5,2bn from the state *1,
armaments company Denel's turnaround strategy could still
fail if stakeholder buy-in from related government departments was not
achieved, CEO Shaun Liebenberg has warned.
Liebenberg, who is leaving the company at the end of next month, was brought in
to drive the turnaround of the loss-making armaments company three years ago,
when the state decided to recapitalise Denel .
In a frank assessment of the state of Denel, Liebenberg said yesterday he had
delivered on his mandate, but remained to be convinced
that Denel had the necessary buy-in from "horizontal stakeholders" notably the
defence, trade and industry, foreign affairs and treasury departments to
ensure the viability of the local defence industry.
His concern echoes repeated criticism about a disconnection between state
departments and a lack of strategic alignment *2,
which undermines policy implementation.
The lack of co-ordination *3 seemed to extend to
the very funding the government committed to Denel's turnaround.
"To date, Denel has only received R3,5bn, leaving a shortfall of R1,7bn. We are
simply alerting Denel's stakeholders that the full turnaround requires of the
shareholder to contribute its portion of the strategy in order for the business
to become sustainable and profitable," he said.
The recapitalisation plan was structured to include capital of R3,5bn to service
debts and clean up the balance sheet *4, while the
rest was for investment in new plant and equipment, the restructuring of
businesses and processes, technology upgrades and skills development. The
projected balance sheet confirmed the R1,7bn is still required to conclude the
process, Liebenberg said.
Denel's results for the year ended March are yet to be released, but Liebenberg
said the company had raised turnover 20%, that working capital had improved
significantly and that it had a cash balance of R900m *5,
compared to a shortfall previously.
Likening Denel to Eskom where state departments had failed to approve capital
expansion leading to a power crisis Liebenberg warned that horizontal alignment
with relevant state departments was lacking. Denel was
still in the dark about the procurement practices of the defence department *6,
its natural customer. This undermined Denel's planning and
cash flow management. *7
Liebenberg said he was confident that all commercial entities of the
group were on a firm footing and financially viable.
With acknowledgements to Mathabo le Roux
and Business
Day.
*1Despite a capital injection of
R5,2bn from The Taxpayer.
Non-nett-taxpaying citizens contributed nothing to Denel's survival.
*2*3Unless some of the wonga is going to Chancellor House
there will always be a lack of co-ordination and strategic alignment.
*4Clean up the balance sheet ?
One can see the Denel CEO is an accountant and not an engineer.
That's what matters - a clean balance sheet and not innovative, cost-effective
products that have customers stomping towards one's door and wonga stomping into
one's current account and finally back to the shareholders - hey, that's us..
*5That's not bad - that's about half of what the ANC's got
in it's piggy bank - also after being bankrupt a few years ago.
*6Join The Club.
One only gets the inside track on the DoD's procurement practices if one is a
European armaments manufacturer like BAE Systems or Saab, or Thales, or
ThyssenKrupp Marine Systems or Ferrostaal, or Agusta-Westland, or EADS.
The rest of us have to be content with the DoD's procurement malpractices.
*7This undermined the entire South African Defence Related
Industries' ability to do business and survive - let along thrive.
It entirely ironic - the South African DoD buys from the European Defence
Related Industries while the South African Defence Related Industries do their
best to sell their products to the European and American DoDs.
But the European Defence Related Industries have far bigger bribery budgets and
longer chains of offshore money laundering companies - even than Denel.