Perpetual push for Denel’s AGM
In the labyrinth of corporate governance, the case of Denel’s delayed annual shareholder meeting serves as a stark reminder of the challenges facing state-owned enterprises (SOEs) in balancing transparency with operational exigencies. The arms maker’s request for yet another extension for its longoverdue AGM is a symptom of a deeper malaise afflicting SOEs.
Few know better than readers of this newspaper that AGMs are the cornerstone of corporate democracy, offering shareholders a platform to scrutinise management and influence strategic direction. For Denel, which last held an AGM in 2021, the repeated postponements are not just procedural lapses. They feed into the contrarian disposition that we, the shareholders, lack the power of information to influence the policies that govern us.
How else can we raise questions about accountability and oversight in Denel, our company? What happened to what had looked like a coherently drawn up turnaround plan to cut costs and sell equity stakes in some businesses while almost doubling sales by 2024? The plan was mapped out in 2019.
The Companies Act is clear: AGMs must be held annually, with a grace period extending no more than 15 months from the previous meeting. Yet Denel has managed to secure an extension from the Companies Tribunal, citing “good cause” due to unfinished bookkeeping by the auditor-general. True, this practice is legally permissible but it skirts the underlying issue: Denel’s chronic financial distress.
Since 2019, Denel has held out begging bowls, demanding billions of rand to make up for the hundreds of millions in losses and to pay salaries. The commitment of Enoch Godongwana, who become finance minister in 2021 amid the glow of national goodwill, to additional funding in the 2024 budget underscores the government’s precarious position of propping up an SOE that is yet to demonstrate fiscal recovery.
The auditor-general delay — attributed to late submissions — complicates the picture. The auditor-general is now tasked with auditing three consecutive financial years, a process fraught with complexity and possibly further delays.
This situation is emblematic of the broader challenges facing SOEs. On one hand, there is a need for stringent oversight to ensure taxpayers’ money is well spent. The other is that operational realities of these entities often necessitate flexibility and support beyond what a private sector company might require.
The Denel case also highlights the tension between public interest and the operational autonomy of SOEs. While the state has a duty to ensure it operates in the best interest of its stakeholders, including the public, the repeated deferrals of the AGM suggest a governance gap. The silence from Denel and the public enterprises department adds to the opacity of the situation. We are left in limbo, questioning whether the extensions are a genuine effort to resolve outstanding issues or a stalling tactic.
As Godongwana ponders injecting more money into Denel, we, the taxpayers, deserve clarity and assurance that our investments are secure. The AGM is more than a regulatory checkbox; it is a vital instrument for accountability and strategic direction.