Shooting itself in the foot

The betting man wouldn’t often have lost money over the years if he’d backed SAA to win the Cash-guzzling Zombie Apocalypse Handicap, but all of a sudden plucky old Denel has popped up on the rails with a run that suggests it could give the national carrier a challenge. With the foul whiff of corruption assaulting the nostrils, Denel has plunged to a loss of R1.7bn that may not match SAA’S more spectacular years but certainly suggests the company has promise.

The entities that came together to form Denel were born from the undeniable strategic requirements of the apartheid government, which had a whole lot of fighting it wanted to do. But, due to its pariah status, it could not buy the kit it needed, so it had to make its own. Clearly this rationale no longer exists, and the arms deal demonstrated quite how happy the global players are to entertain anybody with a fat taxpayer-funded cheque book. Denel describes itself as a national strategic asset, but on current form it’s hard not to think that somebody’s got their assets and liabilities mixed up.

The company admits to some R500m of irregular expenditure, and the disclaimer audit opinion from the auditor-general should set the alarm bells ringing. A new board has been appointed with a mandate to root out corruption and strengthen governance, as well as restoring the financial position from its current liquidity challenges. None of this shambles is likely to get the customers beating down the door, and things had better improve at speed if the company’s going to have a future.