Denel says Gupta-linked deal ‘approved’
STATE-owned arms manufacturer Denel says its joint venture with the Gupta-associated company VR Laser Asia has been approved‚ clearing the way for it to enter the burgeoning Asian market using the new company as its vehicle.
The joint venture – Denel Asia – was formed through a partnership with VR Laser Asia in December last year and was controversial because Denel did not first obtain the consent of the Treasury as required by the Public Finance Management Act.
Presenting the company’s annual results on Tuesday‚ Denel’s acting chief financial officer‚ Odwa Mhlwana‚ said all the necessary approvals were now in place.
“We have agreed with our shareholder department [public enterprises] that there was nothing wrong‚” he said.
Denel Asia “was without a doubt” the vehicle it would use in attempting to penetrate the Asian market‚ he said.
However‚ no business had yet been done through VR Laser Asia‚ as at the time of the controversy over its formation, Public Enterprises Minister Lynne Brown had asked Denel to wait until the matter had been cleared up. The Treasury did not respond on Tuesday to a request for confirmation that Finance Minister Pravin Gordhan had approved the joint venture.
Apart from its association with the Gupta family – VR Laser Asia is solely owned by close Gupta associate Salim Essa and registered in Hong Kong – the Treasury also questioned the value the partnership would bring.
Denel has several joint ventures with large international firms‚ a strategy that is viewed as responsible for the company success.
Foreign partners contribute capital and technology and hold 51% control in the subsidiary companies‚ while Denel remains 100% state-owned at the level of the holding company.
Denel also has a business relationship with VR Laser – an SA-based company owned by the Gupta family.
In a recent‚ unsuccessful court application another Denel subsidiary – LMT Holdings‚ which is 51%-owned by Denel – claimed that the company was in dire straits after Denel contracts that were intended for it were diverted to VR Laser.
The application was a request to be placed in business rescue‚ but failed. The merits of the argument were not examined by the court.
For the past five years‚ Denel has been regarded as a shining success story among stateowned companies. — BDLive