Denel’s lessons in how to capture the state
Gupta fingers in yet another state-owned enterprise pie, Zondo Commission hears
In a brief detour from the State Capture Inquiry’s focus on Denel this week, Deputy Chief Justice Raymond Zondo made a rare disclosure about his personal life: In the 1990s, he had a relationship and a child with Thobeka Madiba’s sister, he revealed in a statement.
Madiba later married and divorced Jacob Zuma, who has threatened to go to court over allegations of bias to force Zondo to recuse himself when the former president appears at the State Capture Inquiry. Zondo has dismissed the claims.
The deputy chief justice spent the rest of the week wading through detailed testimonies about Denel’s deals with VR Laser, a company linked to the Gupta family.
Denel, the state-owned aerospace and military technology conglomerate, has featured at the commission before, but Zondo is rushing to finish this work by the 31 March 2021 deadline and those who testified this week filled in gaps in Denel’s chapter of the Gupta story.
It starts in 2013, when Gupta frontman Salim Essa took a 74.9% stake in VR Laser. Essa and the Guptas forced out shareholder Benny Jiyane and Craysure Investments took his stake. That was owned by Westdawn Investments, in turn, owned by the Guptas and Duduzane Zuma.
Zondo heard how VR Laser signed a contract in 2014 to provide armoured hulls for Denel subsidiary Denel Land Systems (DLS). Suppliers were invited to submit proposals and VR Laser’s R262-million bid was more than R100-million higher than that from another Denel subsidiary, LMT Holdings.
Denel procurement executive Dennis Mlambo wanted to know who VR Laser’s shareholders were. He knew of Essa but the company claimed it had 25.1% black, female ownership. He was ignored and Denel’s CEO Riaz Saloojee approved the deal.
Saloojee has testified he had meetings with the Guptas, Duduzane Zuma and Malusi Gigaba, but he later fell out of favour with the country’s first family.
Reenan Teubes, DLS COO at the time, appeared to push the deal and give VR Laser preferential treatment, violating company policy, apparently pushed by DLS CEO Stephan Burger.
VR Laser had done work for Denel prior to Essa’s entrance, but it rapidly escalated after the company changed ownership.
DLS then signed a single-source deal with VR Laser for components. It wasn’t advertised and no other suppliers were invited to submit proposals.
Burger’s name features often in the deals with VR Laser but he has categorically denied many of the allegations.
“You lose nothing by going the open tender route,” a puzzled Zondo put to Teubes on the single-source contract.
“In hindsight, I would have done it differently,” he replied.
Teubes, who believes he acted rationally and within the law, was a typical witness. Executives and managers at the commission repeatedly defend turning a blind eye to corruption, claiming they had been convinced by their seniors or their decisions made business sense at the time.
In July 2015, public enterprises minister Lynne Brown appointed a new Denel board, led by Daniel Mantsha. The attorney had been struck off the Law Society’s roll and had sent a municipal bill to the Guptas, and had travelled on their dime. Mantsha represented Zuma after leaving Denel.
By September, the board had suspended three top Denel executives, including Saloojee. Then board member Nonyameko Mandindi said the board had hardly grasped Denel’s issues before Mantsha suspended the executives on flimsy grounds.
The newly installed board and executives quickly got to work. Denel had recently added another subsidiary to its stable, Denel Vehicle Systems (DVS). DVS legal and commercial executive Carene Geldenhuys testified how acting Denel CEO Zwelakhe Ntshepe pressured the company to sign a binding single-source agreement with VR Laser.
DVS performed similar functions as VR Laser and its executives couldn’t understand why they were being instructed to outsource their core functions and risk sabotaging a Denel business. Ntshepe resigned in 2018.
Essa, the Guptas and Duduzane Zuma eyed a larger prize. The Indian government had rescinded a ban on Denel a year after Essa took charge of VR Laser.
In October 2015, Denel informed Brown it planned to form a joint venture with VR Laser to form Denel Asia. VR Laser estimated the deal would earn it more than R2-billion in profit over 10 years.
The deal never really got off the ground, limited by Treasury’s opposition during the Zuma years and then Cyril Ramaphosa’s appointment as president. Denel Asia is reportedly being liquidated, but Denel reportedly spent hundreds of millions of rands exploring opportunities in Asia, and it lost billions in revenue as customers fled while it faced allegations of State Capture.
Denel cut ties with VR Laser in 2018. Duduzane Zuma, who now lives in Dubai, has denied he benefited from the proceeds of crime and claimed the State Capture Inquiry has been politicised.
Zondo will likely explore the ill-fated Denel Asia venture in the coming days.
Former president Zuma is scheduled to appear between 16 and 20 November.
If he appears, he’ll likely seek to distract and deflect rather than explain his links to the deals Denel and so many other stateowned entities made with the Guptas and his son.