‘Denel must sell non-core assets to end financial woes’

THE NATIONAL Treasury has indicated state arms manufacturer Denel would be forced to sell its non-core assets to boost its financial position.

The Treasury yesterday said the manufacturer’s financial woes were far from over.

It said the company would need to do something to get back on its feet.

The Treasury said Denel had a weak balance sheet, and the state arms company was also fingered as one of the State-Owned Entities that remained a risk to the economy.

The government has over the years extended guarantees to SOEs, but they are not able to generate revenue.

“Denel has a five-year R3.4 billion government guarantee of which R2.8bn has been used. Denel will struggle to settle maturing debt on its own because its financial position remains weak,” the Treasury said.

“While it implements a turnaround plan, Denel will also contemplate the sale of non-core assets to improve its liquidity position.”

Denel has been in the news recently with Saudi Arabia reportedly trying to buy a stake in the entity.

The parastatal was locked in serious fights with former finance minister Pravin Gordhan in the past few years.

Gordhan and ex-board members clashed openly over the joint venture to form Denel Asia. The Treasury listed Denel as another SOE that continued to pose a risk to the economy. It said SOEs should be able to generate more revenue to be stay afloat.