PRETORIA, South African state arms firm Denel said on Friday it had received a 1.8 billion rand cash injection from the government after a liquidity crunch left it struggling to pay salaries and suppliers in recent months.
The government will also consider a request for a further 1 billion rand recapitalisation in its budget for the 2020/21 fiscal year, the company said.
There is strong agreement that Denel is a strategic national asset that adds great value to the defence and security sectors, the company said in a statement. It cited CEO Danie du Toit as saying the National Treasury had imposed conditions for the bailout that Denel would follow.
Denel, whose finances were hit by mismanagement under previous management, produces military equipment from ammunition and armoured vehicles to missiles and attack helicopters. While it is a supplier to the South African armed forces, the bulk of its business comes from exports.
Saudi Arabia's state defence firm SAMI made a $1 billion bid last year for a broad partnership with Denel, but the approach was rebuffed.
du Toit said the R1.8 billion recapitalisation resulted from tangible progress of detailed plans to restructure the business, enter into strategic partnerships and find new markets for its high-technology products and solutions.
We are grateful for the unwavering support that we receive from our shareholder, the government, and National Treasury. It demonstrates a confidence at high level for the measures taken by the new board and management and a commitment to support us through the next stages of the turnaround, he said.
He said the bailout formed part of a R2.8 billion request, of which an additional R1 billion would be considered in the 2020/21 budgetary process.
The allocated portion will enable Denel to improve delivery performance and support to local and international customers. It will also bring relief to our partners and supply chains who have been affected by Denel's liquidity issues in recent months.
Du Toit says Denel will continue working hard in achieving the conditions that come with the recapitalisation.
Continued careful management of the supplier base, on-time and on-budget execution of projects is critical in the next 12 months. Denel remains aligned with the shareholder's expectations that it disposes of non-core assets on an urgent basis and establishes strategic equity partnerships across the various divisions of the company.
Source: NAM News Network