{"id":4226,"date":"2016-02-05T00:00:00","date_gmt":"2016-02-05T00:00:00","guid":{"rendered":"https:\/\/amabhungane.org\/amabhungane\/stories\/guptas-conquer-state-arms-firm-denel\/"},"modified":"2024-10-23T17:42:15","modified_gmt":"2024-10-23T17:42:15","slug":"guptas-conquer-state-arms-firm-denel","status":"publish","type":"post","link":"https:\/\/further.co.za\/amabwp\/guptas-conquer-state-arms-firm-denel\/","title":{"rendered":"Guptas conquer state arms firm Denel"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">The Guptas have done it again \u2013 this time by teaming up with state-owned arms manufacturer Denel to profit from the sale of its products in the East.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Denel announced the formation of joint venture company Denel Asia last week but did not identify the controversial family as shareholders by name.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The family\u2019s latest success in appropriating state opportunity comes amid a revolt in the ruling alliance about their influence in high places.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Following the ANC executive\u2019s annual lekgotla last week, party secretary general Gwede Mantashe reportedly said that a \u201cwarning came out very strongly\u201d against the \u201ccapture\u201d of state-owned enterprises by \u201cpeople outside the state\u201d.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Recent controversies include the acquisition of Optimum Coal, an Eskom supplier, by a Gupta company. Optimum\u2019s owner, Glencore, agreed to sell after the power utility squeezed Optimum financially and Mineral Resources Minister Mosebenzi Zwane visited Glencore\u2019s Swiss headquarters at the same time as a Gupta delegation.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Eskom has denied it influenced the sale, saying a R2.5-billion fine it imposed on Optimum for poor quality coal was provided for in their contract. Zwane\u2019s spoksperson has said the minister\u2019s visit to Switzerland was according to his policy of engaging with stakeholders and to avoid job losses.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">There are similar claims, though, of unfair play paving the way to the Denel deal \u2013 in this instance over the bodies of officials who might have opposed it.<\/p>\n\n\n\n<p class=\"has-text-align-center wp-block-paragraph\"><strong><em>&#8220;<\/em><\/strong><strong><em>VR Laser, a company with 20 years extensive experience [in] defence and technology in South Africa&#8221;<\/em><\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The joint venture was concluded in the absence of Denel\u2019s permanent chief executive, chief financial officer and company secretary, all three of whom are on suspension.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Several sources sympathetic to the three have indicated that there is a strong suspicion they were removed to clear the way for the deal. Denel says they were suspended for their roles in an unrelated matter.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Announcing the joint venture, Denel said in a press release last week Thursday that Denel Asia, headquartered in Hong Kong, would help Denel \u201cfind new markets for our world-class products, especially in the fields of artillery, armoured vehicles, missiles and unmanned aerial vehicles\u201d.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Denel Asia would \u201cfocus its marketing attention on countries such as India, Singapore, Cambodia, Indonesia, Pakistan, Vietnam and the Philippines who have all announced their intentions to embark on major new defence acquisitions\u201d.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Denel\u2019s joint venture partner in the company was identified as \u201cVR Laser, a company with 20 years extensive experience [in] defence and technology in South Africa\u201d. Denel also said that VR Laser had \u201ca good understanding\u201d of the target \u201cmarkets and opportunities\u201d.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Denel did not answer amaBhungane questions this week about Denel Asia\u2019s ownership breakdown. But Hong Kong corporate records show that it was founded on January 29 with Denel holding 51% and VR Laser Asia 49%.<\/p>\n\n\n\n<p class=\"has-text-align-center wp-block-paragraph\"><strong><em>Value of VR Laser<\/em><\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">VR Laser Asia was registered in Hong Kong after the Gupta family and associates acquired VR Laser Services, a Boksburg engineering firm, two years ago \u2013 another deal that attracted controversy (see &#8220;VR Laser and the Guptas&#8221; below).<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">VR Laser Services specialises in steel cutting and processing. Its only apparent exposure to the defence industry is as supplier of components such as armour plate and armoured vehicle hulls. And although the Guptas themselves have done business in at least India and Singapore, VR Laser Services\u2019 own footprint is local.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Denel did not answer amaBhungane questions probing the value of VR Laser\u2019s contribution and the possibility that the Guptas would profit from Denel sales without contributing to them. The questions included:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>What value would VR Laser bring to the joint venture given its apparently limited experience in defence marketing and limited exposure to the Denel product range, which extends well beyond armoured vehicles?<br><br><\/li>\n\n\n\n<li>Would Denel Asia have the exclusive right to market Denel products in the target countries or would Denel and its other subsidiaries also have the right to market there?<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Momentum for the joint venture appears to have built after Public Enterprises Minister Lynne Brown appointed a new Denel board in late July. She retained only one member of the outgoing board, Johannes \u201cSparks\u201d Motseki, \u201cfor purposes of continuity\u201d.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Motseki, a former treasurer of the Umkhonto weSizwe Military Veterans Association, is a Gupta business partner. A company of which he is the sole director was allocated 1.3% in a Gupta-led consortium that bought a uranium mining company now named Shiva Uranium in 2010.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">These shares, if Motseki still has them, would now be worth about R80-million based on the claimed net asset value of Oakbay Resources and Energy, Shiva\u2019s listed parent.<\/p>\n\n\n\n<p class=\"has-text-align-center wp-block-paragraph\"><strong><em>&#8220;Suspended in respect of&nbsp;their roles&#8221; in acquisition<\/em><\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Denel did not answer directly whether Motseki had recused himself from making decisions about the joint venture, but said: \u201cMr J Motseki has fiduciary duty to act in the best interest of Denel and has never influenced Denel to do business with any persons that he knows in whatever capacity.\u201d<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Among the new board\u2019s first acts, in September, was to suspend Denel chief executive Riaz Saloojee, chief financial officer Fikile Mhlontlo and company secretary Elizabeth Africa. No formal reasons were given at the time.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Denel this week said Saloojee and Mhlontlo were \u201csuspended in respect [of] their roles in the acquisition of LSSA [Land Systems South Africa] by Denel, where Denel paid R855-million, of which Denel business was negatively affected. The disciplinary process is under&nbsp;way.\u201d<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Denel bought LSSA, an armoured vehicle manufacturer, from arms multinational BAE Systems before the new board\u2019s appointment.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">There are questions, however, about the strength of the charges against the officials. One legal and one other source acquainted with the matter this week said disciplinary hearings have not commenced but that an informal mediation process was about to start.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The three officials said they were precluded from commenting. Their attorney, Zarina Walele, also declined comment.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Gupta family spokesman Gary Naidoo failed to respond to questions by the time of going to press. VR Laser chief executive Pieter van der Merwe did not return calls or respond to questions emailed both to the firm and to Naidoo for VR Laser\u2019s attention.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Motseki did not return calls. \u2013 <em>Additional reporting by James Wood.<\/em><\/p>\n\n\n\n<h4 class=\"wp-block-heading\">VR Laser and the Guptas<\/h4>\n\n\n\n<p class=\"wp-block-paragraph\">VR Laser Services first came to wider public attention in July 2014 in an amaBhungane story headlined: \u201c <a href=\"http:\/\/amabhungane.co.za\/article\/2014-07-03-transnet-tender-bosss-r50-billion-double-game\" target=\"_blank\" rel=\"noopener\">Transnet tender boss\u2019s R50-billion double game<\/a>\u201d.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The story outlined how a friend of the Guptas, Iqbal Sharma, had obtained an interest in the company while it was in pole position to benefit from subcontracts in Transnet\u2019s R50-billion tender for locomotives. At the same time, he was chairing the Transnet committee that oversaw the tender process.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Sharma denied any conflict of interest and took amaBhungane to the press ombudsman, but his complaint was dismissed.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">At the time, a key part of the story was that the Guptas\u2019 interest in VR Laser was not initially disclosed. Westdawn Investments, a Gupta contract mining company, better known as JIC Mining Services, took a 25% stake in VR Laser Services, and Salim Essa, another Gupta business associate, took 75%. Duduzane Zuma, the president\u2019s son, also acquired a stake through Westdawn. Sharma\u2019s stake was by ownership of VR Laser\u2019s premises.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Since then, the Gupta family\u2019s control of VR Laser has become clearer. Corporate records show that VR Laser is registered to the same Grayston, Sandton, office park where other Gupta businesses are based. VR Laser\u2019s only three directors are Essa, Pushpaveni Govender, who is also a director of other Gupta companies, and Kamal Singhala, a 25-year-old nephew of the Guptas who gives his address as the family\u2019s Saxonwold compound. \u2013 Sam Sole and Stefaans Br\u00fcmmer<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><img decoding=\"async\" src=\"http:\/\/cdn.mg.co.za\/content\/images\/2016\/02\/04\/ipadkamalsinghalapicextwitter.jpg\"><br><em>Kamal Singhala. Picture: Twitter<\/em><\/p>\n\n\n\n<h4 class=\"wp-block-heading\">Joint venture not approved by ministers<\/h4>\n\n\n\n<p class=\"wp-block-paragraph\">Denel launched its Gupta joint venture, Denel Asia, without approval from the finance and public enterprises ministers as required.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Public Enterprises Minister Lynne Brown\u2019s spokesperson, Colin Cruywagen, said on Thursday: \u201cMinister Brown gave pre-approval with strict conditions that included a viability study and a due diligence on the transaction. There are still other conditions to be met before final approval can be granted.\u201d<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Pressed whether the minister, who represents the government as Denel\u2019s only shareholder, was concerned about the launch of the deal, Cruywagen would only say: \u201cInteractions between the minister and the board are confidential. For questions about operational matters of Denel, I refer you to Denel and the board.\u201d<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The treasury\u2019s spokesperson, Phumza Macanda, said Denel\u2019s application seeking Finance Minister Pravin Gordhan\u2019s approval had been received but the treasury \u201cis still processing it\u201d.She said Denel required both ministers\u2019 approval under the Public Finance Management Act as \u201cit is a significant transaction\u201d for Denel and in line with government guarantee conditions.Denel did not respond to urgent questions on Thursday whether it and its board exceeded their authority. \u2013 <em>Craig McKune and Stefaans Br\u00fcmmer<\/em><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><em>* Got a tip-off for us about this story? Click <a href=\"http:\/\/amabhungane.co.za\/page\/contact-amabhungane\" target=\"_blank\" rel=\"noopener\">here<\/a>.<\/em><\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><a href=\"http:\/\/www.amabhungane.co.za\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/amabhungane.org\/wp-content\/uploads\/2018\/03\/94x94.jpg\" width=\"94\" height=\"94\" align=\"left\"><\/a><strong>The <em>M&amp;G<\/em> Centre for Investigative Journalism (amaBhungane) produced this story. All views are ours. See <a href=\"http:\/\/www.amabhungane.co.za\">www.amabhungane.co.za <\/a> for our stories, activities and funding sources.<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>As controversy rages about \u201cstate capture\u201d by the president\u2019s friends, they team up with Denel to profit from the sale of its products in the East.<\/p>\n","protected":false},"author":3,"featured_media":22689,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[2],"tags":[],"class_list":["post-4226","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-stories"],"acf":[],"_links":{"self":[{"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/posts\/4226","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/comments?post=4226"}],"version-history":[{"count":3,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/posts\/4226\/revisions"}],"predecessor-version":[{"id":31869,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/posts\/4226\/revisions\/31869"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/media\/22689"}],"wp:attachment":[{"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/media?parent=4226"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/categories?post=4226"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/further.co.za\/amabwp\/wp-json\/wp\/v2\/tags?post=4226"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}