Views Article – Sharenet Wealth

Africa, News

Crisis deepens at South Africa’s Denel as board chair resigns

* Denel makes military hardware for home and abroad

* COVID-19 pandemic has exacerbated liquidity crisis

* Board chair’s departure follows other recent exits

* Company has struggled to implement turnaround plan (Adds detail, context)

By Alexander Winning

JOHANNESBURG, Feb 25 (Reuters) – South African state-owned weapons manufacturer Denel said on Thursday that its board chairwoman Monhla Hlahla and another non-executive director had resigned, days after it announced the departure of several other board members.

The company, which makes military equipment for South Africa’s armed forces and for export, did not give a reason for the resignations, which deepen the crisis at Denel. It depends on government bailouts and has faced liquidity problems.

Its fortunes have worsened during the COVID-19 pandemic, as some of its trade unions took it to court after it failed to pay full salaries during some months last year.

Denel said in an announcement on the Johannesburg Stock Exchange that a recruitment process for a new board chair was under way.

A company spokeswoman referred all questions to the Department of Public Enterprises, the main ministry responsible for Denel. A spokesman there said the department would comment at an appropriate time.

Denel, a pillar of the country’s once-mighty defence industry, is one of a handful of loss-making state firms the government is trying to return to profitability.

Although the government has approved a turnaround strategy premised on asset sales and disposals, few have materialised. Sources at two local defence companies say their efforts to buy Denel assets have been rebuffed.

Denel made a 2 billion rand ($134 million) loss in the year to the end of March 2020, the last year for which financial results are available.

In a presentation in parliament this week, it listed among its problems: slow progress in selling non-core assets and exiting loss-making businesses, under-funding for projects of strategic national importance and a worsening debt profile. ($1 = 14.9031 rand) (Additional reporting by Joe Bavier; Editing by Olivia Kumwenda-Mtambo and Barbara Lewis)

© 2019 Thomson Reuters. All rights reserved. Reuters content is the intellectual property of Thomson Reuters or its third party content providers. Any copying, republication or redistribution of Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters shall not be liable for any errors or delays in content, or for any actions taken in reliance thereon. "Reuters" and the Reuters Logo are trademarks of Thomson Reuters and its affiliated companies.