Why South Africa’s Denel asked government for $200 million cash injection

PUBLISHED: Fri, 05 Jul 2019 13:21:34 GMT

PRETORIA (Reuters) – South African state defence company has asked the government for a 2.8 billion rand ($200 million) cash injection to help it emerge from a financial crisis and secure lucrative export deals, its chief executive said.

Denel, a cornerstone of the country’s once-mighty defence industry, is one of several state firms whose finances were damaged by years of mismanagement during former President Jacob Zuma’s tenure.

CEO Danie du Toit, appointed late last year to oversee a turnaround plan, said recovery efforts were progressing well and Denel could win 30 billion rand of deals in the next two years if it received help to overcome acute liquidity constraints.

Denel produces military equipment from ammunition and armoured vehicles to missiles and attack helicopters for the South African armed forces and for export.

“We have an excellent return on investment potential on recapitalisation,” he said in an interview at Denel’s offices outside Pretoria.

He said he hoped the cash injection would be announced this month and that the funds would arrive in September or October.

He added that Denel would not sell equity in any of its divisions to Saudi Arabia’s state defence firm SAMI, which made a $1 billion bid last year for a broad partnership with Denel.

Under current President Cyril Ramaphosa, public finances are stretched by the need to rescue other ailing state firms such as loss-making power company Eskom and South African Airways, which have both already received cash injections.

($1 = 14.0450 rand)

Reporting by Alexander Winning and Joe Bavier; editing by Jason Neely

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