Ex-Denel chief, finance boss accused of changing loan terms
Former Denel chief executive Riaz Saloojee and suspended chief financial officer Fikile Mhlontlo have been accused of changing the terms of a R455m loan with Nedbank - without the approval of the board or minister of public enterprises.
|||Cape Town - Former Denel chief executive Riaz Saloojee and suspended chief financial officer Fikile Mhlontlo changed the terms of a R455-million loan with Nedbank without the approval of the board or minister of public enterprises, putting the company’s liquidity at risk, current board chairman Lungisani Mantsha has claimed.
He said the two had been warned by Public Enterprises Minister Lynne Brown not to agree to terms other than those which had already been presented to her as the shareholder, but they had changed the term of the Nedbank loan from five years to six months, with the result that the full amount was now due by the end of June and the firm did not have the money to pay.
“I can go on and list the contraventions by the executive as far as the conditions of approval from the shareholder and from the Treasury (is concerned), and the fact that the changes of the term sheet were approved by neither the Denel board nor the shareholder and the liquidity of the company has been compromised,” Mantsha told Parliament’s public enterprises oversight committee yesterday.
The loan, along with another R400-million loan from Absa, had been for the acquisition of BAE Land Systems SA (BAE LSSA), whose ability to service the debt had been misrepresented, Mantsha said.
He said the rationale for buying BAE LSSA had been “seriously compromised and flawed” in the first place because Denel already had its own vehicle-manufacturing division.
“The company we bought is a vehicle manufacturing business - Denel Land Systems is probably one of the biggest vehicle-manufacturing companies in South Africa,” Mantsha said. “In the view of the Denel board, this was nothing less than reckless lending.”
Mantsha and acting chief financial officer Odwa Mhlwana were briefing the committee on developments at the company after allegations that Saloojee and Mhlontlo, along with company secretary Elizabeth Africa, had been suspended to clear the way for a joint venture with a company with close ties to the controversial Gupta family. Saloojee had since accepted a settlement on the remainder of his contract, which was to expire in January next year, while Mhlontlo and Africa faced a disciplinary hearing, Mantsha said.
Finance Minister Pravin Gordhan has accused Denel of breaching the Public Finance Management Act (PFMA) in concluding the deal, as it was not approved by the Treasury as required.
Mhlwana took the committee through the process followed by Denel, which included pre-notification of the intended deal on October 29 last year, followed by a formal application on December 11 - the day before then finance minister Nhlanhla Nene was removed by President Jacob Zuma.
He said sections 51 and 54 of the Act, read together, were clear that if there had been no response to the application within 30 days, the company was entitled to deem permission as having been granted.
It proceeded to establish the joint venture on January 29 this year - well past the 30-day deadline - by which stage there had still been no response. Only on February 5 did the Treasury write back requesting more information on the deal, Mhlwana said.
MPs on the committee said while it may have been strictly legal, in Denel’s view, to proceed, it should have realised (given the controversy around the Guptas and the sums involved) that doing so would have negative consequences. But Mantsha said the only question was whether there had been a violation of the law.
The committee agreed that there would have to be a follow-up meeting which included the public enterprises department and Treasury representatives.
POLITICAL BUREAU