Finance

South African defence group Denel to sell stakes in some of its divisions

South African defence group Denel to sell stakes in some of its divisions
Tuesday, 19 February 2019 15:19

(Ecofin Agency) - South African defence group Denel plans to sell some of its equities in the framework of a new investment strategy aimed at making it profitable again (within two years), Reuters reported citing one of the group’s managers.

“We are planning to sell stakes in some of our divisions,” the group’s managing director Daniel du Toit said during a defence exhibition in Abou Dhabi. He also indicated that Denel requested the government’s support for the recovery plan approved last week.  

This plan provides for the search of partners for some of its main divisions as well as the sales of industrial and technological licences.

Last November, Reuters reported that Saudi Arabian Military Industries (SAMI) presented a $1 billion offer to sign a large capital and commercial partnership with Denel. This partnership included the acquisition of the 49% equity of Denel in Rheinmetall Denel Munition (RDM), a joint venture created in 2008 with German Rheinmetall Waffe Munition.

According to sources cited by Reuters, the offer also includes the financing of research and development activities carried out by some of Denel’s divisions, Denel Dynamics, which develops and produces tactical missiles and precision-guided weapons, notably.   

In the framework of that partnership, Denel and Saudi Arabian Military Industries (SAMI) would share property rights and launch a new joint-venture targetting the Middle East and North African market.

Denel group has been experiencing a huge liquidity crisis since the revelation of its alleged implication in a corruption scandal under Jacob Zuma’s presidency. The group is among the firms mentioned in the largest corruption scandal South Africa ever experienced since its democratisation in 1994.

Baptized “State capture”, the scandal revealed the Gupta family’s influence during Jacob Zuma’s presidency. This family was accused of having swooped lucrative contracts in collaboration with one of the country president’s sons.  

Denel produces guided missiles, drones, armored vehicles, artillery shells and bombs.  

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