[Debate] (Fwd) Corrupt Denel

[Patrick Bond]

India’s ‘boycott’ costs Denel
Mpumelelo Mkhabela Published:Jun 20, 2009

‘We have been blacklisted, not officially, but the behaviour shows’ 
‘They don’t invite us to tender, they cancel existing contracts’
Related Content
# Denel is still short of cash
# Talib Sadik appointed CEO of Denel
# Two pies are better than one
Article Tools
Print E-Mail
Save and Share
Arms parastatal says relations frosty since questions arose over 
procedure during contract procurement

South Africa’s state-owned arms manufacturer, Denel, has lost R2-billion 
in revenue after it was “blacklisted” from selling weapons to India. The 
company plans to seek diplomatic assistance from the SA government to 
recapture the Indian market.

On Wednesday, the para-statal’s group executive for business 
development, Zwelakhe Ntshepe, told the parliamentary portfolio 
committee on public enterprises: “We have been blacklisted, not 
officially, but the behaviour shows. They don’t invite us to tender, 
they cancel existing contracts. It’s been going on for the past four years.”

Denel has not received invitations to tender for any Indian government 
armament contracts since 2005, after allegations surfaced that it had 
earlier paid “commissions” for a deal to supply rifles.

The struggling arms manufacturer, which survives mainly on government 
bailouts, disclosed the losses to parliament this week when it appeared 
alongside other state-owned enterprises that had been called to explain 
their financial standing and strategies.

But Ntshepe and group financial director Fikile Mhlontlo did not tell 
parliament — nor were they asked — about the allegations that Denel had 
paid “commissions” to Indian officials to secure arms deals.

Mhlontlo told the Sunday Times later that the dispute arose after 
queries were raised by Indian authorities about “procedure in the 
procurement process”. This related to a certain question in a 
questionnaire Denel had to complete during the procurement process in 
1999 to which the company was expected to give a “yes” or “no” answer. 
He said Denel provided an answer that was queried by the Indian 
authorities in 2004, but declined to reveal the nature of the dispute.

It is understood it was about whether or not Denel had used agents and 
paid “commissions” to secure a contract that included the supply of 
rifles. Denel has previously declined to comment on the allegations, 
citing confidentiality clauses in the contract.

A document submitted to the portfolio committee, mapping Denel’s market 
share, pointed to India as a “no-go market”. Among other things, Denel 
attributed its losses between 2005 and 2008 to a shrinkage of export 
markets, including India.

Ntshepe told the committee that the company was undergoing arbitration 
with the Indian authorities in a bid to resolve the dispute. He said 
that the Indian authorities had investigated Denel and had not charged 
the company with wrongdoing.

Diplomatic efforts by the government had failed to resolve the matter. 
Ntshepe said there had been “an attempt at some point” by the South 
African government to talk to its Indian counterpart, who had responded 
that it was an issue between the state and Denel. He said Denel was 
considering to again call for a diplomatic solution between the South 
African and the Indian governments.

Asked by the committee’s chairman, Mabel Mentor, whether the 
government’s relations with India through the India-Brazil-South Africa 
tri-nation diplomatic platform have not helped the situation, Ntshepe 
replied that relations with India were “difficult”.

The admission about India’s shunning of Denel has come in the same week 
that minister of international relations and co-operation Maite 
Nkoana-Mashabane spoke of strong bilateral relations between the two 
countries. “With India, we share strong historical relations spanning 
through the 20th century. Ours has been a relationship steeped in 
politics and struggle,” she said during her department’s budget vote debate.

Denel has posted losses every year since 1998. In 2006 — during which it 
lost R1.3-billion — the government injected R2-billion into Denel, in 
addition to R1.5-billion in loan guarantees.

The company’s losses have since been declining. In 2007 and 2008 it lost 
R549-million and R347-million respectively. — mkhabelam at sundaytimes.co.za