State arms manufacturer Denel wants the High Court in Pretoria to give its joint venture with Gupta-linked VR Laser Asia the thumbs up, despite the Treasury not giving it permission as required by the Public Finance Management Act.
Denel CE Zwelakhe Ntshepe said the parastatal had on “numerous attempts” tried to work with the Treasury to explain the legal processes it followed in establishing the Denel Asia joint venture. “This matter remains unresolved and continues to unfairly cast doubt on Denel’s reputation and governance regime,” he said.
Denel said it had lodged its application on Friday asking the high court to order that it did obtain approval to form the joint venture with VR Laser Asia, which resulted in Denel Asia being established.
Finance Minister Pravin Gordhan and the Treasury were cited as respondents.
The Treasury said it had learnt about the court application through the media on Friday. “We are still waiting to be served,” it said.
Public Enterprises Minister Lynne Brown would not comment on the matter. Her spokesman, Colin Cruywagen, referred all questions to Denel.
Denel Asia is a joint venture between Denel and VR Laser Asia, owned by Gupta family associate Salim Essa.
Denel submitted a formal application for approval for Denel Asia under the Public Finance Management Act in December 2015. When it did not get a response within 30 days, it went ahead and registered the joint venture company in Hong Kong in January 2016. This resulted in a standoff between Denel’s board and Gordhan.
Brown has approved Denel Asia but has told the company it was not allowed to trade until the approval of the Treasury had been obtained.
Denel maintains that Denel Asia’s establishment complies with the relevant prescripts of the act. “We acted lawfully and in accordance, and compliance, with the provisions of sections 51(1)(g), 54(2)(b) and 54(3) of the PFMA [Public Finance Management Act] in concluding and forming the joint venture agreement,” Ntshepe said.
Denel had several equity partnerships, joint ventures and co-operation agreements with companies in the global defence industry. They were all established following the same process used in Denel Asia, he said.
Ntshepe said Denel’s partnerships gave the company the ability to penetrate new markets, which were important for the company’s success.
Doubts cast over Denel Asia’s legal standing had created negative perceptions about Denel, which had impeded its ability to do business effectively.
Ntshepe said research showed that by 2018 the Asia-Pacific nations would command more than half of global
defence procurement outside the US and two-thirds of non-US defence markets.
“We need a firm foothold in this region, and the establishment of Denel Asia will give us a strong presence and the ability to pursue the desperately needed opportunities in that region,” Ntshepe said.
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