Acting chief justice Raymond Zondo stopped short of recommending criminal prosecution against Lynne Brown as he blasted the former public enterprises minister for using her influential position to help the Guptas siphon off tens of millions of rand from Denel.
Brown took on the role at a time when Denel was pumping profits and sitting on billions of rand in an order book, a rare sight for a state-owned enterprise (SOE) and a feat credited to three former executives, including former CEO Riaz Saloojee.
Under her watch, the three executives were pushed out under mysterious circumstances and were replaced with what the Zondo report said were her own appointees, leading to the beginning of the deterioration at the arms maker, whose fate as a sustainable company is in question.
“Brown participated in state capture by using her powers of her office to install as members of the Denel board of directors person[s] whom she believed, probably because she was told so, would facilitate or at least not oppose the Guptas’ state capture scheme,” the report says.
In order to prevent questionable appointments of board members at SOEs such as Denel, the commission recommends that an independent body be established to identify, select and recruit “the right kind of people” to lead.
The report, just as it did in the first part of the three-part investigation report handed to President Cyril Ramaphosa, recommended the government consider creating a statutory offence rendering it a criminal offence for any person vested with public power to abuse their position.
“Such potential violations might range from the case of a president of the republic who hands a large portion of the nation[al] wealth, or access to that wealth, to an authorised recipient, to the junior official who suspends a colleague out of motives of envy or revenge,” the report said.
The suspension of the executives, which the report says was also driven by the newly installed chair, Daniel Mantsha, paved the way for Denel to team up with Gupta-controlled VR Laser, which later became the primary vehicle through which the Guptas plundered Denel.
Saloojee was among those who resisted attempts to bring VR Laser on board as a preferred supplier and joint venture partner. “This was shown by their [the Guptas’] conduct, at the start of Mr Saloojee’s term, in getting the then-minister of public enterprises, Mr [Malusi] Gigaba to make clear to Saloojee that he was to exert himself to favour the Guptas,” the report says.
With his departure, as well as that of CFO Fikile Mhlontlo and group company secretary Elizabeth Africa, Mantsha, as the newly installed chair, became a “willing participant” of the project to plunder Denel.
“Mantsha knew about what was going on and was prepared to play the role that he played to assist the Guptas and their associates ... The reputational damage which Denel suffered from its capture and the fact that the control of Denel passed into unscrupulous hands was enormous,” the report stated, stressing that Denel is now an entity that is “almost on its knees”.
The commission said the board led by Mantsha, the erstwhile attorney of record for former president Jacob Zuma, failed to carry out its fiduciary duties in suspending the three executives and in failing to ensure that a disciplinary inquiry or inquiries were held in a reasonable time.
“It is recommended that law enforcement agencies should conduct such further investigations as may be necessary with a view to possible prosecutions of members of the Denel board appointed in 2015, who supported the decisions taken by the board in regard to the executives for possible contravention of the Public Finance Management Act,” the commission stated.
The arms manufacturer is still reeling. As of October last year, the firm owed R636m to employees and related costs, and about R900m to suppliers with no indication from the Treasury whether or not it would receive a bailout.
Read the report here:
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