State-owned defence industrial group Denel has given the assurance that it would use the funding granted to it by National Treasury, under the Medium-Term Budget Policy Statement (MTBPS) released on Wednesday, to strengthen its business and achieve a long-term sustainable future. In the MTBPS, Denel was granted R3.4-billion, although under strict conditions and subject to close monitoring by National Treasury, the Department of Public Enterprises and Denel’s own board.

“[T]his will enable us to proceed with the streamlining of the business and establish a base from which we can significantly grow our order book and access new revenue streams,” said Denel interim Group CEO Mike Kgobe. “Government, as sole shareholder, clearly recognises the strategic importance of Denel as a commercially-driven aerospace and defence company and the immense value we can add to the economy in terms of innovation, creation of intellectual property and export revenue generation to contribute to the balance of payments.”

Denel would itself contribute an additional R1.8-billion in funding for its turnaround plan, by means of disposing of non-core assets and by realising cash inflows. The group was currently being restructured and rebuilt, establishing a new business model. The number of operating divisions was being reduced from the current six, to four. Its geographic footprint would be reduced and its facilities would be rationalised. A ‘shared services’ structure would be adopted, regarding such areas as human capital and development, finance, information and communications technology, supply chain management and public affairs.

“I am confident that a sustainable business model will enable us to focus on growth,” he assured. “There is still significant global interest in our battle-proven products in the fields of artillery systems, infantry weapons, small to medium ammunition and infantry systems as well as aeronautical solutions of manned and unmanned aircraft and landward combat vehicles with armoured protection.”

While remaining active in the traditional defence domains of sea, land and air (including systems integration and command and control), the group would also deliver world-class products in the new (for it) domains of civil security and cyber. It would identify, over the next few months, new revenue streams and further market opportunities. 

“Our reputation for excellence and quality has not been dented, and there is still an appetite for partnerships with local and global companies in the aerospace, defence and technology sectors,” affirmed Kgobe. “We are going to prove that Denel remains a valuable asset of which all South Africans can be proud.”