Long-troubled State-owned defence industrial group Denel assured, on Thursday, that its latest restructuring is giving “encouraging” results. The group further assured that it is receiving “significant support” from the Department of Defence, to which Denel now reports, and which now acts as the company’s shareholder.

“Denel is emerging from a challenging period in its history but is quite confident that it is well on its way to recovery,” affirmed the group, in a statement. “It is currently undertaking a critical turnaround to optimise operations, bolster delivery capacity and rebuild trust among industry partners, employees, organised labour, suppliers and end-users within the defence sector.”

Denel has identified six key strategic factors for success. In the order given by the group, the first of these is the necessity of building a healthy order book, by winning both local and international contracts. Then comes the need to prioritise programme delivery, to make certain that the group wins repeat orders, both at home and abroad. Third, Denel assured that it will ensure it has adequate working capital available to underpin future growth; this includes the re-engineering of its cash flow and its working capital management. Next, the group stated that it will reinforce ethical leadership as well as a strong governance culture, inculcated along its complete value chain. Fifth, the group is upgrading its ICT infrastructure, and reinforcing controls to provide financial data that is accurate and credible. Sixth, it will deal with its deficiencies regarding internal controls, to re-establish the confidence and support of its shareholder.

Regarding Denel’s internal controls, the group acknowledged that, in recent years, the Auditor General of South Africa (AGSA) had recorded major disclaimers about them.

“We are actively working together with the AGSA to implement comprehensive remedial actions, including the re-establishment of a strong internal audit capability,” assured the company. “Denel also introduced a wide-ranging fraud and corruption prevention strategy which meets international standards, including lifestyle audits for senior management and executives. We are also embedding a new culture that will enable us to fully address our audit outcomes.”

The group also reported that it had now filled all its senior management positions. It assured that it had been able to recruit leaders in areas such as engineering, financial management and auditing, strategic management and business development.

“These strategic initiatives have fortified Denel’s position, ensuring its relevance and sustainability in a competitive and rapidly changing global defence and technology environment,” stated the group. “Denel’s vital role in the safeguarding of South Africa’s sovereign defence capabilities cannot be overstated.”