South Africa: Denel turns a loss into profits at its pensioners’ expense

en

Press statement issued by the Ceasefire Campaign

The spin that the South Africa state arms manufacturer Denel has managed to put on its financial results is highly misleading. In releasing its annual report last month, it described its results as ‘encouraging’. The fact is it is still making an operating loss: at R314m, this year’s operating loss is nearly double last year’s. The only reason why Denel made a ‘profit’ in 2011 is that it withdrew its sponsorship of the Denel Pension Fund. Current employees are now covered by a retirement fund in which Denel carries no risk. Those already on pension remain in the pension fund. Although the value of the assets held by that fund is substantially greater than the value of its liabilities to these pensioners, they will get no sponsorship from Denel if things turn sour: they are on their own. Whilst (on the assumptions made by the actuaries) their fund has more than enough assets to cover their pensions, if at some time in the future those assumptions turn out to have been wrong, and if the assets are then insufficient, then the fund will be unable to pay their pensions. Denel has washed its hands of these pensioners. That is why it has made a ‘profit’. This is war-profiteering at its worst. It is patently disingenuous for Denel to use this windfall to claim that it has ‘turned the corner’.

In the mean time, government is refusing to continue bailing Denel out of its financial woes. Instead it is giving guarantees. All this will achieve is a pile-up of debt in the books of Denel, making it more and more difficult for government to shut it down. Some years ago, Shaun Liebenberg, then CEO of Denel, told Parliament that it would cost R18 billion to shut down Denel. That was also disingenuous. Certainly if Denel had to renege on all its contracts in progress and retrench all its staff, that would no doubt have been what it would cost. But surely nobody in their right minds (let alone government) would have advocated that? But now government is busy digging a hole from which it will be unable to escape when the misleading statements from the Denel technocrats are finally exposed for what they are. Meanwhile Denel is trying to persuade government to convert its guarantees into share capital. That is just another way of pouring further money into the black hole. What government needs to do is to bite Denel’s bullets and close it down responsibly.

Denel is highly selective in its disclosure of the countries to which it is selling arms and on the nature of the arms it is selling. The purpose of its spin is clearly to divert attention away from the numerous military despots to which South Africa is selling lethal arms. The National Conventional Arms Control Committee (NCACC) is more bent on supporting South Africa’s involvement in war profiteering than on controling the export of lethal weapons. This results in a treacherous conflict of interest between government appointees on the NCACC and government as shareholder in Denel – a conflict that undermines world peace and profits from war at the expense of taxpayers and of South Africa’s poor who are still waiting for basic services.

If government were to stop bailing Denel out of its hole, if the NCACC were to stop licences for the export of arms to countries that fail the criteria specified in its Act, and if both Denel and the NCACC were transparent about what arms South Africa is selling to rogue countries around the world (many of them far worse than India), Denel would be unsustainable. Now is the time to face facts. Denel is not a national asset; it is a national liability.

Countries
Theme
Companies

Add new comment

This question is for testing whether or not you are a human visitor and to prevent automated spam submissions.

Image CAPTCHA
Enter the characters shown in the image.