War of words between Gordhan, Denel heats up

Minister of Finance Pravin Gordhan delivering his Budget speech in Parliament, Cape Town. 24/02/2016 Kopano Tlape GCIS

Minister of Finance Pravin Gordhan delivering his Budget speech in Parliament, Cape Town. 24/02/2016 Kopano Tlape GCIS

Published May 6, 2016

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Parliament - The public spat between Finance Minister Pravin Gordhan and the board of Denel has erupted again after he accused it of arrogance, with the board hitting back on Thursday and effectively telling the minister to keep quiet.

In his reply to the debate on the National Treasury budget on Wednesday, Gordhan said he had noticed a trend of “arrogance and belligerence” among boards of state-owned companies when they began to “do things they're not supposed to do”.

He singled out Denel, saying the board should take note of the message.

Instead, the board issued a statement denying “categorically” that it or the Denel executive were arrogant and belligerent.

“The minister's accusations are unsubstantiated, baseless and unfounded,” said spokeswoman Pam Malinda.

She said the executive had met Treasury officials twice in recent weeks to address “the misunderstanding relating to the establishment of Denel Asia”.

The “misunderstanding” refers to Denel’s position, which it reiterated in the statement, that it had complied with the requirements of sections 51(1)g and 54(2) and (3) of the Public Finance Management Act (PFMA), in terms of which it must seek approval from the public enterprises and finance ministers for the establishment of a new company.

Both ministers - Lynne Brown and Gordhan - have denied that this permission was ever granted.

Denel Asia is a joint venture with a company - VR Laser Asia - with ties to the controversial Gupta family.

Gordhan had previously warned Denel that failure to comply with the PFMA amounted to financial misconduct, potentially attracting disciplinary charges, after which the board implicitly accused him of acting in bad faith by speaking on the matter in public while the firm was in discussions with the Treasury to clarify the matter.

Yesterday, Malinda said Denel and the Treasury had agreed in their discussions not to make unilateral public statements while the talks continued.

“The Denel board is taken aback by the minister's statements, which are a clear violation of the undertakings given by National Treasury and also a flagrant violation of chapter 3 of our constitution,” Malinda said, referring to the principle of co-operative governance.

While Gordhan said onWednesday the Denel board's attitude was not in keeping with “the right kind of corporate governance”, Malinda said it would “continue to observe the highest standards of governance, and will above all ensure that applicable legislation like the PFMA is complied with to in full, not only its letter but also its spirit”.

A meeting between Denel and Parliament's oversight committee on public enterprises to allow it to explain events at the company has been postponed, possibly until next week.

Political Bureau

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