The restructuring of Denel will be completed within the next six months which will reposition the state-owned defence and technology company to efficiently execute existing orders and grow its business through the existing opportunity pipeline.
Members of the Denel board and senior management briefed the Standing Committee on Public Accounts (SCOPA) in Parliament today (14 June) and set out a clear timeline for the company’s consolidation and restructuring.
The formal process of restructuring the business in terms of the Labour Relations Act is expected to be concluded soon and will allow for the envisioned decrease in cost burden whilst ensuring on-time delivery to clients.
Michael Kgobe the interim Group CEO of Denel said this opens the way for the migration to a new operating model within which Denel will consist of four capability areas of guided weapons, integrated systems solutions (ISS), landwards and air.
The existing Denel operating divisions will be arranged to fit in with this structure and will be accompanied by a reduction in the company’s property footprint and a rationalisation of facilities. The Landward capability will be primarily located at Denel’s Lyttelton campus, the unmanned aerial vehicle systems (UAVS) will be consolidated into the Air capability area based at Denel’s Kempton Park campus while ISS will become a separate division to grow Denel’s capabilities in advanced technologies diversifying into cyber and civil security solutions.
The introduction of a shared services model allows for the rationalisation of resources and costs in the support functions such as human resources, business development, supply chain management and information and communication technology (ICT) services.
Kgobe explained that critical vacancies in the organisation are planned to be filled by September 2023 with the appointment of a Group Chief Executive Officer, Group Chief Financial Officer and Chief Audit Executive planned to be completed before the end of the current financial year to stabilise the leadership of the organisation and improve governance.
The unlocking of cash through the Denel Medical Benefit Trust (DMBT) enabled Denel to stabilise the business through the settlement of outstanding salaries and some of the legacy obligations. Whilst revenues remain at conservative levels, the improved financial position following the recapitalisation of the business by the Shareholder to deal with the repayment of government guaranteed debt as well as other legacy obligations and working capital to restart operations positions the business to enter a growth phase through the unlocking of the opportunity pipeline and improved efficiencies and productivity. Further unlocking of cash into the business will be realised through the sale of non-core assets.
Denel is confident that it can secure new orders by March 2024 and that the company will be fully back on a growth trajectory by the middle of next year, said Kgobe.
Parliamentarians were updated on progress made with investigations highlighted by the Zondo Commission and status of cases under investigation by the SIU.
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