Denel must undergo an urgent overhaul and leadership revamp to secure South Africa’s defence sector, the Democratic Alliance (DA) has urged. It says the company needs to adopt a sustainable funding model, with strong oversight to improve efficiency and restore confidence.
“Given Denel’s ongoing struggles, including the recent cutting of municipal services at its Lyttleton Campus, which impacts the headquarters of the South African Military Health Services and its formations, it is crucial to address the implications of the state-owned company’s decline on our defence sector and national security,” stated Chris Hattingh, DA Spokesperson on Defence & Military Veterans.
“Denel must urgently adopt a sustainable funding model that drives operational efficiency and restores stakeholder confidence. To achieve this, the Department of Defence and National Treasury must prioritise robust oversight of Denel’s turnaround strategy, ensuring effective implementation,” he urged.
A critical component of this recovery is a comprehensive review of Denel’s governance structure. The Democratic Alliance recommends the immediate reconstitution of the board, “bypassing the ANC cadre deployment system, and instead selecting board members based on merit, expertise, and proven experience in the highly competitive arms industry.”
This restructuring is essential for Denel to regain its stability and restore its standing as a leading entity in the defence sector, the DA believes.
Denel, which has already received more than R9 billion in state bailouts, continues to grapple with severe financial and operational challenges.
Despite these significant financial injections aimed at facilitating a turnaround, the company has encountered insurmountable difficulties, including liquidity constraints, operational inefficiencies, and a shrinking market share, Hattingh pointed out.
“These issues not only hinder Denel’s sustainability but also now directly impact essential services, the latest victim is the South African Military Health Service (SAMHS) based at the Denel Lyttleton Campus,” Hattingh said in a statement dated 4 April.
He added that a concerning aspect of Denel’s governance is its failure to provide audited financial statements for the past five years. “This raises serious questions about the effectiveness of its leadership and whether the board can be considered delinquent in its duties.”
He said the decline of Denel has far-reaching consequences for the defence industry. Delays, defaulting on contracts and the subsequent cancellation of contracts threatens the operational readiness of our military personnel, putting both their welfare and national security at risk.
“Furthermore, the loss of skilled personnel due to retrenchments and job insecurity within Denel exacerbates the crisis. As Denel attempts to rebuild its capacity, prioritising the readiness of our armed forces must remain a top concern,” Hattingh said.
The DA said it will continue to pursue its aim that Denel should be revitalised in its operations to fulfil its obligation, not through bailouts but through strong principled dedicated leadership. “A well-functioning Denel is vital, not only for our arms industry but also for our national defence and the operational effectiveness of those who serve our nation.”
A sign of the issues facing Denel is its inability to deliver Badger infantry fighting vehicles to the SA Army as part of Project Hoefyster. When the contract was signed with Denel in 2006, the company was supposed to deliver 264 vehicles in multiple variants, but due to shrinking budgets, issues at Denel – particularly from state capture – and shifted target dates, this dropped to 88. Nearly R8 billion has been paid by Armscor for Badger vehicle development, but production vehicles have not yet been delivered.
Denel was the responsibility of the then Department of Public Enterprises until its dissolution post South Africa’s national and provincial elections in June last year. Effective 1 April 2025, Denel falls under the Ministry of Defence and Military Veterans.
According to the 2025 Estimates of National Expenditure (ENE) document published in March, Denel’s focus over the medium term will be on implementing its turnaround plan, which entails rolling out its new operating model, restructuring, and optimising its cost structure.
The plan has a funding requirement of R5.2 billion, of which the company committed to raise R1.8 billion by disposing of non-core assets. The remaining R3.4 billion was allocated to Denel through the Special Appropriation Act (2022). The cash injection was intended to implement the turnaround plan, settle legacy obligations and address the company’s liquidity requirements to support operations and execute its order pipeline.
“However, the company’s financial challenges remain, prompting an independent review to be conducted over the next three years. The review will, among other things, focus on the company’s strategy; operations; funding model; and balance sheet optimisation, including capital structure and assets,” the ENE stated.
Denel has been blocked by the Department of Defence from selling its stakes in Rheinmetall Denel Munition (RDM) and Hensoldt Optronics SA, which has stymied efforts to raise the R1.8 billion by selling off non-core assets. Nevertheless, the company is bullish as it pursues R36 billion in order opportunities.
