State-owned defence conglomerate Denel will be subject to an independent review of its turnaround strategy and long-term sustainability, which will cost an estimated R10 million.
This was revealed in the Defence Vote of the latest budget, announced by Finance Minister Enoch Godongwana on 25 February. Vote 23 (Defence) noted that Denel will continue implementing its turnaround plan, which includes the rollout of a new operating model, organisational restructuring and the optimisation of its cost structure.
The plan requires funding of R5.2 billion, of which the company committed to raise R1.8 billion through the disposal of non-core assets. The remaining R3.4 billion was allocated to Denel in March 2023 through the Special Appropriation Act (2022). This capital injection was intended to support the implementation of the turnaround plan, settle legacy obligations and address liquidity constraints to sustain operations and execute the existing order pipeline.
“An independent review will be undertaken over the next three years at an estimated cost of R10 million to assess the entity’s implementation of the plan and determine its long-term sustainability. The review will focus on the company’s strategy, capability gaps, operations, funding model and balance sheet optimisation, including its capital structure and asset base, among other things,” the budget document read.
National Treasury expects Denel’s revenue to improve due to growing business activity and “intensified implementation of the turnaround plan,” with expenditure projected to increase at an average annual rate of 7.2%, from R3.1 billion in 2025/26 to R3.8 billion in 2028/29. Of the 2025/26 amount, R431 million went to Administration, R238 million to the Missiles division, R672 million to Aviation, R1.5 billion to Land solutions, and R219 million to Integrated Systems Solutions.
“The company expects to generate 87.3% (R8.9 billion) of its revenue over the medium term from the sale of defence and security equipment and related services. Revenue is expected to increase at an average annual rate of 15.6%, from R2.5 billion in 2025/26 to R3.9 billion in 2028/29, also reflecting progress in implementing the turnaround plan.”
Denel’s revenue stood at R2.7 billion in 2022/23 before dropping to R1.5 billion the following year and R1.7 billion in 2024/25 before increasing to R2.5 billion in 2025/26. For comparison, revenue of R8.4 billion was recorded in 2015/16. The company expects a cash deficit of R869 million in 2026/27 before heading into the black the following two years (R84 million surplus in 2027/28 and a R64 million surplus in 2028/29).
Denel has said it has an order opportunity pipeline worth more than R53 billion, with R45 billion in high value potential contracts for artillery, armoured vehicles, missiles, and unmanned aerial vehicles (UAVs).
Denel Group CEO Tsepo Monaheng told Parliament last year the company is stabilising, but its position remains precarious. “We stretch every rand. Liquidity is our biggest constraint, and though we’ve made progress, it’s far from resolved.”
Denel’s performance has been severely compromised since 2016 by governance failures, the effects of state capture, and the collapse of internal systems. Since April 2025, Denel has fallen under the shareholder control of the Department of Defence and Military Veterans, marking a shift from its previous position under the Department of Public Enterprises.
