Denel to Oppose South African Treasury Court Action

  • State defense company accuses Treasury of ‘grandstanding’
  • Objections came after it emerged Guptas are involved: Denel

Denel SOC Ltd., the South African state-owned arms maker, said it will fight National Treasury’s efforts to block a deal to market its products in Asia with a company that has been tied to the Gupta family, who are friends with President Jacob Zuma.

“Denel views the threat by the National Treasury to bring a court action to stop the Denel Asia joint venture as political, sheer opportunism and grandstanding,” the Pretoria-based company said in an e-mailed statement on Tuesday. “Denel will vigorously oppose it.”

The state defense company had informed Treasury in late October that it planned to create a unit in Asia and held meetings with the ministry and Department of Public Enterprises in December about its intentions, without receiving objections to the proposal or any reply to its application, Denel said. It was only in February, when it emerged that the Guptas were involved, that Treasury sent a request for further information, the company said.

Denel entered a joint venture agreement with VR Laser Asia to form Denel Asia, Oakbay Investments, the holding company for the Gupta family’s businesses in South Africa, said in an e-mailed statement on Wednesday. Oakbay owns an indirect minority stake in VR Laser Services in South Africa, but no shareholding in VR Laser Asia, which is a separate legal entity to the South African business, the company said.

Denel’s objections to the Treasury’s actions follow a week of political and market turmoil after reports Finance Minister Pravin Gordhan could face arrest.

Opposition parties and analysts have speculated that Zuma, whose son is in business with the Guptas, may use a police investigation into Gordhan to install a more compliant head of the Treasury. Treasury this week said that state-owned utility Eskom Holdings SOC Ltd. is resisting its efforts to review coal-supply contracts with Tegeta Exploration & Resources Ltd., also part-owned by the Gupta family, and ignores the department.

The Gupta family announced Aug. 27 that they plan to sell all shareholdings in South Africa by the end of the year. The Treasury didn’t immediately respond to an e-mailed request for comment outside of normal business hours.

(Corrects fourth paragraph to show joint venture partner.)
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