South Africa Committed to Rebuiling Arms Maker Denel, Minister Says

(Bloomberg) -- Public Enterprises Minister Pravin Gordhan said the South African government is committed to rebuilding Denel SOC Ltd., the cash-strapped arms manufacturer that's missed payments on its loans.

The state-owned company had its bonds suspended by the Johannesburg stock exchange on Wednesday after failing to submit its annual financial statements on time and delaying interest payments on two notes and capital redemption on one of them. Denel and the government are finalizing approvals for the payments, which will be made as soon as possible, the company said.

READ: Arms Maker Seeks South Africa's Help After Missing Bond Payment

South Africa's government has reduced Denel's debt to 290 million rand ($19 million) from 3 billion rand over the past two years, largely with the help of government funds used to pay off state-guaranteed loans, Gordhan said by phone from Pretoria.

“Our next job is to rebuild Denel,” he said. “How this will be done in refloating Denel has still to be determined.”

Finding the money to rebuild Denel presents another problem for the National Treasury as it's not the only state-owned company that needs government support to survive. The nation's debt-laden power utility Eskom Holdings SOC Ltd. is seeking to restructure its loans as it struggles to keep the lights on in Africa's most-industrialized economy.

Finance Minister Enoch Godongwana is scheduled to deliver his first annual budget on Feb. 23.

A judicial panel investigating government corruption, referred to as state capture in South Africa, said on Tuesday it found that poor-quality appointments made to Denel's board, including by Gordhan's predecessor Lynne Brown, led to the company's demise. The so-called Zondo Commission recommended some board members appointed in 2015 be further investigated for possible contravention of the Public Finance and Management Act.

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“The Zondo Commission report showed how deep the issue of state capture went,” Gordhan said. “Our lawyers are looking at various legal options, including criminal and civil, and how to recover lost monies.”