Denel places finance head honchos on precautionary suspension

State-owned arms manufacturer Denel has placed three senior executives – who are responsible for the entity’s financial affairs and reforms – on precautionary suspension over possible misconduct.

Daily Maverick understands that Denel placed acting chief financial officer Thandeka Sabela, Michael Kgobe (who also served as acting CFO and CEO), and Gawie van Zyl, the head of corporate finance and treasury, on precautionary suspension in early April.

An insider said there has been no official internal communication about the suspensions but Denel staff had been informed about the trio’s temporary replacements.

The suspension of Sabela, Kgobe and Van Zyl means Denel’s finance operations have been left rudderless at a time when the state-owned arms manufacturer is trying to rebuild its financial affairs after being the key site of State Capture corruption.

Denel has also tried to stand on its own, without further taxpayer-funded bailouts, but has failed. Since 2019 it has received bailouts worth R9-billion but continued to pencil in financial losses – the latest being R463-million in the nine months ending December 2023 (against a budgeted loss of R339-million), according to a presentation by National Treasury in Parliament.

Denel has largely been insolvent, unable to pay staff salaries and benefits (such as medical aid contributions) while also facing an exodus of experienced staff, losing engineering and innovation excellence in the process.

At a basic level, Denel manufactures armoured vehicles, air-to-air missiles, stand-off weapons and the ammunition that goes with them. These are manufactured in South Africa and exported to richer and more advanced countries – even those involved in armed conflict. Denel’s innovation goes beyond the military and defence industries. The frequency-hopping spectrum radios it develops for military purposes also feature in set-top boxes, which provide television entertainment for many households in South Africa.

Denel gave no further details of the suspensions when asked for comment, saying only that it was not “in a position to provide any details on any internal matters”.

“We have a duty to protect not only our internal processes but our employees as well, for fear of wrongful public accusations,” a Denel spokesperson told Daily Maverick, without clarifying whether Sabela, Kgobe and Van Zyl are facing charges of misconduct/wrongdoing or whether there is an ongoing disciplinary process against them. The spokesperson added: “Should it become necessary to make public comments, we will certainly do so, at the right time.”

Van Zyl refused to comment, saying it would be in contravention of his employment conditions at Denel. Kgobe referred a request for comment to Denel. An attempt to reach Sabela for comment through LinkedIn was unsuccessful.

Possible link to a R43-million refund

Daily Maverick has been informed that the precautionary suspension of Sabela, Kgobe and Van Zyl was related to a case of fraud and theft opened by the Democratic Republic of Congo (DRC) embassy against that country’s former defence attaché to South Africa, Brigadier Ngoy Timothee Makwamba. According to the National Prosecuting Authority’s Asset Forfeiture Unit (AFU), Makwamba allegedly misappropriated a refund of R43-million from Denel for his benefit.

The unit recently secured a preservation order against Makwamba to recover the R43-million by attaching his assets, including four properties and two bank accounts.

As the defence attaché to South Africa, the AFU said, one of Makwamba’s duties was to buy weapons from Denel. “The DRC embassy then made a payment of R49.6-million to the Denel group. However, the Denel Group could not process the order and arranged to pay back the money to the DRC Embassy,” the AFU said.

In December 2022, the DRC government terminated Makwamba’s employment contract and he was no longer mandated to represent the country. However, the AFU said Makwamba “fraudulently and unlawfully represented himself to Denel as the delegated representative of DRC”, which would pave the way for him to instruct the state-owned arms manufacturer where to make the refund payment. The refund had then been paid by Denel and found its way to bank accounts belonging to Makwamba. The funds had allegedly been used to buy properties in the name of his children.

Denel’s financial and treasury function (headed by Sabela, Kgobe and Van Zyl) would have been involved in the process of effecting the refund. But there was no evidence of possible wrongdoing against them.

Asked whether the the provisional suspension of Sabela, Kgobe and Van Zyl was linked to the refund matter in the DRC, Denel’s spokesperson said:

“Denel’s refund to the DRC got us concerned and we have had to look internally at whether there was anything that we could have done to avoid or prevent the funds from being redirected away from their intended destination, as it is being alleged.” DM