South African arms firm Denel warns of big funding gap for key capabilities

JOHANNESBURG, Oct 21 (Reuters) - South African state arms firm Denel said on Wednesday it faced a funding gap of around 2.75 billion rand ($168 million) over the next five years for key capabilities.

Denel, which makes military equipment for South Africa’s armed forces and export, is in the grips of a liquidity crisis aggravated by the coronavirus crisis.

It is one of a handful of struggling state firms the government has been keeping afloat with bailouts.

Interim Chief Executive Talib Sadik told a parliamentary committee that Denel had asked the defence ministry to provide 683 million rand in the current 2020/21 financial year to cover the funding gap for “sovereign and strategic capabilities”.

Those capabilities are ones that if lost could threaten South Africa’s ability to defend itself.

A presentation to the committee showed funding gaps of 635 million, 600 million, 431 million and 400 million in the subsequent four years for sovereign and strategic capabilities.

Sadik added Denel was taking steps to cut costs, reduce debts and dispose of non-core assets.

But he said difficulties paying full salaries this year had led some important technical staff to leave.

Denel board chairwoman Monhla Hlahla said: “I believe that Denel can be saved if we just do it fast.”

$1 = 16.4117 rand Reporting by Alexander Winning; Editing by Olivia Kumwenda-Mtambo and Mark Potter