EDITORIAL: Talib Sadik has a sturdy plan but he can’t turn around Denel on his own
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Being CEO is hard work but doing it at Denel — or any of the floundering state-owned enterprises — comes with an added degree of difficulty.
On Monday Denel picked Talib Sadik, a nonexecutive director, to run the show on a temporary basis, replacing Danie du Toit, who abruptly resigned after less than two years at the helm.
One could argue that Sadik, a chartered account, should be made a permanent CEO given his stellar reputation and track-record when he was in charge between 2008 and 2012. Under his leadership Denel was profitable and it continued to grind out profits for a few years after his departure before swinging into a loss of R1.7bn in 2018. Then the years of mismanagement and state capture followed.
But it would not matter. Sadik is inheriting a company in the middle of executing what looks like a coherently drawn up turnaround plan, which unfortunately has the backing of the government only on paper.
Under the plan, with Sadik part of the team that conceived it in 2019, Denel wants to cut costs, mainly via retrenchments, and sell equity stakes in some of its businesses while almost doubling sales in four years.
Equity sales and partnerships involving businesses like Denel Land Systems, missile unit Denel Dynamics and Denel Aeronautics should help raise R4.4bn by the end of 2022. Improving the accuracy of demand forecasts, reducing staff costs and selling noncore businesses, including Denel Aerostructures, could net the company almost R900m in further savings, Denel’s board told a parliamentary committee almost a year ago.
In that presentation, the board aimed to start disposing of equity stakes and exiting loss-making businesses within months. It would be exactly a year in September, and there has been little to show for it.
It’s all down to tardy approval processes by the government on cutting its salary bill, which soaks up an astonishing 45% of the company’s R3.8bn annual revenue, and selling noncore assets and equity stakes. The lack of urgency from the government is baffling given what is at stake
In 2018 Denel held out a begging bowl, seeking R2.8bn cash to fund day-to-day expenses and carry through the turnaround plan. But finance minister Tito Mboweni allocated about 64% of that money, which came four months later than Denel expected and forced it to get a bridge loan to tide itself over until the cash came through.
In ...
On Monday Denel picked Talib Sadik, a nonexecutive director, to run the show on a temporary basis, replacing Danie du Toit, who abruptly resigned after less than two years at the helm.
One could argue that Sadik, a chartered account, should be made a permanent CEO given his stellar reputation and track-record when he was in charge between 2008 and 2012. Under his leadership Denel was profitable and it continued to grind out profits for a few years after his departure before swinging into a loss of R1.7bn in 2018. Then the years of mismanagement and state capture followed.
But it would not matter. Sadik is inheriting a company in the middle of executing what looks like a coherently drawn up turnaround plan, which unfortunately has the backing of the government only on paper.
Under the plan, with Sadik part of the team that conceived it in 2019, Denel wants to cut costs, mainly via retrenchments, and sell equity stakes in some of its businesses while almost doubling sales in four years.
Equity sales and partnerships involving businesses like Denel Land Systems, missile unit Denel Dynamics and Denel Aeronautics should help raise R4.4bn by the end of 2022. Improving the accuracy of demand forecasts, reducing staff costs and selling noncore businesses, including Denel Aerostructures, could net the company almost R900m in further savings, Denel’s board told a parliamentary committee almost a year ago.
In that presentation, the board aimed to start disposing of equity stakes and exiting loss-making businesses within months. It would be exactly a year in September, and there has been little to show for it.
It’s all down to tardy approval processes by the government on cutting its salary bill, which soaks up an astonishing 45% of the company’s R3.8bn annual revenue, and selling noncore assets and equity stakes. The lack of urgency from the government is baffling given what is at stake
In 2018 Denel held out a begging bowl, seeking R2.8bn cash to fund day-to-day expenses and carry through the turnaround plan. But finance minister Tito Mboweni allocated about 64% of that money, which came four months later than Denel expected and forced it to get a bridge loan to tide itself over until the cash came through.
In ...
