Denel was South Africa’s arms maker — then a Gupta deal brought it to its knees

Denel was South Africa’s state-owned defence and aerospace company, responsible for manufacturing and exporting military equipment. It was a strategically important enterprise with customers across Africa, the Middle East, and Asia. In the early 2000s, Denel had recovered from near-bankruptcy and was posting profits.

In 2016, Denel entered a controversial 10-year, single-source supplier deal with VR Laser, a company owned by the Gupta family. The Zondo Commission later found that the 2015 board of directors had made decisions that “brought Denel to its knees.” The deal resulted in R3 billion in lost revenue. By 2016, Denel posted a R1.7 billion loss — its first in eight years — triggering severe financial difficulty.

By FY2020, Denel’s revenue had fallen to R2.7 billion and it recorded a net loss of R1.9 billion. Employees went unpaid from May 2020 to January 2022. A R6 billion missile deal with Egypt was lost because South African banks refused to provide a loan, even with government guarantees. The government provided a R3 billion bailout in 2022. The company was declared “on the brink of insolvency” in Parliament.