27/10/2017 09:58 SAST | Updated 27/10/2017 09:58 SAST

Denel Vehicle Systems Can't Pay Its Business Partners

"We have cash flow constraints," its acting CFO tells partners and suppliers in a letter.

Denel Aviation's Rooivalk attack helicotper. Denel Vehicle Systems manufacture turrets for attack helicopters.
Juda Ngwenya / Reuters
Denel Aviation's Rooivalk attack helicotper. Denel Vehicle Systems manufacture turrets for attack helicopters.

Denel Vehicle Systems, a division of embattled state-owned arms manufacturer Denel, did not pay suppliers and business partners last month.

According to a letter dated 22 September 2017, with the salutation "Dear Business Partner", the company had to delay monthly payments owing to "cash flow constraints", which it calls "temporary".

The Denel Group has been in the firing line recently with National Treasury on Wednesday identifying concerns about corruption and poor corporate governance at the state-owned entity as a threat to South Africa's fiscal stability. Treasury says in its Budget Review Denel faces refinancing and default risk on government guarantees amounting to R1.85-billion. The company is also involved in a dispute with its external auditors, SizweNtsalubaGobodo, over alleged irregular expediture.

According to the letter, signed by Denel Vehicle Systems' acting chief financial officer (CFO) Siveshan Puckaree, the company believes its cash flow problems will be overcome "at the end of October".

"We have experienced some scheduling and technical challenges on some of our key projects that has contributed to this constraint. However, we are positive that these challenges will be overcome in due course, which will put us back on track on the path of paying you on time as we have always done," Puckaree writes.

He ends the letter with "apologies for this inconvenience and thank you in advance for understanding and patience".

HuffPost SA last week sent Puckaree's office questions, but was referred to Denel spokesperson Vuyelwa Qinga. She has not responded.

Business Day reported on Friday that Lynne Brown, the minister of public enterprises, "robbed" Denel's new board of an opportunity to appoint a new executive when she made permanent the acting CEO and acting CFO positions. Zwelakhe Ntshepe has been acting CEO for two years. He and and Brown both face scrutiny of their alleged links to the Gupta family and their role in the state capture project, the newspaper reported.