Denel fires back in court battle over LMT Holdings

ARMS manufacturer Denel has hit back at the shareholders of South African military contractor LMT Holdings for using the “populist narrative” of state capture in their legal bid to reclaim Denel’s majority stake in the company.

Denel CEO Zwelakhe Ntshepe rubbishes LMT Holdings claims of “state capture by proxy” as “sensational” in his replying affidavit to the urgent application for LMT to be placed under business rescue. Denel holds a 51% stake.

In court papers filed earlier in July, the LMT Holdings shareholders claim that Denel redirected work meant for the company to VR Laser, a company owned by the Gupta family.

LMT Holdings holds the patent to manufacture the Hoefyster, an antimine vehicle with a flat hull that is also sold internationally.

LMT founder Stephan Nell says VR Laser’s R238m contract to cut steel for the programme should never have been given to the Gupta-linked company because LMT could do the same work.

Ntshepe has hit back, saying the that shareholders are abusing business-rescue provisions for “ulterior purpose to wrestle control of the company away from Denel (and) to unreasonably exert pressure on Denel to provide further funding to LMT”.

He says the application is a calculated strategy to tarnish Denel’s reputation.

Denel bought a controlling stake in LMT Holdings in 2012, with a view to making the company an in-house supplier for its Hoefyster programme with a promise of R1bn in contracts.

READ THIS: POINT OF ORDER: Guptas not the first crony capitalists in Africa

 

According to internal briefing documents, Denel saw the transaction as “strategic” as the company had exclusive intellectual property rights for the design of a flat-floor landmine vehicle.

At the centre of the spat between Denel and the LMT shareholders is an R800m military vehicle manufacturing project by Saudi Arabia.

Ntshepe argues that LMT Holdings has itself to blame for work being diverted to VR Laser as it delivered defective products and failed to deliver on time.

He states there were a number of complaints about the company’s performance from major customers including Saudi Arabia, the UN and LTM’s partner Patria, “and an insistence that VR Laser be appointed due to its superior quality workmanship”.

He says Nell avoids taking responsibility for the shortcomings at LMT despite having been lawfully removed as CEO because of poor performance. “(Nell) blames Denel for the cash flow problems when it was Denel that has injected a further about R90m into LMT coffers since December 2015 and nothing from the applicants.”

The High Court in Pretoria has yet to give a date for the hearing.

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