New Gupta-linked state capture claims

The Gupta name and the words “state capture” are back. This time, it’s one of Denel’s minority shareholders who claims its parent company is moving all its eggs to the Gupta basket.

However, Denel has hit back, saying the minority shareholder has teamed up with a politician to loot shares in the state-owned arms manufacturer.

LMT Holdings founder Stefan Nell – who let Denel buy 51% of its shares for R100 due to financial stress in 2012 – filed an urgent application in the Pretoria High Court that alleged a R1bn contract had been moved over to Gupta-owned VR Laser.

Nell said that “the conduct of [Denel] in this regard can only be described as state capture by proxy”, according to TimesLive.

However, Denel spokesperson Vuyelwa Qinga said “Denel categorically deny that it is captured by the Gupta family” in a statement on Thursday.

The purpose of the court challenge was to seek a ruling in favour of business rescue on an urgent basis. However, Denel said there was more at play.

“Denel is aware that a certain politician is attempting to loot Denel shares at LMT, the attempts by the said politician to hijack Denel shares using business rescue proceedings via Mr Nell will be vigorously opposed and will not succeed,” said Qinga.

In his application, Nel said Denel awarded the remaining Hoefyster contracts to VR Laser, even though they had been promised to LMT.

“It has become patently clear that (Denel) not only reneged on its promises, electing instead to further the interests of a politically connected family in the Guptas, but that it may have also misrepresented its intentions, not only to (the shareholders), but also various government departments,” he said.

Qinga rejected the claims on Thursday, explaining that Denel has been “single handedly loaning money to LMT to fund its operations despite the obstructionist conduct of Mr Stefan Nell”.

“Nell alleges that he has investors who are prepared to invest vast amounts of monies in the business, but yet he does not want to disclose such persons,” said Qinga.

He said the awarding of the contracts to VR Laser occurred before the appointment of the current minister, board and the acting executives.

He said the executive directors of Denel who were board members of LMT “are no longer in Denel’s employ or have been suspended”.

The matter was set down to be heard in court on July 26, according to Business Day.

VR Laser has been doing business with Denel for the past 15 years, Public Enterprises Minister Lynne Brown said in April.

The formation of the VR Laser-Denel joint venture was announced in January this year, but the deal was mired in controversy – not only because of the interested parties – but also because the partnership was in contravention of the Public Finance Management Act.

Denel, as a state-owned company, was obliged to secure a Section 54 application before it could launch partnerships and joint ventures.

She refuted allegations that former Denel CEO and the board were dismissed to “clear the way” for the venture with VR Laser. “In fact, the CEO brought the deal to the board’s attention three months into their tenure.”

VR Laser, partly owned by Ajay Gupta’s eldest son, Kamal Kant Singhala, registered a joint venture with Denel Asia in Hong Kong. The deal is currently the subject of controversy, as National Treasury declared it illegal.

The Guptas, close friends of President Jacob Zuma, have been in the spotlight this year over allegations of state capture.

While no criminal proceedings have yet been brought against the Guptas, the Public Protector last week was promised half of its R3m by Treasury to start its investigation into government state capture. In addition, the Hawks are busy with an inquiry into three affidavits brought to them by the Democratic Alliance, Cope and MP Vytjie Mentor regarding the Guptas and state capture.

The Guptas have often welcomed an investigation, saying they have done nothing wrong.

Ajay Gupta told the SABC last month he believes the idea of state capture is an imaginary concept created by the media. “It is mind capture, it is media capture,” he said.


More on state capture

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New Gupta-linked state capture claims