Military spending is growing around the world, particularly in the Middle East and Asia where it grew by 7.2% and 4.3% respectively in 2017. Despite this opportunity, corruption, inefficiency and misrule prevented South Africa's defence equipment manufacturer Denel from capturing a slice of the growth. A new management team is trying to turn the tank around.
The audit report written by SA Auditor-General Kimi Makwetu on Denel's annual financial statements runs to eight pages and reads like a horror story.
Accounting systems are outdated and processes almost non-existent. There is no record-keeping, no internal controls, no visible adherence to legislation such as the Public Finance Management Act, limited application of the new financial reporting standards and no implementation of basic financial management disciplines and controls over daily and monthly transactions.
This means management has been making decisions in the dark. So it should come as no surprise that just one of Denel's operating divisions - the smallest - reported a profit for the year to 31 March 2019.
Revenue plunged by 36% to R3.7-billion in the year to 31 March 2019 as operational activity declined, in part because of cash-flow constraints. The company reported a net...