# Denel’s turnaround strategy gains momentum: partnerships, asset sales, and production restart

- Link: https://www.military.africa/2023/09/denels-turnaround-strategy-gains-momentum-partnerships-asset-sales-and-production-restart/
- Published: 2023-09-21T09:38:54+01:00
- Author: Sarah Lesedi

Denel, the South African state-owned defense conglomerate, is making significant
strides in executing its turnaround strategy. Interim Denel Group CEO Mike Kgobe
provided an update to the Portfolio Committee on Public Enterprises, highlighting
key developments and progress made by the company.

Denel has received nearly R1 billion from the Denel Medical Benefit Trust (DMBT)
and [R3.4 billion from Treasury recapitalization](https://www.military.africa/2023/02/additional-r3-4-billion-bailout-funds-for-denel/),
which has played a crucial role in stabilizing the company. The recapitalization
funds have allowed Denel to restructure its operations and transition to a new business
model, reducing its divisions from six to four operating units: Guided Weapons, 
Land, Air, and Integrated Systems.

To complete its turnaround plan, Denel requires R2.29 billion, which will be funded
through the sale of non-core assets and the remaining recapitalization funds from
the National Treasury.

The [primary objectives of Denel’s turnaround plan](https://www.military.africa/2022/03/denel-restructuring-for-efficiency-as-it-targets-southeast-asian-markets/)
are to secure its existing customer base and resume key programs that were previously
on hold. Notable progress has been made in restarting crucial programs like [Hoefyster, which had been paused for five years](https://www.military.africa/2022/06/end-of-the-road-for-south-africas-badger-ifv-acquisition/),
and restructuring activities related to the A-Darter missile for the South African
Air Force.

Denel has also been focused on rebuilding its Dynamics division, particularly in
the area of guided weapons and unmanned systems, following critical skills losses.
This [effort has shown progress in recent months.](https://www.military.africa/2023/01/denel-integrated-systems-solutions-positions-for-growth/)

ADVERTISEMENT

The company is now transitioning into a [growth phase](https://www.military.africa/2023/01/denel-integrated-systems-solutions-positions-for-growth/),
actively exploring new revenue streams worldwide and responding to international
requests for proposals. “We are now moving into the growth phase, and chasing new
revenue streams around the world as well as identifying numerous opportunities. 
There have been requests for proposals internationally and we are busy responding
to that,” Kgobe said.

In terms of asset sales, Denel is in the process of selling properties to [Rheinmetall Denel Munition (RDM)](https://www.military.africa/tag/rdm/)
and Hensoldt South Africa, with the sales expected to conclude by October this year.
While Denel will retain its 49% stake in RDM, it will sell its 30% share in Hensoldt
South Africa.

According to a recent _defenceWeb_ article, Denel is also revitalizing existing 
partnerships and forming new ones. In the UAE, Denel is normalizing its relationship
with the Edge Group through its partnership with Barij Dynamics. Additionally, Denel
is pursuing joint ventures with companies like Aselsan and Turkish Aerospace Industries
in Turkey for access to technology and markets. This includes on the Rooivalk attack
helicopter and how [Denel can position the Rooivalk attack helicopter into the future.](https://www.military.africa/2023/07/denel-aselsan-to-modernize-rooivalk-helicopter/)

Following a state visit to Saudi Arabia in 2022, [Denel has reinvigorated its relationship with the Saudi defense sector](https://www.military.africa/2022/11/south-africa-and-saudi-arabia-sign-mou-on-defence/),
engaging with Saudi Arabia Military Industries (SAMI) and the General Authority 
for Military Industries (GAMI).

Denel management has supported initiatives to explore export opportunities, resulting
in a substantial R30 billion opportunity pipeline both domestically and internationally.
The company’s annual order book currently stands at R1.9 billion, with half of it
secured.

ADVERTISEMENT

ADVERTISEMENT

In collaboration with the South African National Defence Force, Denel is focusing
on critical issues in the short term, including support for [C-130](https://www.military.africa/2023/08/marshall-aerospace-to-upgrade-south-african-air-forces-c-130-fleet/),
Oryx, and [Rooivalk aircraft](https://www.military.africa/2018/01/denel-rooivalk-africas-indigenous-attack-helicopter/),
concluding phase 1 development of the Badger infantry fighting vehicle, restarting
Project Kamas for A-Darter missiles, and delivering G5 and G6 artillery upgrades
for the SA Army.

With regard to artillery systems, Kgobe highlighted a [successful trial of the T5-52 self-propelled howitzer](https://www.military.africa/2023/09/denels-155mm-t5-52-self-propelled-howitzer-achieves-over-60-km-range/)
at Alkantpan last month, where nearly a dozen international participants came to
witness the demonstration.

Denel’s progress in implementing its turnaround strategy is a [positive sign for the company’s future](https://www.military.africa/2019/09/what-is-the-future-of-denel/)
and its role in South Africa’s defense industry.

### _Related_