Denel shows SA’s SOEs can be saved

South Africa’s state-owned enterprises (SOEs) are a mess. Eskom, SA Airways, Prasa, the Post Office and many others are sucking up billions in taxpayer money to merely survive.

The hard, capitalist, business approach is to say: stop throwing good money after bad. Sell them off to the private sector, get a little bit back on their assets and stop the drain on the fiscus.

Yet a parastatal company which was in all sort of trouble not long ago, has taken a R1.8 billion lifeline from the state and is turning its business around.

Arms maker Denel was dying financially a year ago, with revenue of just R3.8 billion compared to R5.8 billion the previous year. It had been battered by attempts to pull it, and some of its operating units, into the state capture web.

Now, though, it has cut costs by R500 million, sold off non-core assets and reduced employee numbers by 900 from 4,000.

Now, under new management, the company has secured an order intake of almost R8 billion this year, compared to R509 million the previous year, while long-term orders stretch out for four years.

Denel, if it continues on its upward trajectory, shows that our ruinous SOEs can be saved.

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