Denel’s fragile recovery under scrutiny as company posts first profit in nearly a decade

State-owned defence manufacturer Denel has reported an unaudited profit of R223 million for the 2024/25 financial year, its first since 2016, as it outlines a cautious recovery strategy.

The company’s Group CEO, Tshepo Monaheng, presented Denel’s turnaround plan to Parliament’s Joint Standing Committee on Defence (JSCD) on 20 June, amid sharp scrutiny over years of financial mismanagement and strategic decline.

According to Denel, for the 2024/25 financial year, revenue stood at R1.3 billion, well below the R8.4 billion high it achieved in 2015/16. He confirmed the company is still managing over R700 million in outstanding creditor debt and continues to battle liquidity constraints.

Monaheng reported that during the 2023/24 financial year, R1.4 billion orders were placed with Denel, and this increased to R4.3 billion in 2024/25. “If we continue on this trajectory, we should realise the Denel we want. This is dependent on the happiness of the customers. We are ready to get more orders. We hope to continue on this trend.”

Denel’s performance has been severely compromised since 2016 by governance failures, the effects of state capture, and the collapse of internal systems. Since April 2025, Denel has fallen under the shareholder control of the Department of Defence and Military Veterans, marking a shift from its previous position under the Department of Public Enterprises.

Monaheng told MPs the company is stabilising, but its position remains precarious. “We are fighting for Denel’s life daily,” said Monaheng. “We stretch every rand. Liquidity is our biggest constraint, and though we’ve made progress, it’s far from resolved.”

Denel has received over R10.15 billion in government bailouts since 2019, including recapitalisation and a R4.4 billion guarantee facility, R1.2 billion of which is currently ringfenced. Monaheng confirmed that Denel would submit a full breakdown of how these funds were used, noting that a significant portion went toward settling debt, unpaid salaries, and restoring limited operational capacity. He added that conditions attached to the current R1.2 billion tranche were being met, with the major stipulation now being that Denel must demonstrate long-term sustainability.

Phased Recovery, Core Mandate, and Export Push

In its official presentation, Denel detailed a three-phase turnaround strategy:

• Stabilisation: Debt restructuring, downsizing, system overhauls, and governance reforms, with Section 189 retrenchments reducing the workforce drastically.
• Recovery: Divisions such as Aerospace and Overberg Test Range (OTR) have exited “ICU” status. Pretoria Metal Pressings (PMP) is ringfenced and in the process of resuming operations. Other divisions are being revived.
• Growth: A strategic focus on high-potential systems such as artillery, precision-guided munitions, and integrated defence platforms. Export revenue is targeted to exceed 60 percent of total income to reduce dependence on the constrained South African National Defence Force (SANDF) budget.

Denel reaffirmed its constitutional mandate to design, develop, and manufacture key defence materiel for the South African National Defence Force, especially in areas where sovereignty and strategic capability are at risk. Current operations are prioritised to support the SANDF’s landward systems, air assets, and missile programmes.

The company’s key international projects include an R15 billion artillery contract in the Middle East, support contracts in India, and interest in advanced air defence systems in Southeast Asia.

Missed Opportunities and Brain Drain

Monaheng confirmed that Denel lost a major contract (for Umkhonto missiles) with Egypt after failing to secure financial guarantees in time. “We had the skills, we had the plan, but without guarantees, Egypt walked away,” he said. “Immediately after that, many of our engineers resigned. That was a major blow to Denel Dynamics.”

He also acknowledged the loss of the Cheetah C-RAM missile system to EDGE Group in the UAE, a query raised by committee member Carl Niehaus, who raised further questions regarding the status of PMP. The Cheetah system, reportedly developed at Denel before its collapse, is now in use under a foreign flag, and was a key display at the EDGE Group stand at IDEX 2025. The Special Investigating Unit (SIU) is currently examining possible IP theft and has received Denel’s full cooperation.

Hoefyster and PMP: Projects of National Concern

Denel confirmed that the long-delayed Project Hoefyster, for the Badger infantry fighting vehicle, is progressing slowly. Phase 1, the development phase, is now expected to reach full milestone completion by March 2026. Phase 2 production planning will depend on agreements between Armscor and the Department of Defence. “We do have engineering capacity to complete Phase 1,” said a senior manager. “Phase 2’s shape and timeline are under review.”

At PMP, operations are set to resume by mid-July after a R170 million capital injection. Acting General Manager Justice Nhlapo confirmed the delivery of key input materials and stated that recruitment is underway to restore lost manufacturing capability. Succession plans include training younger personnel alongside re-engaged veteran workers.

Minority Stakes and Strategic Control

Denel currently holds minority stakes in three strategic joint ventures:

• Rheinmetall Denel Munition (RDM) – 49 percent
• Hensoldt South Africa – 30 percent
• Barij Dynamics (UAE) – 49 percent

Only RDM is currently profitable, having paid R100 million in dividends in the past year. Denel sits on all three boards and is conducting a review to determine whether to regain majority control or renegotiate its participation. “We’re asking whether being minority shareholders is in the country’s interest,” Monaheng said. “The new Denel strategy, starting in July, will address this.”

Progress on missile deliveries and development

Denel’s presentation did however reveal some good news, notably concerning deliveries of the A-Darter under Project KAMAS, potential export orders for the Ingwe anti-tank missile and development of the Joint Strike Missile, previously known as the Marlin Beyond-visual-range-air-to-air-missile (BVRAAM).

Although delayed by three years, Denel has concluded deliveries of eight practice inert A-Darter missiles, along with the first four of 21 acquisition trainer missiles. Further, the delivery of the first four operational missiles is expected soon, in July 2025. The standing order is for 41 operational missiles, meant to equip the SAAF Gripen fighter jets for short-range air-to-air engagements.

Committee Members Demand More Transparency and Delivery

Committee member Chris Hattingh criticised the presentation as “more about Denel’s lost potential and dreams than its current capacity.” He requested a detailed account of how bailout funds were spent, whether contract obligations have been met, and what Denel needs to fully resume its original role as prime contractor for SANDF landward platforms.

“There are major implications when key SANDF vehicle maintenance is outsourced to foreign suppliers,” said Hattingh. “We need to know the cost of restoring full-spectrum responsibility to Denel, both financially and operationally.”

Break-even by 2028, Investment in New Tech

Denel’s corporate plan forecasts breakeven by 2027/28. R&D investment will focus on modernising ageing missile systems, vertical-takeoff UAVs, satellite technologies, and advanced cyber defence platforms. The CEO also confirmed that a new integrated ICT system will be implemented by mid-2026 to address persistent audit failures and improve data quality.

“We are working to modernise our product suite to reflect today’s battlefield realities,” Monaheng said. “Without investment in innovation, Denel won’t survive. But we also need to re-establish trust, with government, the market, and our own people.”

Denel’s leadership has set out a clear, if fragile, path to recovery. But committee members remain unconvinced that strategic intentions are matched by tangible progress. With trust still strained and Denel’s critical capabilities under threat, the company must now deliver—on contracts, on transparency, and on its national mandate.

The committee has requested written follow-ups on the use of bailout funds, progress on Project Hoefyster, and Denel’s role in joint ventures. Further oversight sessions are expected before the end of the 2025 parliamentary calendar.

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