As investigation over the alleged state capture by the Gupta family deepens, a South African military contractor has taken the family to court over a dispute involving parastatal arms manufacturer Denel.
The military contractor who is a shareholders of LMT Holdings filed an urgent application in the Pretoria High Court yesterday in which they allege “state capture by proxy”.
The shareholders claim that the family’s company VRLaser, diverted a R1-million contract under suspicious circumstances, leaving LMT Holdings out of pocket.
Denel bought a controlling stake in LMT Holdings in 2012 for R100 with a view to making the company an in-house supplier for its Hoefyster programme.
The company took the transaction as “strategic” as the company had exclusive intellectual property rights for the design of a flat-floor landmine vehicle.
LMT Holdings founder Stefan Nell, a mechanical engineer with 29 years‘ experience in military vehicle design, agreed to the deal with Denel due to “financial distress”.
“LMT Holdings would be awarded the design and manufacturing contracts for the Hoefyster project, which would generate an estimated income of approximately R100-million a year for a period of 10 years and, moreover, that [Denel] would fund all the operations requirements of [LMT Holdings] to enable the latter to grow and have the financial resources and capacity necessary to supply its customers,” Nell says in his affidavit. The deal had to be ratified by the Treasury and the minister of public enterprises.
The document further stated that the major strategic benefit of the transaction for Denel is that it is in Denel Land Systems’s interest to ensure that LMT continues to operate as a going concern due to its significance to the Hoefyster programme,” Finance Minister Pravin Gordhan was reported to have said in a July 2012 letter approving the transaction.
However, in a court papers Nell argued that Denel was yet to not met its side of the deal, instead, it diverting its work to VR Laser.
According to him, Denel awarded the remaining Hoefyster contracts, previously promised to the company, to VR Laser, an entity affiliated to the Gupta family and the son of President [Jacob] Zuma. He also argued that the conduct of [Denel] in this regard can only be described as state capture by proxy.
“It has become patently clear that [Denel] has 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.
In doing so it has acted to the prejudice of itself, [LMT Holdings, the shareholders] and the public funds entrusted to it by the South African government,” he says in the affidavit.”he said
To him also, Denel purchased another company [BAE Land Systems] that trades in direct competition with [LMT Holdings] without reference to [the shareholders] and without disclosing their interests in that company to [the shareholders.
LMT Unable to Pay Staff
Nell’s affidavit revealed that LMT is struggling to pay salaries to its 250 staff and suppliers because the funding it has received from Denel is “wholly inadequate”.
Meanwhile, Denel spokesman Pam Malinda has said the company would not comment because it was unaware of the matter.While VR Laser chief executive officer Pieter van der Merwe said his company was not party to the case and that he had an interest in it as VR Laser is “one of LMT‘s bigger creditors”.
“VR Laser has been doing steelwork for LMT, on normal commercial terms, for almost six years. LMT does not have the steel manufacturing facility necessary to process [cut and bend] steel plates, and therefore used VR Laser,” he said.
He also refused to comment further because VR Laser has “a supplier relationship with Denel as well as LMT, separately, and is therefore bound by confidentiality agreements with both companies.