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Ambitious government jealously guards Denel's IT arm
PRIVATISATION
THE privatisation of Ariel Technologies, the information technology arm of state-owned Denel appears to have hit snags amid indications that the government plans to use it as a nucleus of a government-controlled IT company. Last year Denel separated Ariel Technologies, then Denel Informatics, from its core business, commercialised it and suggested a possible listing as part of a partial privatisation. Denel CE Seshi Chonco says: "We corporatised Ariel, recapitalised it and addressed problem areas. It could be listed within three months, but I do not have shareholder (government) approval to do so. "But government wants a state-owned IT company," says Chonco. A cabinet memo about four weeks ago outlined the need for a state-owned IT company, possibly using Ariel as its nucleus. "It has not formally been communicated, but I assume that the plan incorporates Denel," he says. Chonco insists though that even a state-controlled IT company would require private sector support. The partial privatisation of Ariel is considered key to turning Denel around. With a turnover of R640-million it contributes 20% to Denel's sales. In a separate development, Denel Aviation has started discussions with Aerospatiale, the French-based aerospace company, and British Aerospace, to try to attract either as a strategic equity partner. Chonco says the alliance is necessary given the consolidation of the industry, particularly in Europe and the US. "We cannot grow offshore without a strategic partner who can inject capital and technology," Chonco says. He envisages that the partner would be offered 49% (and management control) of Denel Aviation and the state retain 51%. "We could turn the loss- making Denel Aviation into profitability by getting a strategic partner on board." Denel is set to report a loss in the year to end-March, after two arms contracts to Taiwan and Saudi Arabia were cancelled. Chonco is adamant the group will return to profitability. As part of his rightsizing plan he expects staff numbers to fall from 14 000 to 8 000.
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