Denel, the state-owned defence manufacturer, told Parliament on 9 October that it is on a “good trajectory” even as the Auditor-General of South Africa (AGSA) handed it a ninth consecutive disclaimer, according to defenceWeb. A disclaimer means the auditors could not gather enough evidence to give any opinion on the financial statements. Revenue grew, but the company still lost money on its operations and its cash position was due to turn negative.
What Denel told the committee
Group chief executive Tsepo Monaheng presented the 2025/26 annual report to Parliament’s Portfolio Committee on Defence and Military Veterans. “Although there are challenges as we navigate the growth journey of Denel, the company is in a good trajectory for growth, stability, and doing good for the country,” he said. He also argued that “Financial performance is secondary to us delivering and strengthening a sovereign capability.”
The figures, as reported by defenceWeb from Denel’s own annual report:
- Group revenue rose from R1.272 billion to R1.473 billion, a rise of about 15.8%, which returns it to 2023 levels.
- Denel Aerospace brought in R880 million and Denel Land Systems R478 million, the two largest units.
- Gross profit margin improved from 11% to 24%, or R361 million.
- Net profit was R156 million, but the group still made an operating loss of R364 million, against R370 million a year earlier.
- Cash generated from operations swung from a loss of R122 million in the 2024 financial year to R261 million.
Denel blamed the operating loss on a higher cost base and on legacy contracts paid for in earlier years.
The net profit is lower than last year’s. Engineering News reported on 5 August that Denel told Parliament’s Standing Committee on Appropriations that net profit was R156 million against R193 million in 2024/25.
Targets missed and cash running short
Denel reached only 41% of the targets in its shareholder compact, the performance agreement with government. Revenue growth was about 15% against a target of 25%. Operating expenses rose from 43% to 55% of revenue, against a target of 30% or less.
The liquidity picture is the sharper concern. According to defenceWeb, Denel’s own figures showed its liquidity position turning negative in September 2026, though it told the committee interventions were under way. Of the R3.378 billion in recapitalisation (fresh state funding) received since 2023, R81 million remained at 30 April.
Engineering News reported that Denel has been solvent since 2023 but that liquidity constraints remain, with traditional lenders reluctant to back it. “Denel has unlocked alternative means with the support of the Shareholder [government] to access facilities with government collateral,” the group told the appropriations committee. It also said a planned R1.8 billion in sales of non-core assets has stalled, a figure the analysis below says has not materialised.
The audit, and a politician’s reading
Interim board chair Tshidi Mokgabudi closed the presentation by focusing on the audit. She confirmed this is the ninth year of a disclaimer, together with a finding that the financial statements are “not credible”. “The board is now doing a deep-dive into the supporting documentation and evidence to actually establish what makes our financial statements to be termed as not credible,” she said. She said the board would work to show significant improvement in the next annual report through what she called an “exiting disclaimer project”.
The AGSA has been flagging the problem for years. A Parliamentary Monitoring Group record of an AGSA briefing to Parliament’s public accounts committee on the 2023/24 audit outcomes says Denel had been receiving disclaimers for many years and that a large part of its bailout money had gone to cover legacy debts. The 9 October meeting is listed there, but its minutes are behind a subscription.
A separate defenceWeb opinion piece by Carl Niehaus, an EFF member of Parliament who sits on the committee, takes a harder line. It is analysis from a politician, not a neutral account, and its figures are his reading of the documents. He writes that Denel’s presentation contained facts that should be acknowledged, but “Those are facts. They are not a turnaround.”
Niehaus says revenue missed the corporate plan target of R1.956 billion and that the R364 million operating loss was more than double the R168 million Denel had budgeted. He says the AGSA could not obtain sufficient evidence across 34 areas of the financial statements, and that of about R3.297 billion drawn under the turnaround framework, roughly R2.757 billion went to legacy obligations and about R178 million to growth. He also describes Project Hoefyster, the Badger infantry combat vehicle programme, as more than ten years late.
He wants a go or no-go decision on Hoefyster within sixty days and a cash-flow statement before any further recapitalisation. The 9 October session was part of Parliament’s Budgetary Review and Recommendation Report (BRRR) process, in which committees assess how departments and state entities used their money before the next budget.
