An urgent labour court application by a former high-ranking official at state arms manufacturer Denel has resuscitated the contentious loss of secret intellectual property (IP) worth billions of rands at the centre of the company's demise.
Sello Ntsihlele, a former CEO of Denel subsidiary Denel Dynamics, is seeking to set aside a mutual separation agreement (MSA) he concluded with the company in August 2023.
The settlement was reached during his disciplinary hearing — the second in the space of less than a year — in circumstances Ntsihlele argues were filled with subterfuge and intimidation.
“The disciplinary hearing was convened in an unlawful manner by the Denel board, and it was clear to me that their intention was not to genuinely address any misconduct, but rather to remove me from my position,” he said in court papers.
“The allegations against me were baseless and fabricated, designed solely to create a pretext for my dismissal. I was denied a fair opportunity to present my defence, and the entire process was a sham.”
In response, Denel’s group manager for legal Khalatse Marobela said Ntsihlele's claims were baseless and without merit. “The disciplinary process was conducted in accordance with Denel's policies and procedures, and he was afforded every opportunity to present his case.
"His assertion that the process was a sham designed to remove him is a desperate attempt to avoid accountability for his own actions.”
The second charges, which led to the MSA, were served on Ntsihlele while he was in arbitration with Denel over the first charges in 2023, and related to evidence he placed before the arbitration.
Denel asserted that Ntsihlele was in possession of privileged information that showed he had allegedly breached Denel policy by being in contact with Denel employees while under suspension.
As part of his argument in the labour court, Ntsihlele claimed that his problems at Denel began after he resisted unlawful instructions to transfer data packs for the Seeker 400 (drone) unmanned aircraft system (UAS) as part of Denel’s consolidation and turnaround strategy, to the newly formed Denel Aeronautics. A data pack consists of blueprints and specifications that would allow anyone to produce or replicate a product.
The instructions, Ntsihlele argued in his papers and two prior grievances lodged against senior Denel officials in 2022, were unlawful because proper governance steps — including securing board and ministerial approvals — were not followed.
There was neither a resolution of the board to appoint [Denel chief restructuring officer Riaz Saloojee], nor was there a resolution to restructure the company. All there was, after I raised the lack of approvals as my defence eight months later at arbitration, is the letter of approval from the minister
— Sello Ntsihlele, former CEO of Denel Dynamics
His allegations asserted that Denel chief restructuring officer Riaz Saloojee's plan for the company was allegedly not approved by Denel’s board, the ministry of public enterprises and the department of defence at the time of these instructions from then acting Denel group CEO Mike Kgobe in September 2022.
In August of the same year, he had already dismissed verbal overtures from Saloojee to release the data packs to another division of Denel.
He was suspended in November 2022 and a few weeks later hit with 18 charges, which included insubordination for refusing to share data packs related to UAS and missile technology.
When contacted about his court application this week, Ntsihlele said: “There was neither a resolution of the board to appoint him [Saloojee], nor was there a resolution to restructure the company. All there was, after I raised the lack of approvals as my defence eight months later at arbitration, is the letter of approval from the minister.
“However, there was no submission requesting this approval from Denel’s board of directors to the ministers of public enterprise, defence and finance as per section 54 2(b) of the Public Finance Management Act, which speaks in part to the restructuring of state-owned entities.”
In previous labour court papers fighting his first suspension in 2023, Ntsihlele said: “I was not prepared to compromise the company by giving Saloojee everything and all that he asked for without first understanding his mandate and authority,” Ntsihlele said in previous labour court papers fighting his first suspension in 2023.
“I began to raise questions with [William] Hlakoane, who was the interim group CEO at the time, regarding on what basis Saloojee was appointed and on what basis he would require access to the company systems.
“Notwithstanding there being no meaningful responses to my questions, I began to receive unlawful instructions which, if complied with, would in summary, enable inter alia the sale of valuable state-owned assets at less than fair value, which was not in the taxpayer’s and the public’s interest.”
Ntsihlele remains convinced that had he given up these data pack, this technology would have ended up in the wrong hands without proper authority — a repetition of the situation during the state capture period that landed Denel in troubled waters.
Denel's revenue had declined significantly. It posted revenues of R8.4bn in 2016 and this year reported revenue of R1.3bn. Its lowest ebb was in the 2018/19 financial year when it was unable to pay salaries. The restructuring, post-Covid, was an attempt to revitalise a company on its knees and involved folding its six subsidiaries into four.
This week DefenceWeb, an online news publication, published an article detailing how Denel’s cash flow issues led to an “exodus of skilled personnel and their IP to countries in the Middle East”.
Citing an internal report commissioned by a leading defence company, DefenceWeb revealed how “industrialisation pushes by Middle Eastern companies saw them target individuals involved in missile, unmanned aerial vehicle [UAV] and guided weapons projects in South Africa”.
In relation to Saloojee and his reappointment to Denel in 2022, the Special Investigating Unit (SIU) told the Sunday Times this week: “The SIU referred evidence pointing to misconduct against former officials of Denel and one of the matters related to the former GCEO Mr Riaz Saloojee. The SIU is not in a position to comment about the reappointment of Mr Saloojee. Furthermore, the SIU is precluded from releasing the details of its correspondence with its clients.”
However, in a report submitted to parliament in January, the SIU noted that Denel’s board failed to implement recommendations in relation to disciplinary action against one of their employees.
This employee, two sources with direct knowledge said, was Saloojee, who left Denel in 2024 to join Incomar, an aerospace and defence company based in Pretoria.
Saloojee, who served as Denel group CEO between 2011 and 2015, could not be reached for comment before publication.
Denel declined to respond to detailed questions, saying it does not comment on matters before the court.
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