President Cyril Ramaphosa has authorised the Special Investigating Unit (SIU) to launch an investigation into allegations that a major security breach at state arms company Denel may have led to the theft of classified and highly sensitive data about the company and the South African military’s missile capabilities.
The unprecedented breach has been compared to treason and industrial espionage by a senior military officer.
City Press can today reveal that, last week, Ramaphosa signed a proclamation authorising the SIU to probe allegations that intellectual property for some of Denel’s highly sought-after missiles was stolen by current and former employees.
The intellectual property, which was allegedly stolen in about April last year, was allegedly given to arms company Saudi Arabian Military Industries (Sami).
At least two former Denel executives, who met with Sami officials when they visited the company’s offices in Pretoria last year, are now employed there.
Founded in May 2017, Sami is a defence products manufacturing company owned by the Kingdom of Saudi Arabia.
A senior Denel executive told City Press that as many as 20 engineers, with vast amounts of experience in the design and manufacture of missiles, have left Denel for Sami since last year.
“The Saudis were interested in nothing but our missiles, which are among the most sophisticated in the world,” added the manager.
An army general, who knows about the alleged theft, said: “What happened at Denel amounts to industrial espionage. What happened there is nothing short of treason.”
The proclamation mandates the SIU to investigate “unlawful, irregular or unapproved measures or practices in relation to the misappropriation of proprietary and intellectual property rights in Denel’s air-to-air missiles, stand-off weapons, surface target missiles, air defence and unmanned aerial vehicle systems”.
Denel has indicated that a previous investigation showed there was no substance to the allegations.
‘MAJOR SECURITY BREACH TO THE REPUBLIC’
In a detailed letter – obtained by City Press – motivating for Ramaphosa’s approval of the probe into the alleged theft, the SIU wrote that a whistle-blower told the unit that the alleged heist “poses a security risk to the military security of the republic”.
“This is a major breach of security of a sovereign state. The intellectual property … in respect of these missile systems constitutes the sovereign security of South Africa and cannot be compromised to a foreign country in the manner in which this has occurred,” the whistle-blower told the SIU.
“Maladministration with regard to the handling of intellectual property rights by implicated officials of Denel has to, therefore, be investigated further. The causes of such maladministration have to be uncovered.
“Consequential losses, which may have occurred as a result of security breaches on Denel intellectual property to Sami, have to therefore be investigated. It has to be further ascertained whether a legal recourse cannot be obtained in order to remedy this dire situation.”
The theft has resulted in Denel’s worth as a company, and its relationships with the department of defence and its procurement agency, Armscor, being “laid bare”, said the whistle-blower.
On Friday, Armscor’s acting chief executive, Solomzi Mbada, said that sometime last year, the agency had received information that Denel’s intellectual property had been stolen and handed over to Sami.
An internal investigation was conducted and there was no substance to the allegations, Mbada said.
“Armscor can state that the extent of the alleged breach will have to be established first, with further supporting evidence, before any conclusions can be reached. If such an act was committed, it should be referred to the relevant law enforcement authorities for further investigation.”
Denel spokesperson Pamela Malinda said: “In 2018, Denel reported the allegations of theft of intellectual property to the relevant authorities, who investigated the matter and found no substantiating evidence of impropriety in this regard. However, should there be new information in this respect, Denel would not hesitate to report the same to the authorities.”
Last year, Sami approached Denel for a joint-venture offer. At the time, it was also reported that Sami’s proposed multibillion-rand partnership would include the acquisition of Denel’s 49% stake in Rheinmetall Denel Munition, a large artillery shells and ammunition company.
Malinda said the company was not planning any joint venture with Sami and there had been no agreements reached. “However, Denel is open for business. If Saudi Arabia seeks to buy or develop products that are admissible for export from South Africa, Denel would engage accordingly,” she added.
HOW THE HEIST HAPPENED
The whistle-blower, a senior Denel executive known to City Press, told SIU investigators that on February 19 last year, the company’s business development unit hosted a delegation from Sami.
The meeting, which took place at Denel Dynamics, was attended by the division’s former chief executive officer (CEO), Johan Steyn, current CEO Sello Ntsihlele, business development executive Sipho Khoza, and Johann Schoeman and Petrus Mentz, who are also employees.
“According to the whistle-blower, presentations were made by Denel and focused on Denel Dynamics’ capabilities in air-to-air missiles, stand-off weapons, surface target missiles, air defence and unmanned autonomous vehicle systems, as well as areas of potential collaboration between Sami and Denel Dynamics,” the SIU letter to Ramaphosa reads.
“After the presentations, the delegation was taken through the facility, showing them the above systems. The meeting was concluded with the understanding that there were going to be follow-up discussions aimed at exploring areas of mutual interest for possible collaboration.”
The Sami team returned a few days later for more discussions, to be hosted at Denel’s corporate office. But Steyn had requested that the discussions with Sami, which were to last for about two weeks, should happen at the offices of Denel’s business development unit.
What happened at Denel amounts to industrial espionage. What happened there is nothing short of treason
“Security concerns were raised, including fears about IT security in terms of risk of access to network points. According to the whistle-blower, this led to the securing of the network points by putting plugs on them,” reads the SIU letter.
The meeting did not happen at the company’s business development unit, but was hosted at its corporate offices.
“The whistle-blower later realised that the Sami team had been at corporate [offices] for some time and that some information on the technology readiness level (TRL) of Denel’s missile products was provided to Sami on the instruction of Steyn,” the letter reads.
“TRL is a type of measurement system used to assess the maturity level of a particular technological product. The officials who took part in these ‘negotiations’ with Sami from Denel were Theo Kleynhans, Steyn and Carene Geldenhuys.”
Kleynhans was the Denel group’s executive manager for strategy, and Geldenhuys is Denel Dynamics’ company secretary.
The letter states that on April 16 2018, Steyn, Ntsihlele, Kleynhans, Schoeman and Christine Slabbert, who was Denel Dynamics’ chief financial officer at the time, met for further discussions on how to move forward with Sami. But Steyn excused himself before the meeting started, saying he had resigned from Denel after accepting an offer from Sami, the letter reveals. Slabbert also recused herself.
During the meeting, Kleynhans was pressed to provide feedback about the meetings that he, Steyn and Geldenhuys had with Sami.
The letter states: “Kleynhans could not give any clear view of the status, except [to say] that the discussions were at an advanced stage but had stalled. He cited poor support from the department of public enterprises, among others. He also said Sami was not responding.
“According to the whistle-blower, two days later Steyn announced his resignation, citing a better opportunity at Sami that he could not refuse. It was clear that those who have been negotiating on behalf of Denel had been ‘offered an opportunity that very little [sic] people get in their lifetime’ by the same Sami that they were negotiating with.”
The whistle-blower told SIU investigators that an official later confessed to having passed information on to Sami. “The official who gave them (Sami) Denel’s missile products; product definition indices [sic] also gave them [the] product data index of Ingwe, Mokopa and Mkhonto missiles, together with their technical descriptions. The whistle-blower has reason to believe that similar information of other missile products, such as A-Darter, Marlin and Umbani, also listed in the TRL document, could have been obtained in the same way from other employees within the business.
“This poses a major risk not only for Denel but its present and future customers.”
‘ONE BY ONE THEY LEFT’
Publicly available information shows that Steyn left Denel in April last year and was later appointed as Sami’s land systems executive vice-president.
The senior Denel manager who spoke to City Press said that Kleynhans, who also left Denel more than a year ago, was also working for Sami in Riyadh. Jan Wessels, another former bigwig at Denel, was appointed as Sami’s executive vice-president for defence electronics last year.
City Press tried to contact Steyn, Kleynhans and Sami but was unsuccessful in getting a response from any of them.