Concerned Denel employees want business rescue practitioners called in

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Another call has come for Denel to be placed in business rescue, this time from concerned employees going under the name Denel Employees Association (DEA), while there has also been a liquidation call.

The grouping applied to the North Gauteng High Court in Pretoria this week, submitting papers naming the State-owned defence and technology conglomerate as first respondent. Second respondent is recently appointed Finance Minister Enoch Godongwana with Public Enterprises Minister Pravin Gordhan third respondent and the Companies and Intellectual Property Commission the fourth.

The DEA wants the beleaguered State-owned company (SOC) put into business rescue and independent administrators appointed to drag the once-proud arms manufacturer out of the financial mire it now finds itself in. The sorry state of Denel was once described as a prime example of State Capture by Gordhan, whose ministerial portfolio includes national power generator and supplier Eskom, another victim of State Capture, now under the Zondo Commission’s spotlight.

The DEA business rescue call is not the first, with Democratic Alliance (DA) shadow deputy public enterprises minister Michele Clarke making the same call in April.

Now it appears her words that “the only rational way forward is to place the State-owned enterprise (SOE) under business rescue as bailouts and government guarantees are not an answer” echoed with the DEA.

“There is no way forward other than for Denel to be placed under business rescue. If there isn’t an urgent intervention the entire entity will collapse. It is important business rescuers take over the running of the arms manufacturer and formulate a credible business rescue plan to create order,” she said at the time.

The commencement of a court process by DEA, which its legal representatives maintain is urgent, asks for Denel to be placed under business rescue under interim practitioners Philip Lessing and Sumaiya Khammissa.

The DEA is reportedly a voluntary grouping of current and former Denel employees. Included in its ranks are serving employees on the receiving end of short-paid salaries, late and non-payment of salaries with the same applicable to employee benefits such as medical and pension. In some cases the salary issue has been ongoing since May last year.

According to an affidavit supporting the DEA application, by a Denel employee, placing the State-owned conglomerate in business rescue would improve chances for survival and result in a better return for creditors, including the current just over 2 500 employees on the payroll.

Trade union Solidarity also went the legal route to obtain redress for its Denel members and was granted a court order to attach assets to be sold to help pay those who went without their full salaries. Denel currently owes staff more than R600 million and suppliers R900 million.

Helgard Cronjé, Solidarity public sector deputy general secretary, in May told defenceWeb the Centurion—headquartered labour organisation would prefer Denel to continue as a going concern rather than having to go either the business rescue or liquidation route.

“The call for Denel to be put into business rescue is not possible as there is conflict in the legislation regulating the practice. This includes the Companies Act and legislation regulating transactions at SOEs – the Public Finance Management Act (PFMA).

“Business rescue practitioners (BRP) first have to determine if the company is saveable. If yes, the BRP will look for financing from banks and other financial institutions. If they do not want to provide financing, the BRP will go to the shareholder, in this instance government and will be viewed as a bailout of sorts for further financing. If the shareholder does not want to – or cannot afford to, as with Denel – provide further financing external parties will be approached.

“If any part of/or interest in a SOE is to be sold to external parties, approval from the Minister of Public Enterprises (Pravin Gordhan) has to be sought in terms of the PFMA. It means the Minister has the final say about the outcome of a business rescue process based on the current legislative framework. These challenges were the biggest stumbling blocks in the SAA business rescue process,” was how Cronjé explained the negatives of business rescue for Denel then.

Three months ago Denel creditor Saab Grintek Defence went to court with an application for the liquidation of the Irene, Centurion-headquartered conglomerate. This was apparently held back with engagements seeking a reported “amicable outcome” over unpaid debts.



Answering affidavits have, according to the DEA submission, be filed by Monday, 13 September