Denel again ordered to settle outstanding salaries

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In what is another financial blow to struggling Denel, the State-owned defence and technology conglomerate has to pay 42 non-unionised current and former employees over R13 million in outstanding salaries.

The order was handed down earlier this week by the North Gauteng High Court in Pretoria, according to Fin24, and comes in the wake of legal action brought by at least three trade unions since Denel found itself unable to meet personnel commitments two years ago.

The first legal approach to force Denel to meet non-payment of salaries and employee obligations including medical and pension, came from Centurion headquartered Solidarity with UASA (United Association of SA) following. In both instanced the court (high and labour) decided in their favour. The Gauteng, West Rand-based labour organisation indicated last month (May) Denel owed “almost R830 million” in salaries and employee benefits. Solidarity maintains the amount owing is in the order of R789 million with a further R900 million still to be paid to goods and service suppliers.

The Pretoria court, Fin24 reports, ruled Denel must pay 42 current and former employees between R55 000 and R700 000 within 10 days. The employees are owed a combined R13.2 million in unpaid wages for the period between May 2020 and April 2022.

The group’s legal representative, advocate Michael Matlapeng, told Fin24 his clients are hopeful Denel will “find their senses and pay” they are ready to approach the court to enforce the order.

This is the second time Matlapeng and colleagues have represented Denel workers seeking salaries. In February, he represented 14 Denel employees who were awarded R4.3 million in unpaid wages.

After Denel failed to make the payment, the group approached the court to enforce the order. The 14 employees were paid in March after a Denel account at RMB was attached.

Matlapeng is confident his clients will be paid, with the digital financial news site reporting him as saying “it’s unclear where the money will come from”.

Denel had been allocated  R3 billion by government to settle ballooning interest payments. This money cannot be used for staff salaries as it is ring-fenced for debt repayments.

As part of its five year turnaround strategy, Denel aims to save R250 million a year by restructuring into two divisions, from the present six operating units and raise R2.5 billion by selling stakes in Rheinmetall Denel Munition (RDM), Hensoldt South Africa and some of its property portfolio. The Public Investment Corporation (PIC) has been approached to buy some Denel land while offers will be made soon for RDM shares. Denel is waiting for final offers for Hensoldt shares and hopes to conclude the sale around the end of May or June this year.

Denel urgently needs to dispose of non-core assets and find an equity partner to bring the company back from the brink of collapse. Interim chief executive William Hlakoane told Business Day the company needs another R4 billion. “Without restructuring the business, there’s no way we can survive in the next year or so,” he said.