Denel cannot pay May salaries – chief executive


What was the jewel in the crown of the South African defence industry has literally been brought to its knees by a succession of crises with the latest – coronavirus – leaving Denel unable to pay salaries and wages for May.

An internal memo from Denel group chief executive Danie du Toit, seen by defenceWeb, has it that the state-owned defence and technology conglomerate has not been spared from the global pandemic.

“Since the easing of the lockdown,” he writes to personnel, “we have been allowed to bring just 30% of our workforce back to production and have 19% of our people working from home while the remaining 51% cannot work at all. This has happened when we need all hands on deck to secure a successful turnaround for the business”.

Du Toit tells just on five thousand Denel employees the liquidity challenges foisted on the group by corruption and state capture since 2017 when added to the impact of COVID-19 “have put Denel further in the red”.

“It saddens me to inform you at the moment Denel is not in a position to pay salaries for May. June and July salaries are in serious jeopardy,” he writes.

Unsurprisingly, trade unions responded strongly led by Irvin Jim’s NUMSA (National Union of Metalworkers of SA) and Centurion-headquartered Solidarity.

Jim maintains Denel treats its workers with “absolute disregard” and does not rule out a legally protected strike action. The union’s general secretary adds that Denel is another company “hiding behind the COVID-19 pandemic”.

A more measured response comes from Helgard Cronje, Solidarity co-ordinator for defence and aviation.

“Solidarity believes the current lockdown regulations should be terminated to allow businesses such as Denel to generate income so they are no longer dependent on the state or have to rely on additional aid packages or bailouts. There is no need to choose between work and health; all businesses can open doors and allow workers to work without compromising their health. Many people are losing income and companies and businesses are suffering huge losses with catastrophic consequences for the economy.”

He also points out another problem area specifically for Denel’s defence component.

“Orders valued at R101 million cannot be delivered at present because export permits are not being issued. Orders of this type determine whether people can be paid salaries or not.

“Permits are approved by the National Conventional Arms Control Committee (NCACC) and issued by the Directorate: Conventional Arms Control (DCAC). These bodies are closed during lockdown. Apparently, the Directorate will open on 20 May. It is not possible to determine how long it will take before the NCACC, a committee several ministers serve on, will meet to either approve or not approve permits,” Cronje said.

Denel twice last year found itself not able to pay full salaries to employees with the impasse resolved by government intervention via a R1.8 billion injection from National Treasury.