After a salary warning for employees of the Denel group, missile and UAV systems house Denel Dynamics is hopeful it will be able to pay 30% of salaries for June.
In a memo to staff, Denel Dynamics CEO Sello Ntsihlele on 23 June said, “Although the financial situation remains highly constrained, management has received some money from a foreign client and will make every effort to pay 30% of the June 2021 salaries this week.
“Our efforts to support the programmes and secure funds for the outstanding salaries are on-going, and we will keep you updated with further developments. With the other expected monies, we will endeavour to pay the outstanding salaries for April, May, and the remainder of June 2021.”
Earlier this week, Business Report said that Denel’s inability to pay employees for June was due to “a dire liquidity position, competing priorities and declining sales”. In what was presumably an internal memo to staff, Denel said it “did not foresee being able to honour financial obligations for the month of June”. This includes “employee salaries, related statutory and third party payments”. Positive developments are anticipated in between three and six months.
Denel divisions and associated companies to date have a 12 month history of not meeting employee financial obligations with in excess of R500 million owed to staff.
Staff from different divisions within the Denel group can be paid different percentages depending on each division’s revenue for that month.
Last month, Denel Land Systems employees were promised 20% of their May salaries while Denel Dynamics in April told its staff it unlikely they were going to receive their pay.
Darren Olivier, defence expert and Director at African Defence Review, at the time stated that it’s grossly unfair to keep staff hanging in the balance, especially as senior executives still earn full salaries and feel no pain.
“The long-term situation is caused by the corruption and mismanagement from the previous administration, which wrecked the company’s cash flow. The current situation is poor management within the group and ridiculous delays along with a general lack of urgency from DPE [Department of Public Enterprises].”
Last month Public Enterprises minister Pravin Gordhan said, “It is highly regrettable that Denel last paid full salaries in May 2020. The current amount owing to employees is about R500 million. The business has subsequently experienced a loss of critical skills to both domestic and foreign companies. The board continues to make efforts to secure funding to pay salaries and implement its turnaround strategy and restructure Denel into a far more effective organisation.”
Many Denel divisions are struggling to keep production going, with production standing at around 30-40% of capacity.