Only those staff working on certain ring-fenced programmes at Denel Dynamics will be receiving 100% of their salaries going forward, as the company’s focus shifts to ‘lifeline’ projects.
This was revealed by Denel Dynamics CEO Sello Ntsihlele in an infogram to staff dated 10 December.
“With the challenges the business is facing not abating, we have to make far reaching decisions,” he wrote to employees. “As previously mentioned, we have taken a decision to ring fence programmes. This is done in order to keep the business going as no sources of capital can be found at this stage. These programmes are the only lifeline we have. The result of this decision is that going forward, we will not be able to cover all the employees,” he explained.
From 1 December 2021, staff working on ring-fenced programmes will get 100% of their salaries while critical functions such as finance, HR, ICT etc. will be paid from an overheads contribution. The percentage to be paid will be dependent on cash availability.
“Here we will seek to maintain minimum of 50% to sustain these. The remainder will be paid as funding become available such as upon completion of milestones or funding,” Ntsihlele stated.
The payment of all other employees outside of the above will depend on funds being available after the above is covered.
The infogram went on to state that arrangements are also being made with customers on other programmes to change period of payments to short-time (from quarterly to monthly) to allow early access to ensure that employees on these projects are paid on time (100%).
“For programmes without working capital, alternative funding mechanisms are being explored to enable us to continue with execution of these programmes.”
Ntsihlele added that 45% of November salaries would be paid on 10 December, after the business received a number of payments on submitted invoices.
He expressed appreciation of the “tremendous effort being made by the programmes and support teams.”
Denel Dynamics was only able to pay 20% of September salaries.
Other Denel divisions, including Denel Land Systems, were told they were not getting any money in November, nor 13th cheques, due to extreme financial pressures. Pretoria Metal Pressings (PMP) is one of the divisions that has fared better, with staff receiving full November salaries.
Last month Denel announced the implementation of voluntary severance packages for staff in an effort to cut costs – it owes staff more than half a billion rand, and is facing pressure from trade unions and the labour court over salaries and benefits that have been unpaid since mid-2020.
Although Denel has been granted R2.9 billion by National Treasury, this is ringfenced for servicing debt, and not towards paying staff or suppliers, who are owed a combined R1.5 billion.