Denel Land Systems (DLS) is unable to pay salaries for April as the division says it is under extreme financial and liquidity pressure.
In a notice to all employees dated 15 April, Denel Land Systems said, “revenues have been extremely low resulting in a weak outlook for total sales for the current month. Thus, April has proven to be an even more challenging month and as a result, our liquidity position remains unchanged if not worse.
“It is with great regret to inform you that we will not be able to honour our contractual obligations with regards to the payment of salaries on the 25 April 2021. We will continue engaging all relevant stakeholders to try and avert this unfortunate reality.
“We are expecting some of our debtors and clients to make some payments within the current month which may allow us to pay salaries to a certain extent. We will communicate by next week as to what salary sliding scales will be applied, and when the remainder of the outstanding salaries for May-July 2020 will be paid.
“We are appealing for your understanding and continued support as we navigate through this unprecedented storm,” the letter from DLS management read.
Many Denel divisions are struggling to pay salaries and keep production going, with production standing at around 30-40% of capacity. Between May and July 2020 Denel was unable to pay full salaries and statutory obligations due to a significant decline in productivity, Denel said in a presentation to the Select Committee on Public Enterprises in February. Employees were instead paid a portion of their salaries on a sliding scale.
Denel explained the root cause of its salary woes relate to the inability to industrialise products and systems and that problems began to arise from 2016 amidst allegations of corruption and mismanagement, a decline in performance and solvency. Denel started losing customer and supplier confidence, staff morale bottomed and labour costs remained high despite significant reductions in revenue.
Darren Olivier, defence expert and Director at African Defence Review, said the DLS notice last week is “utterly shocking.” He noted that many staff at Denel’s divisions, like Land Systems and Dynamics, haven’t had a proper salary in more than a year. “No wonder so many with rare skills have opted to leave and go elsewhere.” Many former employees are now working in the United Arab Emirates and Saudi Arabia.
Denel is today (19 April) due to host a meeting with organised labour to discuss proposed policy changes that trade union UASA is worried will cut back on benefits paid out to employees under certain circumstances.
“It is hoped that the proposed changes will see reduced retrenchments in future, but UASA will fight tooth and nail any attempt by Denel to reduce benefits for workers to be retrenched,” the union’s spokesperson Abigail Moyo said.
“While we understand that Denel desperately needs to be normalised in order to build towards economic viability and to stem the outflow of skills required for the SOE’s survival, this should not happen to the detriment of our members and other workers employed at the company.
“UASA is committed to continued discussions with government to assist with the turnaround of Denel. The union is also poised to help with finally getting the SOEs employees and creditors paid.
“Unbelievable as it is, workers in certain Denel divisions are still waiting to receive their full salaries of which they have received nothing or only a percentage since July last year. This is an issue of serious concern as people are entitled to full remuneration in terms of their employment contracts and are now forced to put up a fight to survive.
“UASA will continue to work relentlessly for workers’ rights by pushing toward continued communications and engagements that will serve the best interest of our members who must remain protected under any outcome. Our members and South Africans in general need employment and to stay employed. More retrenchments are not the answer to our country’s woes. We need to keep workers working and economic sectors in business to overcome our unemployment and COVID-19 crises. Denel’s plan to reduce the benefits due to retrenched workers does not take us in that direction,” Moyo concluded.
Since April 2020, staff turnover at Denel has been around 16%. There are currently around 3 000 people employed at Denel, down from the norm of approximately 4 000.