Denel says it is “working tirelessly” to pay the pension fund contributions of its employees, after it emerged the company only paid its staff their June salaries, but not their pension contributions.
A letter sent out to staff by the Denel Retirement Fund, seen by Sowetan Live, read “The fund will NOT be able to process or effect payment of members’ benefits, which include death in service and medical disability benefits, resignation benefits, investment return updates and any other benefits payable.”
The benefits are not due as monthly payments are not up to date.
The letter continued, reading, “Section 13A of the Pension Funds Act is unambiguous in that any employer must effect payment of members’ contributions to the fund before the 7th day of the month following the month for which it is due.”
The retirement fund added that Denel would be charged interest on late payments.
Denel on Wednesday said management “is working tirelessly to correct a situation in which it was unable to make the June 2019 payment of the employer’s contribution to the Denel Pension Fund. The organisation is also engaging the banks to secure bridging finance to support the company until recapitalisation is received.”
The pension issue is connected to the current liquidity challenges experienced by Denel, which also resulted in a delayed payment of full salaries to employees in June.
“Denel is in constant communication with the Denel Retirement Fund managers and will advise employees as soon as the issue is resolved,” the company said. “Management is in regular contact with all the labour unions within the company to keep them informed about the situation to maintain the good relations we have with them.”
Denel said it acknowledges the support given by Government and the recognition that the company needs additional capital that will enable it to rebuild the business and position Denel as a reliable designer and manufacturer of world-class defence and technology systems.
Denel late last month announced it would only be able to pay its employees 85% of their June salaries due to “ongoing liquidity challenges”, but employees received an eleventh hour reprieve when Public Enterprises Minister Pravin Gordhan announced that a lender, a South African commercial bank, had come to assist Denel and allowed full salaries to be paid.
Denel, which made a R1.7 billion loss in the last financial year, has asked the government for a R2.8 billion cash injection to help it emerge from a financial crisis and secure export deals.
CEO Danie du Toit last week said recovery efforts were progressing well and the company could win R30 billion in contracts over the next two years if it received help to overcome acute liquidity constraints.
“Our products are still wanted, the brand is still respected, though of course there is still some nervousness about the financial state and sustainability.”
He said he hoped the cash injection would be announced this month with the first funds arriving in September or October.