An apology, if it can be termed that, was forthcoming to Denel employees from Public Enterprises Minister Pravin Gordhan during his budget vote speech this week.
The Cabinet member whose responsibility is the management of South Africa’s State-owned enterprises (SOEs) including the Centurion headquartered defence and technology conglomerate as well as the beleaguered national carrier SAA and electricity generator Eskom, is on record as saying Denel rates as an example of State capture.
Prefacing his comments on Denel in the National Assembly, Gordhan said: “As we all know Denel is facing financial and operational difficulties” adding it is “highly regrettable” Denel employees last received full salaries a year ago in May 2020.
“The current amount owing to employees is approximately R500 million,” Gordhan told parliamentarians with further bad tidings – in terms of skills losses – which he did not specify other than to say critical skills once in Denel are now with “domestic and foreign companies”.
“The board continues to make efforts to secure funding to pay salaries and implement its turnaround strategy to restructure Denel into a more effective organisation.”
According to the former SA Revenue Service commissioner, Denel’s core capabilities will now reside in two divisions – Engineering, and Manufacturing & Maintenance – as opposed to five previously.
That Denel has a future is fact because, in Gordhan’s words, government’s economic reconstruction and recovery plan (ERRP) identifies the defence and aerospace industry as key to economic growth, particularly in localisation and exports. In support of the ERRP a defence and aerospace master plan (topic of this week’s first major defenceWebinar) is complete. Additionally, Denel’s confirmed order book of R11 billion will assist in the conglomerate keeping heads above water even though it cannot currently secure capital or supplier support to execute contracts.
On government’s ERRP Gordhan said its implementation – which places the national economy on as new trajectory – focusses on priority interventions, including accelerating structural reforms by modernising and reforming network industries and associated SOEs and lowering entry barriers to make it easier for businesses to start growing capacity.
He acknowledged the damage done to SOEs by State capture, under investigation by the Zondo Commission of Inquiry, as well as corruption and ineptitude was now “legend”.
“The actual impact on governance, operations, finances and institutional culture is barely appreciated by many. In addition, reputational damage of SOEs and inadvertently the country is significant.
“The inability to invest in new infrastructure, replace old equipment, pay salaries to workers and other obligations are consequences of corruption and malfeasance,” the former finance minister said.