Labour Court rules against Denel – again

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Trade union Solidarity, unhappy about Denel’s failure to obey a court order, brought a successful contempt of court application which should see the cash-strapped State-owned company settle outstanding salary and other employee payments.

“Solidarity welcomes the result. Denel failed to obey the court order of 4 August and did not make any payments as stipulated by the court order. This left Solidarity no option but to approach court again,” Helgard Cronjé, Solidarity sector co-ordinator for defence and aviation said.

Solidarity’s application follows the Labour Court ordering Denel on 4 August to fulfil all outstanding contractual and statutory obligations to Solidarity members by no later than 7 August. This included the payment of outstanding salaries for May, June and July.

“It is ridiculous that even after a court order in their favour employees still have to pay the price for Denel’s crimes and mismanagement of the past.

“Solidarity could not allow this to happen and approached court to compel Denel to fulfil its obligations. The result is a victory for Solidarity and members affected by Denel’s negligence,” Cronjé said.

Solidarity, in a further effort to ensure payment of salaries and other employee benefits, is issuing warrants of execution. If these are granted and Denel does not honour the court ruling by 3 December, Denel assets will be attached and auctioned to meet salary and other benefit bills, according to Cronjé.

Last week interim Denel chief executive Talib Sadik indicated the defence and technology conglomerate would not seek any government equity injections to stay afloat, despite the liquidity crunch made worse by the coronavirus pandemic worldwide and the South African lockdown, part of a national state of disaster now lifted to level two from a high of five.

“At this stage it is not in our plan,” Sadik is reported as saying in an interview, when asked if Denel would approach government for further bailouts. “Our view is we need to fix our own house, because what we have is a bit of moral hazard”.

Irene, Centurion-headquartered Denel with manufacturing and other facilities at its Lyttelton and Ekurhuleni campuses, received R1.8 billion from government in 2019 and expects R576 million from this year’s budget, which is coming in tranches.

The interim chief executive said Denel was talking to the Public Investment Corporation (PIC) and “other bondholders” as regards rolling over more than R2.6 billion of debt due to mature in September.

Last week Fitch Ratings downgraded Denel’s rating over the company’s severely strained liquidity position and lack of government support.

Trade union UASA said the move is disappointing but did not come as a surprise. “UASA regrets that the situation at Denel has reached this point after we took the company to court in a bid to get the SOE to pay its employees’ salaries. Their failure to do so in spite of a court order made clear how much the company has deteriorated,” the union said.

“The sad part is that it’s been allowed to get to this point. Fitch stated as a reason that management volatility may impact the group’s ability to implement its turnaround strategy. With a CEO coming on board and resigning before any rescue plan could yield results, Denel is now looking to a new CEO who is expected to save this already sinking ship. Sadly, South Africans cannot afford any more bailouts. The country is at a low point after the devastation of the COVID-19 global pandemic and years of corruption,” UASA said.