Troubled defence conglomerate Denel has been ordered by the Labour Court to pay outstanding salaries as well as contractual and statutory obligations it has not met apparently due to cash flow problems.
This week’s Labour Court hearing, brought by Solidarity and UASA, follows an earlier undertaking by trade union Solidarity to hold off on legal action if the State-owned defence and technology group met – in full – its commitments to personnel.
“Denel and the State as shareholder dealt recklessly with employees,” Helgard Cronjé, Solidarity sector co-ordinator for defence and aviation, said after the ruling was handed down on Tuesday by Judge A van Niekerk.
“Historic problems are at the root of the predicament Denel finds itself in by not being able to pay employees. This is not a result of COVID-19 but years of incompetent management, corruption and state capture.”
The judgement was handed down electronically and followed the hearing taking place via the Zoom electronic platform.
Tuesday’s virtual hearing came after Solidarity put an earlier urgent court application back on the roll. The original application was set down for a 30 June hearing with the Centurion-headquartered trade union acceding to a Denel request to “find a solution” and “honour its obligations”.
“Attempts by Denel to turn around its financial position were not supported by the State (with Minister Pravin Gordhan’s Department of Public Enterprises the shareholder on behalf of government as with other State-owned enterprises). This left Solidarity with no option but to resort to the Labour Court,” Cronjé said.
“Solidarity is pleased with the ruling in favour of Denel employees. It is another step forcing the Denel board to take action to save the entity and ensure government as shareholder is a responsible shareholder.”
In terms of the court ruling Denel has to make all outstanding employee payments (including May, June and July workers’ salaries) by Friday (7 August).
As well as paying outstanding salaries, Denel has to meet statutory obligations including payments to its employee pension fund, which it struggled to do in recent months.
It was not immediately clear where Denel would find funding, given its cash flow constraints.
In a statement, Denel confirmed receipt of the court judgement regarding payment of outstanding salaries. “Denel is studying the judgment and the company remains committed to meet all its employment related obligations,” it said.
“Denel is having continuous discussions with all relevant stakeholders regarding the company’s cash flow situation. Once again, Denel apologises for the stress and anxiety caused to employees as a result of the current uncertainties.
“The shareholder, the board and management are working relentlessly to ensure the business overcomes its short term challenges and returns to a sustainable situation, actively contributing to keeping South Africa safe by securing its sovereign and strategic defence and other technological capabilities,” Denel said.