Salaries an ongoing concern for Denel

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Parliament’s portfolio and select committees on Public Enterprises were told by Denel’s chief financial officer salaries and paying them was an ongoing concern for the government-owned defence and technology conglomerate.

Answering questions posed by committee members, Carmen le Grange is reported by a Parliamentary Communication Services statement as saying “we have run the numbers with the shareholder’s support and are putting mitigating action in place” as regards salaries and financial stability.

“We are negotiating with our suppliers. We can be a going concern,” the statement has her saying.

Denel chief executive Danie du Toit told the joint committee hearing on Wednesday employees on “the lower scales” received full salaries while those in “top management” did not receive full salaries. He explained when Denel could not pay full salaries in May, it applied a sliding scale – with the lowest level employees receiving 100% of their salaries and those at the top receiving around 20%.

Du Toit said Denel cannot guarantee it can pay June salaries. “In terms of June salary payments, we are consolidating to see what cash we have. We will make a decision about June salary payments in coming days,” TimesLive quotes him as saying.

The publication added Denel received funds from the unemployment insurance fund (UIF) for March and applied for April and May.

Denel received R576 million from the state but is not allowed to pay salaries with this money, earmarked for other expenses. Salaries must be paid from trade revenue. “Our typical employment cost is around R144 million a month – we can’t sustain that on revenue of around R2.8 billion,” Du Toit said.

Looking back on the 2018/19 financial year Du Toit told committee members it was “characterised by fragmented, defocused, loss-making, ineffective, weak business systems and poor governance”.

Attempts to right this situation form part of the second phase of Denel’s turnaround strategy. This will see the conglomerate rid itself of “onerous contracts” and improve both commercial skills and performance.

Responding to concerns expressed by the committees, Denel said the venture to building ventilators and ambulances was not a diversion from its core functions.



“It is the right thing to do, looking at the current situation the country faces. Denel has made progress on certification of products, working with the Department of Health,” the statement said.