Unidentified lender ensures Denel salaries will be paid in full

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Hours after Denel employees heard they would be short paid for June, Public Enterprises Minister Pravin Gordhan pulled a rabbit from the hat during the State of the Nation debate in Parliament on Tuesday, much to the relief of the State-owned company’s 3 500 employees.

“The latest update is a lender has come to the assistance of Denel and full salaries will now be paid,” he told the National Assembly without divulging the identity of the Good Samaritan.

Earlier this week Denel chief executive Danie du Toit said in a memo to personnel the defence and technology conglomerate would only be able to meet 85% of its salary bill for June. This, he said, was because of “ongoing liquidity challenges”.

A subsequent Denel media statement had it that: “The shareholder (government in the form of the Department of Public Enterprises), the board and management are continuously working to find sustainable solutions to the liquidity crisis facing Denel. Government is cognisant that Denel is highly leveraged and in need of additional liquidity to rebuild the business”.

Addressing MPs, Gordhan said there was no clearer example of the damaging effects of state capture than “the financial strain and uncertainty 3 500 Denel employees and their families face if the company’s liquidity problems continue”.

He noted that Denel, South Africa’s producer of military and aerospace equipment, was “substantially harmed by state capture” and gave six areas where work was underway to turn it around.

“The company is improving the way that it contracts as well renegotiating existing contracts to improve margins it earns. A new, permanent, chief executive was appointed in December on the recommendation of the Denel board. Governance improved and steps are being implemented to improve reliability of financial accounting and reporting. Denel is reviewing its supply chain and procurement processes to reduce costs and streamline processes. The company has reduced employee costs through voluntary severance packages” and, importantly, “Denel has a pipeline of potential contract worth in excess of R30 billion” the Public Enterprises Minister said.

In a statement on Wednesday morning, du Toit confirmed the announcement made by Gordhan that full salaries will be paid to Denel employees in June. “Denel has successfully secured the remaining balance of 15% and it will be paid to employees by Friday, 28 June.”

Denel said the shareholder, the board and management are continuously working to find sustainable solutions to the liquidity crisis facing Denel. “However, it is still facing challenges. Government is aware of the fact that Denel is highly leveraged and in need of recapitalisation to rebuild the business.”

Du Toit apologised to Denel employees for the inconvenience caused for not honouring the full salary obligation for June. He also thanked them for their understanding and constant support during a difficult period.



“I am confident that working together towards the long-term resolution of the current challenges we will ensure the long-term sustainability of our business,” he said.