State owned arms conglomerate owed R688 million to its suppliers by the beginning of November, according to Public Enterprises Minister Lynne Brown.
In a written response to a parliamentary question published on 3 November, Brown revealed that Denel had 1 557 unpaid invoices totalling R688 million. This included 718 invoices (R266 million) unpaid over the previous 30 days; 427 invoices (R86 million) over 60 days; 246 invoices (R185 million) over 90 days and 166 invoices (R151 million) over 120 days.
Brown’s reply also revealed that Eskom had R102 million worth of invoices that had not been paid over the previous 120 days; and Transnet owed R728 million to suppliers.
Natasha Mazzone, opposition Democratic Alliance (DA) Shadow Minister of Public Enterprises on 4 January said “It is increasingly evident that under the stewardship of the Minister of Public Enterprises, Lynne Brown, South Africa’s state-owned entities are in crisis.”
In her reply, Brown indicated that the Department owed over R1.532 billion to its suppliers. Moreover, a total of 61 063 invoices have not been paid within the prescribed 30 days after an invoice has been submitted.
“The shocking figures point to nothing other than a complete lack of oversight at National level and gross mismanagement at the entity level, both spearheaded by the Minister. This failure has a direct consequence for small businesses which deal with the Department as they are worst affected, often facing closure as a result of by late payments by government departments,” Mazzone said.
The revelation comes as Denel struggled to pay its 4 000 employees their December salaries. The company said that the December salaries as well as the outstanding 13th cheque payments due to its employees would be paid out as planned on December 22.
It is not clear if suppliers have been paid as well – for instance an employee at Bradbri Engineering stated that Denel has not paid its invoices in the last 120 days and after promising payment on 22 December had still not delivered, affecting employee salaries.
Defence analyst Darren Olivier, from African Defence Review, pointed out that Denel’s problem isn’t a lack of profit — although with its declining order book that’ll soon be the case too— but a badly-managed liquidity crisis.
“The troubles at Denel are hurting the rest of the sector too, as many of its suppliers are small and highly-specialised engineering firms that rely on steady income from contracts. I’ve heard of a few that have gone out of business already, taking their niche capability with them.
“The SOEs will never be able to survive without competent leadership, strong and independent boards, and an end to political interference. For a while it seemed the government understood this, but it’s now clear that the real goal is the large scale looting of state assets.
“Denel has gone, in a relatively short space of time, from being profitable and cash-flush to being near bankrupt and unable to pay suppliers. This was always going to be the end result after Salojee and his exec team were replaced by pro-Gupta sycophants,” Olivier said.