In a presentation to the Portfolio Committee on Public Enterprises today on its annual financial results for 2019/20, Denel revealed that it had lost nearly 500 employees over the last year.
The presentation by Interim Group CEO William Hlakoane showed Denel’s workforce shrinking – as of 1 April 2020, Denel employed 3 332 people but this had dropped to 2 837 by 31 January 2021 (2 617 permanent staff, 162 students and 58 contractors).
Between April 2020 and January 2021, 498 people left the company, including 73 managers, 99 engineers/project managers, and 249 technicians/artisans/operators.
Reasons given for leaving included better salary/benefits (60 people), better career opportunities (77), forced retrenchment (119), early retirement (28), retirement (59), and contract termination (61).
Many people have left Denel over the non-payment of salaries last year – a matter that went to court and is awaiting judgement by the Labour Court. Denel Dynamics, for example, has lost almost all its engineers, many of whom have gone to work for companies in the Middle East.
Denel also detailed its bleak financials, telling the committee that its R1.962 billion net loss for 2019/20 and R4.4 billion losses in the last three years was due to revenue decline, contracting and export permit related issues with the National Conventional Arms Control Committee (NCACC) during the COVID-19 pandemic lockdown in FY2019/2020, high cost structure including labour under-recoveries, interest, legacy obligations and the inability to secure new business and execute on existing work due to liquidity constraints.
The company said the reduction in revenue over the last three years (from R5.8 billion in 2018 to R2.7 billion in 2020) was primarily due to reductions at Denel Aeronautics, PMP, Denel Dynamics and Denel Vehicle Systems.
The company is insolvent (-R2.277 billion for 2020) while cash is at a low (R535 million for 2020 versus R2 billion in 2017). Total borrowings stand at R3.1 billion in 2020. “Cash generated from operations has reduced significantly as increased investment in inventories, trade receivables and contract asset persists due to delays in contract execution.”
The audited loss of R1.9 billion in FY2019/20 was due to significant decline in revenue, attributable to current liquidity challenges. Equity levels decreased substantially despite the equity injection of R1.8 billion in FY2019/20 and Denel is technically insolvent.
Although R576 million was allocated in the FY2020/21 Medium Term Expenditure Framework cycle; R305 million was allocated to debt and interest and short-term liquidity has steadily worsened.
On the positive side, Denel did say it is pursuing a number of opportunities around the world, including:
T5-52 self-propelled howitzers in the Europe, the Middle East and Africa (EMEA) region
G6-52 self-propelled howitzers in the EMEA region
8×8 infantry fighting vehicles in the EMEA region
Seeker 400 UAVs in the EMEA region
A-Darter missiles in Latin America through Saab
Umkhonto air defence systems for the Royal Saudi Air Defence Force
A-Darter missile integration on a South Asian air force’s JF-17 fighter fleet
In South Africa, Denel sees opportunity in Rooivalk Mk II, Badger IFV, Samil replacement and Ratel modernisation programmes as well as Projects Sapula (partial Casspir replacement) and Marlin (air-to-air missile).