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Court orders state arms manufacturer Denel to pay staff their unpaid salaries amounting to hundreds of millions within ten days

As Denel scrambles to pay workers the outstanding salaries it owes, the entity has said it is confident it can turn its fortunes around. File photo.

As Denel scrambles to pay workers the outstanding salaries it owes, the entity has said it is confident it can turn its fortunes around. File photo.

Published Nov 15, 2021


THE North Gauteng High Court yesterday ordered beleaguered state arms manufacturer Denel to pay staff their unpaid salaries, which amounts to hundreds of millions of rand, including provident funds and medical aids, within ten days.

The National Metalworkers’ Union (Numsa), which represents staff at Denel Dynamics, Denel Land Systems, Denel Pretoria Metal Pressing, Denel Aeronautics and Denel Vehicle Systems, took the entity to court, having issued a letter of demand, in June as employees had not been paid their full salaries since May 2020.

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It is unclear as yet how Denel plans to raise the funds.

However, acting chief executive William Hlakoane recently told Business Report Denel had finally found alignment with the Department of Public Enterprises, Ministry of Defence, and Treasury on the sales intended to raise about R1.5 billion over the next five years.

He bemoaned the loss of capacity for some divisions including Denel Dynamics, a missiles business, and Denel Land Systems which had seen an exodus of specialist personnel to some local companies and the United Arab Emirates.

“We operate by trade, there are no capital clients, we have to invoice to generate some cash and there are these divisions that have suffered a lot which could be helping us to undertake some available contracts,” he said.

Hlakoane expressed hope that engagement with the DPE would yield results in the next month or so after Denel submitted all requisite information for a subvention, which would hopefully pay salaries now hovering over the R590 million range, with about R230m of that being for taxes.

Hlakoane revealed that Denel had paid about R17m in back salaries for the contentious May through to July 2020 bill for which labour unions, Uasa and Solidarity had taken legal action.

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Hlakoane has not responded to enquiries about the state-owned entity’s plans now that a R2.9 billion subvention has been granted in Finance Minister Enoch Godongwana’s maiden Medium-Term Budget Policy Statement, but had been optimistic that the entity would be out of the woods by December.

“We are determined to turn Denel around and repurpose it while retaining the core capabilities required to meet South Africa’s strategic security requirements,” Hlakoane said, outlining that the revitalisation plan included reducing Denel’s current operating divisions, plus one subsidiary, from six to two.

One division will focus on engineering, while the other focuses on manufacturing and maintenance, of which the latter is the core business.

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The engineering division will merge all Denel’s capabilities in artillery, infantry and vehicle systems, its missile and precision-guided munitions business as well as its management of complex integrated systems.

Furthermore, it will drive the company’s diversification of technology into existing and new markets in fields such as command and control, cyber security and communications, while researching and developing new technologies of the future.

The maintenance and manufacturing division will build on Denel’s market reputation in the fields of aeronautics, unmanned aerial vehicle systems and the production of small and medium calibre ammunition as well as the production of combat vehicles.

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Denel’s campuses will be optimised to reduce their footprint and contain costs. This will be supplemented by further reductions in the executive cost structure, and the implementation of the shared services model in areas such as supply chain management, human capital, IT and finance.

“Although some of these activities are at an advance stage, we do acknowledge that it will take some time to sell these assets while the payment of legacy debt and the requirements for liquidity are immediate,” said Hlokoane.

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