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Denel again in no position to pay employees; UASA asks Gordhan to please step in

State-owned enterprise Denel is, again, in no position to pay its employees at the end of May with clear indications that it won’t be able to do so at the end of June and July either.

Denel has now become another SAA, seeking continued financial bail-outs with no possibility of it ever becoming a sustainable business again.

Since employees simply cannot afford to be without their salaries and continue to pay their bills and putting food on the table for their families, UASA requests that public enterprises minister Pravin Gordhan assists the employees of Denel by showing the same “fighting” spirit he does in the battle for SAA.

Denel has been in a precarious financial position since at least late 2017 when it could not make full salary payments. The financial crisis in the company dragged on until the Department of Public Enterprises (DPE) assisted with an R1.8b bailout in April 2019. Barely a year later, it is in the same position, asking for a further R576m bailout.

Denel management has now requested that employees agree to a salary sacrifice to help save the company. Denel management indicated they would ensure “letters” for employees to take to their creditors, explaining the non-payment of salaries. This “plan” was tested by as number of employees who without exception received the same reaction from creditors, namely that services would be cut if payments were not made in time.

During discussions held on 22 April 2020 Denel presented general feedback with specific focus on the current Denel financials and the way forward.

Many issues were touched on, including that the SOE

  • ·       was currently funded on guarantees (not sustainable)
  • ·       is engaging with the DPE regarding the timing of a further R576m bailout (if still available)
  • ·       signed contracts/business deals
  • ·       was rated lower by Moody’s
  • ·       was again struggling to pay salaries and SARS, UIF and the pension fund on behalf of its employees (with end April coming up).

On 6 May 2020 Denel indicated it was only able to secure sufficient funds to cover medical aid contributions for the month of May’s salary payments.

After discussions regarding Denel’s inability to pay salaries with the company’s management on 11 May 2020, UASA demanded the following information as a matter of urgency:

  • ·       Status of the May 2020 salary payment and going forward.
  • ·       UIF relief action and process during the lockdown in terms of leave going forward (no work no pay scenario).
  • ·       A copy of Denel’s indicated request to defer payment on behalf of its employees towards UIF, SARS and pension fund and the response of said institutions to this request, preferably before payments are deferred.
  • ·       Status of a possible Section 189 processes at Denel as well as the status of non-core businesses to be sold.
  • ·       The status of the current Section 189 process at Aeronautics where retrenched employees were remaining at work, doing nothing with full pay, as there is no cash to pay out retrenchment packages.

In response Denel set up further meetings with labour to discuss the specific concerns/issues on 15 and 19 May. All that came to the fore at these meeting was that Denel was still unable to pay salaries at the end of May, June and July 2020.

Having a Denel with serious financial problems on the one hand and the devastation of the Covid-19 pandemic on the other – only having 30% of the workforce at hand – does not make matters easier. However, UASA does not believe Covid-19 has much to do with Denel’s current financial position and for the SOE to point a finger at the pandemic as a cause for its financial woes, is pushing the envelope

For further enquiries or to set up a personal interview, contact Stanford Mazhindu at ‪074 978 3415‬.


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