Defence Firm Denel Can’t Afford Salaries


South African state defence firm, Denel, says it cannot pay salaries for May and June and July salaries are at risk, highlighting the gravity of its financial position.

Denel, which makes military hardware for the armed forces in South Africa and globally, has been reportedly awaiting an R576 million bailout that was announced in a budget speech in February.

Denel is one of a number of struggling state-owned enterprises that have been kept afloat with government bailouts but are now being run down by the fallout of the coronavirus pandemic.

Despite the slight ease in South Africa’s lockdown restrictions this month, Denel continues to run a reduced operation.

Chief Executive of Denel, Danie du Toit said in a statement the company was in continuous conversation with the government “to find solutions to the current crisis”.

According to the Trade Union Solidarity, Denel has pending orders of roughly around R100 million rand ($5.5 million) because of export permits that weren’t issued during the lockdown. “Those are exactly the type of orders that determine whether people can be paid salaries or not,” the union’s Defence and Aviation Sector Coordinator, Helgard Cronje, said.

The chief executive is determined to bring Denel back to profitability with a strategy based on cost-cutting, selling assets and bringing in strategic equity partners.

He has reportedly told staff that Denel had reduced operational costs by R1 billion in real terms and has filed at least five applications to the government to sell non-core assets. The staff has been asked to assist in submitting further ideas on how to cut costs.