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Denel gets reprieve with loan to pay salaries

Benefactor not named.

State-owned arms manufacturer Denel has received a loan to pay its staff their full salaries this month, according to Public Enterprises Minister Pravin Gordhan, giving the company a short-term reprieve from a cash crisis.

Read: Denel struggling to pay wages

“A lender has come to the assistance of Denel and full salaries will now be paid,” Gordhan told lawmakers in Cape Town on Tuesday, without naming the benefactor. To ensure greater financial stability, the company is working to improve its profit margins and accounting practices and has R30 billion of potential contracts in the pipeline, he said.

The minister made his comments just hours after Denel said employees will only receive 85% of their June salaries due to a “liquidity crisis.” The squeeze comes as R30 million of coupon payments become due by June 28, although Denel will make the interest payments, chief executive officer Danie du Toit said in response to Bloomberg’s emailed request for comment.

Denel is one of several South African state companies struggling to stay afloat after years of financial mismanagement. The weapons maker said last month it would have to restate accounts for the 2018 fiscal year after they weren’t reported correctly first time out, while a review of asset values found that some are worth nothing.

‘State capture’

The company has been a victim of “of the damaging effects of state capture,” Gordhan said, using a local term for the looting of state entities during the presidency of Jacob Zuma. His successor, Cyril Ramaphosa, has pledged to fight corruption and Du Toit was appointed earlier this year to lead a turnaround.

Should Denel be unable to roll over or service its debt, which is guaranteed by the government, that would put further strain on state coffers at a time when public companies including Eskom, the electricity utility, are also in need of bailouts. South Africa’s potential liability for government-guaranteed debt of state-owned companies was R879.6 billion in March, according to the National Treasury.

© 2019 Bloomberg L.P.

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When I was a youngster, Armscor turned my application for a bursary down. Thank God!

Pravin spoke with great authority last night as though he knows exactly what is wrong and how to fix it. He has for the past decade or two and the result is it has just gone from bad to worse.

We were taught never to borrow to pay for our living expenses. What are we teaching our SOE’s?

This Commie and former Zupta FD disgusts me. He talks so much but just about every problem with SOEs arose from his poor decisions( at best). Eskom -he destroyed the capable new CEO by buying votes when the CEO said retrenchment time, state guarantees were his idea thus keeping the ill SAA and SABC going, low growth was all on his watch as Finance minister. Now the lender of last resort for Denel is a secret of the “party”. Why the lack of transparency? 1960s Brezhnev mindset!

No substance and utterly disgusting man.

“No substance and utterly disgusting man.” Please google and read his biography. This is ONE man that stood out and spoke against JZ and the shenanigans.

I am afraid that you are incorrect! He talks a good story but his conduct has been abominable. He castrated the Eskom CEO who was capable with the vote buying strategy to maintain jobs at Eskom. No wonder the CEOs health declined and he left.

As for the state guarantee mess Gordhan conjured this rubbish up when he was finance minister ie get more debt for badly managed entities and as they were such rubbish from a credit perspective get the government to guarantee it and wish the problem away. It has not worked as teh real issue is the quality of management of SOEs as well as gross cadre deployment and overstaffing-Gordhan acquiesced to this

He is the most over rated, disgusting individual of the gang called the ANC. Mr Malema is correct to call him delinquent

Please give me your dealers number. Sounds like some good stuff you smoking…

Agree, nothing wrong with his integrity and honesty – only with his economic ideology of state intervention in the economy. But him and the EFF share the same economic sentiments.

Gordhan is a chubby communist chemist shop owner; none of which qualify him for having anything to do with any of SA’s SOE’s let alone the largest. He’s keeping the loot flow into Lootuli House flowing and cadres employed. Full stop.

What he should be doing is putting up ALL the power stations for sale on the open, free market (no BEE for chums); an anathema to a communist.

You’ve got to ask yourself who in their right mind would lend a bankrupt SOE money to pay salaries ? There must have been a massive behind the scenes “backhander”for this. They, whoever they are, should be investigated for irresponsible lending.

Maybe it was Gordhan himself

The whole state of the nation is replete with problem stating and whining.

Pravin is great at telling us all the problems he faces and how much the 10 lost years cost us. But guess what? Every time the opposition brought a vote of no confidence in Zuma to stop the rot, the ANC closed ranks and defended him. Therefore, they are all complicit in the 10 lost years they bitterly complain about now. No sense of shame or humility needed.

Meantime, the problem stating comes with no convincing plans of redress. So a lender will help pay June salaries…and then what?

Eskom will or will not be split into 3 (depends on whose talking) and then what? SAA will fly again with 10 times too many heads (seriously?) And then what?

There is no coherence or consistency here at all. Hence we are offered dreams instead.

So they borrowing to pay salaries, interesting times indeed.

What happens next month? And the months after that? A bail out every month to pay salaries?

How to spend 2.1m (out of 57m population) taxpayers money. He either robbed Peter to pay Paul (read somewhere, like education or health) or is spending money earmarked for more important things. Worst case scenario GEPF or PIC has been robbed

“A lender has come to the assistance of Denel…”

Does this mean the banks are refusing to do the usual – just asking, because according to the CEO interviewed on radio, they were waiting for bank approval for something he did not specify. He said money to pay salaries could come either from clients/customers payments or bank approval (for something) which, this month, had been delayed. He said the bank approval was guaranteed by Treasury.

Sounds like the banks are pulling the plug – who can blame them?

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