Registered users can save articles to their personal articles list. Login here or sign up here

Denel struggling to pay wages

State-owned defence group will only pay employees 85% of their salaries this month.

State-owned defence group will only pay employees 85% of their salaries this month because of liquidity problems, a memo to staff seen by Reuters showed on Tuesday.

The cut to wages highlights the severity of the financial crisis at Denel, which makes ammunition, missiles and armoured vehicles for the South African armed forces and customers in Africa, the Gulf and Europe.

Read: Denel makes loss in 2017/18, eyes turnaround

The company has been working on a turnaround plan with the government, but it has so far failed to secure the significant cash injection it wanted.

South Africa’s public finances are stretched by the need to rescue ailing state power company Eskom and South African Airways, which is heavily loss-making.

Read: SOEs demonstrate galling lack of governance

“Regrettably, employees will receive 85% of the salary obligation for June,” the memo signed by chief executive Danie du Toit said. “Management are working tirelessly to ensure that the delayed portion of the salaries will be reimbursed as soon as possible.”

Denel confirmed in a statement that it had decided to only pay 85% of June salaries for now.

Denel struggled to pay salaries to some staff in September last year, but it since resumed full payment.

It has offered severance packages to staff and is trying to renegotiate onerous contracts and exit parts of its business to cut costs and return to profitability. 

Get access to Moneyweb's financial intelligence and support quality journalism for only
R63/month or R630/year.
Sign up here, cancel at any time.

COMMENTS   13

To comment, you must be registered and logged in.

LOGIN HERE

Don't have an account?
Sign up for FREE

Daniel Mantsha, the Denel chairperson who sent his own municipal bill to the Guptas to settle, at a time when the company was almost donated to the Guptas, is now Jacob Zuma’s lawyer.

Connect the dots, because the NPA certainly cannot.

All of this is in the public domain.

Government is in the arms business why?

Cant think of any reason. Is it because the current regime wants to show they can do it better than the previous regime?

Wonder if they will be able to figure out it’s not working well for them. Shame.

Its because the old Apartheid government was a successful arms manufacturer, and the thinking of the current regime has always been: anything they (the hated Boers) can do, we can do better.

Unfortunately here, as elsewhere in general, this has not turned out to be the case in fact.

Yarwell no fine – I think the ANC has got the ”Anti-Midas touch” – everything they touch turns to $hit!

We don’t have a defense force worth talking about so why are we in the arms business?

Got to do with earning foreign currency. Unfortunately, arms industry is big money and brings lots of politics and SA doesn’t have the clout to get into certain markets and coupled with the current regime’s inability to manage, Denel is pretty much dead

One has to wonder about the wisdom of not paying employees of a weapons company their monthly salaries or only part thereof. Would the employees not be tempted to seek work at offshore arms companies? or worse, sell intellectual property to the highest bidder?

I have a relative you works for Denel, was shocked to learn that half of their workforce they spend the whole day doing nothing since there’s no work to be done. Worse is that the Denel subsidiaries have instructed their employees not to come to work but still getting paid

They should get a loan from the SABC. Oops they also can’t pay salaries. Okay then SAA. Omg, they can’t meet salaries either.

Eskom can lend them the cash. That’s okay. We won’t let them go down.

Whew, that’s a relief. No need to cut heads or to back off our usual double digit wage increases.

Can’t they use goverment pension fund money to help pay salaries?

Actually, they do get a loan from Eskom (indirectly) to do this. When they run out of cash they don’t pay their municipal bills ( the municipality is not going to cut Denel off); in turn the municipality does not pay Eskom (Eskom is not going to cut them off either); Eskom then goes more bust than it already is and ..

The government bails Eskom out. Loan from Eskom achieved

Load All 13 Comments
End of comments.

LATEST CURRENCIES  

USD / ZAR
GBP / ZAR
EUR / ZAR
Insider GOLD
ONLY R63pm

Moneyweb's premium subscription is a membership service which will give you access to a number of tools to take charge of your investments.
Or choose a yearly subscription at R630pa - SAVE R126

Get instant access to all our tools and content. Monthly subscription can be suspended at any time.

Podcasts

SHOP NEWSLETTERS TRENDING CPD HUB

Follow us:

Search Articles:Advanced Search
Click a Company: