A R2.9 billion shot in the arm from the state to arms manufacturer Denel has not helped its situation as it still has to struggle with the disposal of its assets, timed for early next year, to meet its financial obligations, largely interest payments on debt, CEO Willliam Hloakoane has said.
A large part of the R2.9 billion subvention from Finance Minister Enock Godongwana in his Medium Term Budget Policy Statement (MTBPS) is being used to reduce interest payments on debt while it negotiates with interested buyers for the sale of some assets, including properties, by January next year to stabilise its finances.
This is as trade union UASA is pushing legal action on two fronts against the SOE, with Public Protector Busisisiwe Mkhwebane, and through a contempt of court charge with the labour court, after Denel reneged on an August 2020 judgement to settle its mounting salary bills.
Denel on Friday asked the labour court for breathing space, until late 2022 to make payment, but Judge Reghana Tulk ruled that the matter be postponed to March 16, 2022.
UASA argued that such a postponement would have allowed Denel two years to comply, which it considered a long period considering how Denel’s inability to honour the court case had affected UASA members working for the SOE.
UASA has taken another stance in its fight with Denel over the issue of non-payment of full salaries to UASA members employed by the entity, by laying a formal complaint against Denel to the public protector.
“UASA has numerously approached the Labour Court to intervene on the issue and obligate Denel’s executive management for salary payments with no luck. Following several ignored submissions that were made by UASA to the local Denel forum and court orders compelling Denel to pay outstanding salaries, UASA had no choice but to approach the public protector, UASA spokesperson Abigail Moyo said.
She said the most disappointing deed was that the government, the sole shareholder of Denel, was not willing to assist the affected workers, as the recent R2.9bn that was granted to the SOE was for secured debt, only not for salary payments.
Last week, Denel Land Systems (DLS) confirmed it would not be able to pay November salaries and thirteenth cheques due to extreme financial pressures, while the group had initiated voluntary severance packages in order to reduce the staff count.
Hlokoane, in an interview, said the R2.9bn subvention was going mostly to interest payment on debt, leaving the entity to still grapple with the disposal of its assets, tentatively set for early next year, and then to be able to attend to the salary debt obligations.
“We are still where we were, not able to service our loans. The subvention is still part of the strategy, interest obligations are too high for us, we have note holders of over R3.2bn. It does relieve us to be able to pay the interest payments, but we still have to go ahead with the disposal of assets by January or February next year,” he said.
He said Denel ideally needed between R17bn and R20bn in bank guarantees for contract work that it could undertake to alleviate its financial quagmire.
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