STATE arms manufacturer Denel still faces a steep road ahead with its outstanding R650 million salary bill despite a R3 billion gifting by Finance Minister Enoch Godongwana, and R1bn allowance out of the medical aid kitty.
Unions with favourable attachment orders might still execute them, because the latest windfall is meant for interest payments and legacy debt, and not the salary arrears that the unions fought for in court.
As acting CEO William Hlakoane confirmed on Friday, the financially embattled state utility would still rely on its five-year turnaround plan, including the disposal of assets such as property and land to meet its arrears obligations.
Unions were adamant they would move for an execution of court orders, which entitle them to attach Denel's assets. “It seems money will not go to salaries… If the sheriff enforces all these court orders, obviously it will be the end of Denel. If they auction everything, then no matter what the turnaround strategy entails, even if it could be successful which is still debatable, the company would not be successful,” United Association of SA(Uasa) secretary-general Rick Grobler said.
Hlakoane said that while the allocations dating back from last year appeared tangible on paper, most of the money was destined for legacy debt and interest payments.
“It will not cover everything. We are working on the salaries and other matters from court cases,” Hlakoane said.
Denel owes staff R650m in outstanding salaries, and suppliers R900m. This week it was ordered by the Labour Court in Joburg to pay R90m in outstanding salaries to Solidarity union members within 10 days.
In the latest Budget on Wednesday, it emerged that the R3bn allocated to the state-owned company will be used to settle interest payments. This amount includes the R2.9bn for Denel announced in the Medium-Term Budget Policy Statement in November, 2021.
“Broader alignment is required between the Department of Public Enterprises, National Treasury and other stakeholders to agree on Denel's future.
“This will enable Denel to implement its strategic plan to consolidate operations, dispose of non-core assets and move ahead with identified strategic equity partnerships,” the Budget document stated.
It added that Denel's guarantee facilities declined to R3.4bn after R2.5bn lapsed, following the cancellation of the Egyptian missile contract and the maturity of R1bn of its debt.
African Defence Review director Darren Olivier said in the DefenceWeb publication that an Egyptian missiles contract probably would have saved the group and prevented the short-paying of salaries, “but the government let it fail”.
Olivier maintained that Treasury and the Department of Public Enterprises' delays regarding reviving Denel were “incomprehensible and infuriating”.
“Treasury wants more discussion and ‘alignment'… It's been three years of unending crises without improvement. And while Treasury and the DPE dither and treat Denel as an inconsequential small SOE that can be rescued at leisure at some later point, strategic capabilities both within Denel and within the SANDF are collapsing and being lost. There's no longer the luxury of time,” Olivier said.
Hlakoane said Denel was doing as much as possible to deal with immediate issues.
“Salaries are the main thing we are working on. Now it is not affordable for us to be paying people who are sitting at home,” he said.
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