Denel is holding talks with unions over voluntary severance packages, reduced working hours and salary cuts for some staff. Photo: Supplied/Denel
JOHANNESBURG - South African state arms firm Denel is holding talks with unions over voluntary severance packages, reduced working hours and salary cuts for some staff as it struggles to emerge from a financial crisis, a union official said.

The discussions underscore the extent of the financial difficulties affecting Denel, which produces military kit for South Africa’s army and foreign forces.

Johan Botha, deputy general secretary for labour union Solidarity, said Denel management had told union officials on Monday that staff salary payments for October and beyond were at risk because of the severe liquidity woes the company is facing.

A Denel spokeswoman did not immediately respond to a request for comment.

President Cyril Ramaphosa has made improving governance and stabilizing the finances of state firms a priority since replacing Jacob Zuma as head of state in February. In April, Ramaphosa oversaw the appointment of a new board at Denel.

The firm was embroiled in corruption allegations under its previous management.

Reuters reported last month that Denel had not paid managers and specialists their full salaries in September because of a lack of liquidity.

Botha said that regular staff - not just managers and specialists - will be affected by the proposed severance packages, reduced working hours and salary cuts.

“Innocent employees will now have to account for earlier mismanagement, which is still under investigation. There is no clear indication that a strategic plan for Denel is forthcoming,” Botha said.

REUTERS