Denel salary fiasco shows it should be placed under business rescue, urgently - DA

By Mayibongwe Maqhina Time of article published May 31, 2021

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Cape Town - The DA on Monday said the decision by Denel to only pay its employees 20% of their May salaries was proof that the state-owned entity should be placed under business rescue as a matter of urgency.

DA MP Michele Clarke said there was clearly no other way forward for the arms manufacturer which was fast becoming commercially unsustainable.

“The DA is of the view that should a business rescue process not to be initiated, the entire entity will collapse. This will not only compromise South Africa’s national security but also the thousands of jobs in its value chain,” Clarke said in a statement.

She said bailouts and government guarantees would do nothing to turn the tide for Denel as it would not address the root of its challenges, which were the years of mismanagement, looting and capture.

“Only a credible business rescue process which is independent and overseen by credible business rescuers will turn things around at Denel,” Clarke said.

She made the comments hot on the heels of the National Union of Mineworkers (NUM) condemning the failure by Denel Land Systems to pay the salaries of its workers.

Reports emerged on Sunday that Denel Land Systems said that honouring its wage bill in the next few months would be difficult as its cash problems continued.

It was reported that chief executive Mxolisi Makhathini sent a memorandum to staff on Friday, saying the employees would get a net payout of just 20% of their May salaries along with medical aid cover and the risk proportion of pension contributions.

“As the company’s liquidity status worsens (sic), the payment for the upcoming months will continue to be a challenge to honour,” Makhathini was quoted as saying.

The employees have not been paid their full salaries since May 2020. The state-owned companies owed the employees R500 million.

On Monday, the NUM said the situation of workers in the Denel Land systems was beyond crisis. Some workers resorted to committing suicide as a solution.

“We send our sincere condolences to the families of those workers,” NUM metal sector co-ordinator Mawonga Madolo said.

He said the union had been attempting to engage the company but had no success as management had failed to respond.

"The union has also been calling on the government to intervene by providing financial support in the interest of workers. The union has now reached a point that further action should be undertaken to fight against this ongoing violation of workers rights,” he said.

“The first action the union has done is to issue the demand letter to the employer, regarding the outstanding salaries, with an ultimatum to pay the salary within 14 days or face legal action.

“The second plan of action is working with Cosatu to organise the march to the National Treasurer office in an attempt to force the government to take responsibility on the matter as the sole shareholder.”

Political Bureau

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