Denel pays salaries - but leaves out pensions

Staff at state-owned arms manufacturer Denel learned on Tuesday that the company has paid their salaries, but not their pension contributions.

In a letter sent out by the "Denel retirement fund", the fund said workers would not be able to claim benefits as monthly payments were not up to date.

It read: "Section 13A of the Pension Funds Act is unambiguous in that any employer must effect payment of members' contributions to the fund before the 7th day of the month following the month for which it is due." 

The letter sent to staff, which TimesLIVE has seen, said: "The fund will NOT be able to process or effect payment of members' benefits, which include death in service and medical disability benefits, resignation benefits,  investment return updates and any other benefits payable."

It also said it would charge Denel interest on late payments.

Solidarity's Johan Botha also received the letter on Tuesday afternoon. He said the trade union had not yet confirmed exactly how many people were affected. 

''Denel didn't pay (pension) contributions for a large part of the group. We are still waiting for the exact numbers," he said.

On June 25, Denel group CEO Daniel du Toit said in a signed letter the company was unable to pay employees their full salaries this month.

“Due to the ongoing liquidity challenges, we are now faced with the unfortunate reality that the company is not in a position to fulfil the 100% salary obligation for June 2019.

“Employees will receive 85% of the salary obligation for June 2019,” said the letter.

Following this, minister of public enterprises Pravin Gordhan announced a "lender" had enabled the arms manufacturer to pay the rest of the staff salaries.

But on Tuesday afternoon, it became clear that none of the pension contributions for June had been paid.  Pension contributions are commonly between 12- 19% of  about a salary.

The Alexander Forbes 2018 Market Watch report showed that the average pension fund contribution for the employers it represents (not Denel) is about 14.11% of an average salary.

BusinessLIVE reported in March that ratings agency Fitch had downgraded Denel’s long-term credit rating.

- Denel said in a statement on Wednesday that its management "is working tirelessly to correct a situation in which it was unable to make the June 2019 payment of the employer’s contribution to the Denel Pension Fund".

"The organisation is also engaging the banks to secure bridging finance to support the company until recapitalisation is received," the statement read.

"This issue is connected to the current liquidity challenges experienced by Denel, which also resulted in a delayed payment of full salaries to employees in June. Denel is in constant communication with the Denel Retirement Fund managers and will advise employees as soon as the issue is resolved."

The company "acknowledges the inconvenience caused by this situation and commits to share information with employees timeously."

"Management is in regular contact with all the labour unions within the company to keep them informed about the situation to maintain the good relations we have with them. Denel acknowledges the support given by Government and the recognition that the company needs additional capital that will enable it to rebuild the business and position Denel as a reliable designer and manufacturer of world-class defence and technology systems."

- This article was updated July 10 2019 to reflect the company response, which had been requested but was outstanding at the time of first publication