Bleak month-end for Denel staff with just 20% of their salaries to be paid

Armoured-car and artillery manufacturer Denel Land Systems says honouring its wage bill in the next few months will be difficult as its cash woes continue.

In a memo on Friday to staff, which TimesLIVE has seen, CEO Mxolisi Makhatini said the embattled defence contractor's employees would get a net payout of just 20% of their salaries for May, along with medical aid cover and the risk portion of the pension contributions.

Denel Land Systems is one of Denel SOC's largest divisions, manufacturing land-based weapons systems such as armoured vehicles and heavy artillery.

Makhatini said operational requirements, payments to suppliers, statutory payment obligations and “our actual cash in the bank” had determined how much the company could pay its workers this month.

The situation was also unlikely to improve in the short term.

“As the company's liquidity status worsen (sic), the payment of salaries for the upcoming months will continue to be a challenge to honour,” he said.

Makhatini said management would continue discussions with employees on possible actions to free up cash in the months ahead.

Denel spokesperson Pam Malinga said staff had been earning only a percentage of their salaries for the past year.

“We are trying to find solutions to this liquidity problem,” she said.

She noted that staff from different divisions within the Denel group could be paid different percentages depending on each division's revenue for that month.

Public enterprises minister Pravin Gordhan revealed during his budget vote speech in parliament on Tuesday that the embattled state defence manufacturer owed its workers a whopping R500m in salaries.

“It is highly regrettable that Denel last paid full salaries in May 2020. The current amount owing to employees is about R500m. The business has subsequently experienced a loss of critical skills to both domestic and foreign companies,” said Gordhan.

“The board continues to make efforts to secure funding to pay salaries and implement its turnaround strategy and restructure Denel into a far more effective organisation.”

TimesLIVE