Denel staff assured of payment as Treasury steps in

15 December 2017 - 15:56
By Katharine Child
South African money: Stock Photo
Image: Stock Photo South African money: Stock Photo

State-owned arms manufacturer Denel has told unions it has money to pay employees their salaries on 22 December‚ after treasury gave it a debt guarantee.

Denel and the union Solidarity confirmed this on Friday.

The treasury guarantee allows Denel to ask banks next week to further extend their credit.

Unions met with Denel management on Friday to determine whether the 4000 staff members would be paid after Denel admitted it is running out of cash.

Solidarity manager Deon Reyneke said despite the guarantee‚ the union did not know if Denel would get a bank loan in time.

"We hope they will get a loan by next week‚ in order to pay on the 22nd."

Business Day reported in October that banks were becoming apprehensive about lending to Denel.

"Banks and other lenders had given the government an ultimatum to replace the Eskom board by November and that of arms manufacturer Denel by December or have their credit facilities withdrawn‚” Treasury officials told the newspaper.

Reyneke said unions had asked Denel management where the money it earns had gone.

"We did ask. It is still a mystery‚ [as to] where the money has gone."

He also asked: "What are [Denel's] contingency plans? They can't live on a loan [long term]. What are they going to do?"

In a statement released on Friday‚ Denel said it had "a week of intense engagements… with the Department of Public Enterprises and the National Treasury about its severe liquidity challenges". Odwa Mhlwana‚ Group CFO of Denel said it would now pay suppliers.

“I also want to thank our suppliers for being patient with us at times when we were not able to honour our obligations. We are also thankful to our employees for their patience and understanding during these past two weeks.”

On Tuesday‚ staff were sent a letter explaining Denel was "faced with a severe cash situation" that resulted in it defaulting on paying suppliers and defaulting on paying 13th cheque to some employees.

The letter signed by CEO Zwelakhe Ntshepe said: "We are currently engaging various critical stakeholders‚ the most important being government‚ to avert a situation where we may be forced to delay salary payments on the expected date for December 2017."

The 13th-cheque that is still owed to some staff is not actually a bonus‚ but is a forced savings scheme where employees save a portion of their monthly salary‚ in order to get a pay out in December.

Treasury confirmed it had been approached this week for a bank guarantee by Denel.

"At this stage‚ Denel through its shareholder has approached the Minister of Finance to consider a potential government guarantee. So this request will still have to go through the necessary internal processes. For details of how much is involved‚ please contact Denel directly‚” it said in a statement.

Denel already has government guarantees on its debt of R1.85-billion.

A guarantee means if the state-owned-enterprise fails to pay back bank loans‚ the taxpayer will forced to pay back the bank.