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Arms manufacturer scores R1.8-billion state bailout

A mechanic works on an Oryx helicopter engine in a workshop hangar on the Denel Aviation site in Boksburg.
A mechanic works on an Oryx helicopter engine in a workshop hangar on the Denel Aviation site in Boksburg.
Image: Kevin Sutherland

Cash-strapped state-owned arms manufacturer Denel has finally received a bail out from government.

The company, which faced cashflow challenges that resulted in staff two months ago getting their full salaries late, confirmed the R1.8-billion recapitalisation on Friday afternoon.

Denel group chief executive Danie du Toit said the R1.8 billion recapitalisation resulted from tangible progress of detailed plans to restructure the business, enter into strategic partnerships and find new markets for its high-technology products and solutions.

“We are grateful for the unwavering support that we receive from our shareholder, the government, and National Treasury. It demonstrates a confidence at high level for the measures taken by the new board and management and a commitment to support us through the next stages of the turnaround,” he said.

He said the bailout formed part of a R2.8 billion request, of which an additional R1 billion would be considered in the 2020/21 budgetary process.

"The allocated portion will enable Denel to improve delivery performance and support to local and international customers. It will also bring relief to our partners and supply chains who have been affected by Denel’s liquidity issues in recent months.”

Du Toit says Denel will continue working hard in achieving the conditions that come with the recapitalisation.

"Continued careful management of the supplier base, on-time and on-budget execution of projects is critical in the next 12 months.  Denel remains aligned with the shareholder’s expectations that it disposes of non-core assets on an urgent basis and establishes strategic equity partnerships across the various divisions of the company.

Denel in June released a statement stating that due to "liquidity challenges" the company was not in a position to fulfill the 100% salary obligation for June the month, adding that employees would receive 85% of the salary obligation.