Denel acknowledged that it had lost a number of engineers, technologists, scientists and technicians
Denel said it is in a rebuilding phase. Picture: Jacques Nelles
State arms manufacturer Denel’s efforts to rebuild its depleted engineering and technical workforce are raising questions about whether the entity has recovered enough critical skills to safeguard the country’s defence independence.
In Denel’s 2025/26 annual report to Parliament’s Portfolio Committee on Defence and Military Veterans on Friday, 9 October, the entity acknowledged that it had lost a significant number of engineers, technologists, scientists and technicians.
Denel in rebuilding phase
The company said recruitment of technical personnel had resumed during the financial year, but the rebuilding process was still underway.
“The societal demands and rapid growth in innovation and artificial intelligence are accelerating the changes in defence and technology industry offerings. Denel lost a lot of engineers, technologists, scientists and technicians,” Denel’s annual report states.
According to the report, during the financial year under review, the company recruited technical skills in different areas and that the rebuilding process has started.
The report notes that the shareholder recognises the evolving threat environment and the need for new products and capabilities.
“…the friend today can be an enemy tomorrow. The geopolitics have become very fluid,” the report warns.
Questions about Denel’s abilities
The disclosure raises questions about the extent to which the loss of specialised expertise has affected Denel’s ability to execute defence contracts, maintain complex systems, develop new technologies and meet the operational requirements of the South African National Defence Force (SANDF).
Denel’s turnaround is not just a question of restoring profitability.
Its mandate includes upholding sovereign defence capabilities and technologies that SA may need to maintain national security without excessive dependence on foreign suppliers.
The entity’s latest report identifies research and development, technical recruitment, innovation and the execution of new and legacy contracts as priorities for its recovery.
“We are committed to applying our expertise and professionalism to uphold South Africa’s national security interests,” the report states.
The company reported that production had resumed at its Pretoria Metal Pressings facility, which manufactures short- and medium-calibre ammunition for the SANDF, the South African Police Service (Saps) and other customers.
It also said that some longstanding contracts had been delivered during the year, while others remained under execution.
Financial challenges
Denel’s challenge is deepened by financial pressures, with the entity reporting revenue of R1.473 billion for 2025/26 but recorded an operating loss of R364 million.
Management also warned that its liquidity position had deteriorated, while the company continued to work on reducing costs and securing sustainable contract revenue.
The company’s ability to continue operating as a going concern remains under pressure due to persistent operating losses, solvency challenges and deteriorating liquidity.
Its cash position turned negative in September 2026, while liquidity ratios remain below required benchmarks and could worsen once outstanding balance-sheet adjustments are completed.
Denel has not fully settled legacy debt and is considering cost-cutting measures at its Dynamics and Landwards divisions.
Some project advances are not fully supported by available cash, including Hoefyster funds, while access to a $21.3 million deposit for the G6 upgrade contract remains pending.
