Brian Sokutu
Senior Print Journalist
1 minute read
22 Oct 2020
4:57 am

Denel on the verge of imploding

Brian Sokutu

Denel told parliament of its inability to pay full salaries, amounting to R391 million – a statutory obligation that has led to low morale and lawsuits.

Denel company logo is seen at the entrance of their business divisions in Pretoria, South Africa. Picture: Moneyweb

State-owned defence and armaments manufacturing giant Denel, once revered as among South Africa’s top strategic assets, is on its knees, if a report the company tabled yesterday before parliament is anything to go by.

Among the many cash cows of the infamous Gupta family during the Jacob Zuma presidency, Denel told parliament of:

  • Inability to pay full salaries, amounting to R391 million – a statutory obligation that has led to low morale and lawsuits;
  • Relations with organised labour strained due to an inability to honour contractual obligations in terms of salary payments;
  • Liquidity constraints and working capital, with Denel requiring a R370 million a month to ensure operations ran smoothly;
  • Lenders unwilling to advance further funding for projects;
  • Liquidity in the first 12 months negatively impacted by outstanding legacy obligations of R866 million, requiring payment; and
  • A challenge in retaining core skills and delivery to clients.

Defence industry expert Darren Olivier said Denel was “in an extremely precarious situation and the risk of it entering business rescue or liquidation should not be underestimated”.

“The company hosts a number of critical strategic and sovereign capabilities that would severely damage the SA National Defence Force if lost.”

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