13/12/2017 06:57 SAST | Updated 13/12/2017 06:57 SAST

Denel Cannot Pay Its Staff This December

Denel is facing "severe liquidity challenges" after a disastrous year.

A Denel Rooivalk attack helicopter.
A Denel Rooivalk attack helicopter.

State arms manufacturer Denel cannot pay its staff their December salaries, The Times reported on Wednesday.

A meeting between unions representing Denel employees and Denel staff took place in an effort to resolve the issue, but the unions told The Times that it was fruitless.

"We have been told: 'We don't have money'," United Association of South Africa (Uasa) spokesperson Willie van Eden told The Times.

Denel reportedly needs R350-million to pay suppliers and December salaries but apparently only had R60-million on hand.

"The fact is, Denel could not answer the question: 'Will members be paid on December 22?'" Van Eden reportedly said.

Denel spokesperson Pamela Malinda told The Times that the state-owned company was experiencing "severe liquidity challenges".

"We can confirm that a meeting was held [on Tuesday] between management and organised labour. This was a long-standing scheduled meeting for management to provide a business update to labour.

"We can further confirm that Denel is experiencing severe liquidity challenges, of which we are currently engaging with key stakeholders including the government."

Denel reportedly met with Treasury in what looks like an effort to secure more funding.

Earlier this month, Business Day reported that workers were outraged over a memo from Denel management, warning them that their 13th cheques might not be paid due to "liquidity challenges". Unions said this was not a bonus, but that their salaries were deducted every month to make up the 13th cheque.

Van Eden told Business Report: "This is unacceptable. Senior officials get 50% of their annual salary as performance bonus, which is about half a million rand, while employees have to wait for a R10,000 bonus."

In August, Business Day reported that the weapons manufacturer was reeling from a drop in its exports, board resignations and the end of a costly partnership with associates of the Gupta family.

Denel's failed relationship with the Gupta-linked VR Laser Asia was cancelled, reportedly delaying a critical re-entry into the Asia-Pacific market.

Denel was reportedly blacklisted from the market for a decade after a bribery scandal in 2005, and had hoped to re-enter the market through the deal with the Gupta-linked company. But Treasury withheld approval of the deal over concerns about its legitimacy.