NEWS
03/01/2018 07:10 SAST | Updated 03/01/2018 07:10 SAST

Denel Cannot Pay Its Debts

Cash-strapped Denel owed its creditors millions.

Juda Ngwenya / Reuters
South Africa's Rooivalk (Red Falcon) attack helicopter at the Aerospace Africa exhibition in Pretoria, April 28. The South African Air Force also ordered 12 of the locally designed and made Rooivalk, partly to demonstrate confidence in the state-owned Denel arms company's bid to market the sophisticated gunship abroad.

Cash-strapped state-owned arms manufacturer Denel cannot pay its creditors and has 1,557 supplier invoices that have not been paid for 30 days or more, Business Day reported.

Public enterprises minister Lynne Brown reportedly revealed this in response to a parliamentary question by Democratic Alliance (DA) MP Solly Malatsi.

At the beginning of November, Denel had debts of about R687-million that were 30 days old or more, while debts to the value of R266-million had not been paid for more than 60 days. Debts older than 90 days were worth R185-million, and R151-million in debt was older than 120 days.

According to Business Day, Brown revealed that Denel is not alone. Eskom owed creditors R102.3-million in November, while Transnet owed R728.3-million and SA Express owed R382-million.

Denel has faced a series of financial challenges recently. It could not afford to pay its staff their salaries, with reports that the arms manufacturer was running out of cash.

Treasury came to Denel's rescue with a debt guarantee, so that Denel's staff could be paid, according to TimesLive.

Earlier this month, the Sunday Times reported that trade union Solidarity had laid criminal charges against Denel's chief executive and chief financial officers, after staff's savings allegedly disappeared.

A Denel employee alleged in an affidavit: "From a brief glance it is evident that Denel deducted certain amounts from me and fellow employees on which we were taxed‚ and then failed to invest same [the money] in accordance with the employment agreements. Neither Denel nor its officials has successfully explained why the amounts deducted are not available for payment."

This week, defence minister Nosiviwe Mapisa-Nqakula denied reports that government is considering selling off a stake of Denel to help it to become financially stable, according to DefenceWeb.

Earlier, Brown had said that while no decision had been taken to sell off a stake in Denel, this could not be ruled out in the future.

"In an event that such a consideration or decision is made, government will have to carefully determine which parts of the Denel SoC should be sold, through which model and to whom," Mapisa-Nqakula reportedly said.