Denel, a state-owned arms manufacturer, has only been able to pay employees 85% of their salaries for June 2019.
As reported by Times Live, the state parastatal issued an email to its workers notifying them to expect a shortchanged remuneration package for this month, as it has not been able to fulfil its financial obligations.
Denel financial standing in dire straits
Denel’s books have been on a slippery slope for the past two financial years. In 2017/2018, the arms manufacturer recorded a net revenue loss of an estimated R1.8-billion.
While the government has, on a year-on-year basis, guaranteed at least R3.4-billion to Denel, a deal which earlier in the year was extended to September 2023, it is still not enough to supplement its mounting debt commitments.
“It has clearly not been sufficient to address operational requirements and debt funding remains overwhelmingly short-term in nature,” ratings agency, Fitch wrote in March, when Denel’s credit strength was downgraded.
When will the workers get the rest of their salaries?
In the 2018/2019 financial year, Denel lost a further estimated R2-billion. This, according to the arms manufacturer’s Group CEO, Daniel Du Toit, has been one of the chief reasons behind the parastatal’s inability to meet its workers’ remuneration needs.
“Due to the ongoing liquidity challenges, we are now faced with the unfortunate reality that the company is not in a position to fulfil the 100% salary obligation for June 2019,” Du Toit told his workers in the email.
He stated that the company is working hard to ensure that the remaining 15% is paid to workers as soon as conveniently possible.
“We acknowledge the inconvenience caused by this, in particular, the late communication to you. However, at the time this decision was made, the company had no alternative but to go this route,” he added.