Denel's financial crisis compromises SA's security, parliament told

Denel's financial crisis compromises SA's security, parliament told

The financial woes facing state-owned defence company Denel have compromised the security of SA.

This is according to a report presented by its acting CEO, Talib Sadik, at parliament's public enterprises portfolio committee on Wednesday.

The state-owned entity is one of many facing serious financial challenges following financial irregularities linked to the capture of the state by the Gupta brothers during former president Jacob Zuma's tenure.

“Our triple mandate ... is to not only be the custodian of sovereign defence capabilities, [but] also to strive to be commercially sustainable as a state-owned company and to add to the social economic objective of the South African economy.

“So we do play a key role to our defence industry, and the national defence industry council identified that the liquidity challenges facing Denel compromise the national security of our country,” said Sadik.

He said their financial woes had caused damage in the defence industry to the extent that employment in the industry has dropped from 20,000 in 2017 to a meagre 8,500.

“The challenges Denel is facing ... expose SA to a mass exodus of skilled personnel in the defence domain and also a loss of critical defence capabilities, both sovereign and strategic capabilities.

“And the reason Denel exists ... it is quite critical because it helps the SANDF [South African National Defence Force] keep SA safe,” said Sadik.

Denel has seen such serious financial hardships that it had been struggling to pay its employees even before the country was hit by the Covid-19 lockdown, when the company decided to cut employees' salaries.

According to Sadik, from May to July they have only managed to pay full salaries to 25% of its 300 employees and have been taken to court by unions over the matter.

In any situation where you are unable to pay 100% of what is due to a person, it causes a lot of stress.
Monhla Hlahla, Denel board chair

The company has further seen a 34% staff reduction since 2018. He said they have also asked for R683m in funding for research & development from the department of defence.

Speaking during the same meeting, Denel board chairperson Monhla Hlahla said the company's dependence on a single client, the department of defence, was one of its main challenges.

She said she believed Denel could be saved if they moved fast, together with the department, to fix the company's woes.

Hlahla also expressed her sympathy with employees over uncertainties regarding salaries.

“In any situation where you are unable to pay 100% of what is due to a person, it causes a lot of stress. My biggest worry as I watch Denel's people ... not sure whether we would be able to pay their salaries in full, month on month, is how focused they are going to be,” she said.

“You worry about when they get home, what happens when they can't pay debts, what happens when their children start to worry that maybe mom or dad doesn't have a full salary, maybe we owe somebody else.”