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North West Portfolio committee given 48 hours to respond on Denel debacle

September 16, 2020
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Denel may wind down manufacturing for Airbus A400M
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The North West Portfolio Committee on Premier, Finance, and Co-operative Governance and Traditional Affairs (COGTA) has given the Office of the Premier 48 hours to provide it with a clear report on the Denel debacle.

The committee had summoned the Premier and the administrator to give feedback on the progress made since its last meeting, following the termination of the apprenticeships of 39 students at the State defence firm in January 2020.

The students want to complete their programme and be paid for their stipends.

The chairperson of the committee Aaron Motswana says, “We want them to put into writing within the next 48 hours an action plan that would indicate when they are anticipating to finalize their procurement processes.”

“To say then, if you have written to Iterllec Consulting and Bardled Cement, which we are told that they are two companies, that they’ve managed to agree with the Office of the Premier to continue with the training, put that in writing. And the second issue is with regards to the payment of stipends, it is not reflected on the document,” adds Motswana.

Denel not planning to seek further bailouts

Denel is not planning to seek new government equity injections despite a liquidity crunch aggravated by the coronavirus crisis, its interim chief executive toldReuterson Thursday.

Denel, which makes military equipment for South Africa’s armed forces and clients around the world, is one of several troubled state-owned companies in the country that have been kept afloat by government bailouts in recent years.

It has struggled to pay salaries this year amid export restrictions and declining revenue. Last week the government said Denel made an R1.7 billion ($100 million) loss in the 2019/20 financial year.

“At this stage, it is not in our plan,” Talib Sadik said in an interview when asked whether Denel would approach the government for further bailouts. “Our view is that we also need to fix our own house because what we have is a bit of moral hazard happening.”

Sadik became interim CEO this month after his predecessor Danie du Toit resigned, without giving reasons.

Du Toit had toldReutersin a July interview that Denel’s survival could be at stake if conditions attached to an earlier bailout – which was earmarked to pay down government-guaranteed debt – were not eased.

Denel received R1.8 billion from the state in 2019 and in this year’s budget was promised another R576 million, which it is receiving in installments.

Sadik said that although Denel was not asking for more money from taxpayers beyond what was promised in this year’s budget, it was talking to the Defence Ministry about a retainer to help it maintain some capabilities the government considers strategic.

Denel, which makes equipment ranging from armored vehicles to attack helicopters and missiles, does not need to enter a local form of bankruptcy protection called “business rescue” despite speculation in local media, he said.

State-owned airline South African Airways entered business rescue last year.

Sadik said Denel had started discussions with the Public Investment Corporation and other bondholders about rolling over more than R2.6 billion of debt maturing next month.

“In the past, we have successfully rolled over,” he said.

Executives are trying to reach a settlement with labour unions about salary payments owed to some staff and hope to conclude one or two equity partnerships by April next year as part of a turnaround strategy.

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