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Does Denel have money to pay the Salaries of its employees???

Statement by Andre Venter, spokesperson of the trade union UASA:

The trade union UASA is extremely concerned that Denel might not be in a position to make full salary payments to its employees for the November 2017 pay month and beyond. It is our understanding that Denel Corporate issued an instruction to all its divisions to “do the best they can”, with the finances allocated to them so as to ensure that employees at least receive their normal salaries for the November 2017 pay month. While salaries have since been paid, the payment of the 13th cheques of employees at various Denel entities was withheld.

The so-called “13th cheque” is, in fact, a self-funded savings initiative from Denel employees, which they use as a bonus in December of each year during annual shutdown.

In response to concerns raised about the unilateral action of Denel management, demanding the unilateral action be withdrawn before close of business on 30 November 2017, Felane Mahlangu – Transformation Manager of Denel Corporate  simply stated: “I am still awaiting a comprehensive response from Finance, but indications from Treasury are that payments will not happen today or tomorrow as per your deadlines”.

“It is our contention that Denel could be acting fraudulently by withholding payment of the employees’ own money,” says, Willie van Eeden, Sector Manager of UASA. “If Denel does not have money to pay our members now, what is going to happen in December?"

A further issue is that Denel, for the second year running, indicated to employees that performance bonus payments have to be postponed. After much deliberation and a mandate from union members, Denel Corporate committed to make such payments over a six month period – so as to make funds available on a monthly basis. It is our information that such bonus payments which were supposed to be paid at the end of November 2017, have also been withheld.

In addition to the apparent financial difficulties of Denel, it is also important to note that

  • Payment to suppliers is a serious problem which results in the non-delivery of equipment, spares, etc. The latter has an effect on the finalisation of contracts for Denel.
  • Less than 60% of the Denel target for available cash has been secured, which should question the ability to secure and finalise current contracts.
  • While it is trite that divisions such as LMT and Dynamics are not performing well, PMP’s under-performance is because of antiquated machinery.

While the performance of Denel is not improving, UASA is concerned that Denel's Financial Annual Report 2016/17, specifically the remuneration report, reflects that:

  • New appointments at Denel Corporate at a huge increase to the salary bill; and
  • The CEO and CFO are to receive 50% of their annual salary as a performance bonus.

Fedusa recently lodged a Section 77 Notice at Nedlac. The demand by Fedusa is inter alia to protest against the government/s failure to appoint competent, ethical, accountable, responsive and responsible management of State Owned Companies (SOCs) including Denel.  

Fedusa General Secretary Dennis George said that government’s failure thereto has seen them progressively fall into a state of dysfunction, maladministration and becoming a huge financial drain on the fiscus in the form of continuous multi-billion rand bailouts and government guarantees that help them secure overdraft facilities at commercial banks. It is common knowledge that this has a serious impact on the broader civil society and all the employees and their families. It further negatively affects the terms and conditions of employment, safety in the workplace, and the job security of employees. 

The key features of the Section 77 Notice include Fedusa’s proposal to appoint independent forensic auditors and that the Fedusa affiliated unions, Nedlac and all other recognised unions at the SOC’s be allowed full and unhindered access to their internal and external reports of the past three years.

UASA cannot allow its members to be subjected to a situation as per what is currently happening at Denel; hence we demand an urgent intervention by way of an urgent but full forensic audit regarding Denel’s financial position. Although consideration should be extended to place Denel under administration, such a step could result in even worse reputational damage to the company.

Communication between Denel and its employees/labour have become strained and it is important to rectify the situation. If the company does not take employees along in respect of strategy, concerns and understanding of the way forward as to ensure Denel move from “Good to Great”, any initiative is bound to fail. 

UASA strongly believes that there needs to be transparency and understanding in respect of the way forward for Denel.

For further enquiries or to set up a personal interview, contact

Willie van Eeden at 082 445 1945.