Carol Paton Writer at Large
An armoured modular vehicle made by Denel Land Systems. Picture: SUPPLIED
An armoured modular vehicle made by Denel Land Systems. Picture: SUPPLIED

Arms manufacturer Denel is the latest state-owned company to head for a clash with its employees over wages after it offered wage increases of 3% to 3.8%.

The Liberated Metalworkers Union of SA, a Cosatu affiliate, said on Monday that it found it "ridiculous and provocative that the management will consider offers which are below the inflation rate".

The union has asked for increases of 8% to 12%, saying it would not allow "the Thuma Mina brigade" — a reference to President Cyril Ramaphosa — to bring about changes at the expense of workers.

Denel is one of several state-owned companies that is experiencing financial and immediate liquidity problems.

Over the past five years the company’s financial position has deteriorated and it has been caught up in several questionable relationships with Gupta-associated businesses. Banks ceased lending to Denel in the second half of 2017 and have not yet restored funding.

New board

In April, Public Enterprises Minister Pravin Gordhan appointed a new board with former chairwoman of Airports Company SA Monhla Hlahla as chair. Also appointed was UDF and ANC leader Cheryl Carolus, an established businesswoman who has served on the board of South African Airways.

Denel has debt of R3bn and has utilised all its available loan guarantees from the Treasury.

The new board has been engaging with banks, with the result that R690m of debt was rolled over earlier in 2018. But the company is still in need of immediate funding to pay staff and suppliers.

The predicament of Denel and SAA was raised by Gordhan in a meeting with bank CEOs last week when he appealed to them to restore credit lines.

Spokeswoman for Denel Vuyelwa Qinga said on Monday that banks had made "firm proposals" on how to support Denel, which included various conditions. "There will be conditions from the banks. However, more importantly is that at least we are now getting closer to each other.

"We can also confirm that we have been in discussions with the Department of Defence and Armscor on support for Denel business," she said.

In the past, Denel has proved to be a self-sustaining and profitable entity mainly through the establishment of joint ventures with global arms producers.