Skint Denel not able to pay full salaries for June
Staff to receive 85% of their pay while loss-making arms manufacturer struggles to scrape together the rest
State-owned arms manufacturer Denel is unable to pay its employees their full salaries this month.
“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,” Denel group CEO Daniel du Toit in a statement.
Employees will receive 85% of the salary obligation for June 2019.
Du Toit said management was working “tirelessly” to pay the rest of the salaries soon.
“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.”
Fitch downgraded Denel’s long-term credit rating in March.
“Denel continues to benefit from sovereign support through the government’s irrevocable and unconditional guarantee for R3.4bn of Denel’s R4bn domestic medium-term notes. While this guarantee framework has now been extended to 29 September 2023, it has clearly not been sufficient to address operational requirements, and debt funding remains overwhelmingly short-term in nature. However, the rating reflects the expectation of continuing timely government support in some form,” Fitch said in a statement in March.
Denel recorded a loss of nearly R2bn in the past financial year. In the 2017/2018 financial year it suffered a net loss of R1.8bn on a 38% decline in revenue to R5bn from R8bn the previous year.