Court orders Denel to hand over deductions made from salaries

State-owned arms manufacturer Denel has been ordered to pay unemployment insurance and the taxes deducted from employees’ salaries by the end of this month. 

On Tuesday, the High Court in Pretoria ruled in favour of union Solidarity’s application to force the cash-strapped company to pay the outstanding amounts. 

The urgent application came after Denel announced that it was only able to pay a certain portion of its employees’ salaries for June and July. It then also came to light that the company had not paid over certain statutory compulsory payments such as PAYE, UIF and the skills development levies, despite making the deduction from employees’ salaries. 

Denel said on Monday that it is engaging with Sars to find solutions regarding its request for a payment deferment application.

When asked on Tuesday if the company would be in a position to make the payments by the end of the month, Denel said the government, the board and management were “continuously working to find sustainable solutions to the liquidity crisis facing Denel and we are positive that a solution will be found soon”.

Spokesperson Pam Malinda said Denel would always strive to meet the company’s contractual obligations towards the employees. 

Denel would not say how much it owes Sars. “Unfortunately, we are not in a position to disclose the amount at the moment as it would compromise our discussions with Sars,” she said.

Head of Solidarity’s legal services, Anton van der Bijl, said Denel did not oppose Tuesday’s court application, nor did it file any answering affidavits.

“It is a major victory for Solidarity and the Denel employees. However, it is regrettable that we had to go to court just to draw Denel’s attention to payments that it should have made a while ago.”

Solidarity’s deputy general secretary of the professional industry Johan Botha said that although the court order was a major step in the right direction for the greater fight against the misuse of taxpayers’ money, the union is still concerned about Denel’s continued survival.

Denel is one of the state-owned entities (SOEs) embroiled in allegations of state capture and slipped into such a severe financial crisis that in December 2017 it needed a government guarantee to enable it to pay its workers and suppliers. Almost two years later, the company is still in a dire financial position and struggling to pay salaries.

Denel, which fell into an operating loss of R1.7bn in the 2017/2018 fiscal year, has been promised funds from the Treasury contingency reserve and was rescued by the banks after the scare in June.

Earlier in August, the firm said bridging finance is still being provided in anticipation of a recapitalisation process by the government. Denel has asked for a R2.8bn cash injection.

quintalg@businesslive.co.za