A Denel company logo is seen at the entrance of their business divisions in Pretoria. Picture: REUTERS/Siphiwe Sibeko
A Denel company logo is seen at the entrance of their business divisions in Pretoria. Picture: REUTERS/Siphiwe Sibeko

State-owned arms manufacturer Denel says the process of exiting the greater part of its aircraft components manufacturing business is now at an advanced stage, with major steps put in place to minimise the impact of the withdrawal on job losses.

The loss-making company recently entered into a mutual agreement with its customers to transfer the manufacturing of aircraft parts to alternative suppliers as the business is no longer sustainable.

Denel, which is one of the many parastatals struggling to recover from state capture, has recorded massive losses in recent years. In the past financial year it posted a loss of close to R2bn, with revenue dropping 36%. 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.

The new Denel board has been involved in an intensive cleanup campaign to deal with irregular transactions undertaken by previous management, who had become entangled with businesses linked to the Gupta family.

The divisional CEO of Denel Aeronautics, Mike Kgobe, said the company has concluded consultations  with stakeholders including organised labour and representatives of non-unionised employees as required by the Labour Relations Act. The consultation process was facilitated by a senior official of the Commission for Conciliation, Mediation and Arbitration (CCMA) and will result in retrenchments based on operational requirements.

“We have really worked hard in trying to keep job losses to a minimum and some of the employees will be transferred to other positions within the Denel group while voluntary severance packages have been offered,” said Kgobe.

Denel applied to the departments of public enterprises and finance to wind up the business of Denel Aerostructures in terms of the Public Finance Management Act. Formal approvals were granted during 2019.

Denel group CEO Danie du Toit said the decision to wind up the division is in line with the broader long-term strategy to reposition the company and return it to profitability.

The winding up of the aircraft components manufacturing business will not affect other businesses conducted by Denel Aeronautics at the Kempton Park campus, he said.

This includes the support given to the Rooivalk combat helicopter, the Oryx medium transport helicopter and the C130 transport aircraft, together with the export business for the Cheetah multi-role fighter aircraft and Puma helicopter and various maintenance, repair and overhaul services provided to both the SA Air Force and other customers.

phakathib@businesslive.co.za

A Denel company logo is seen at the entrance of their business divisions in Pretoria. Picture: REUTERS/Siphiwe Sibeko
A Denel company logo is seen at the entrance of their business divisions in Pretoria. Picture: REUTERS/Siphiwe Sibeko