Unions at Denel to apply for a contempt of court order

Unions Solidarity and Uasa will on Tuesday apply to the Johannesburg labour court for a contempt of court order against the Denel board and the government for failing to meet the deadline for payment of salaries.

State arms manufacturer Denel missed a Friday court-imposed deadline to pay all staff their outstanding salaries, pension contributions, insurance and other outstanding payments.

Since May, some staff have received as little as 20% of their salary, with others getting up to 60% of their salary in June and July. Most medical aid payments and all pension, life insurance and other amounts have not been paid for the past three months.  

Uasa and Solidarity took the state-owned enterprise (SOE) to court after a two-week arbitration process broke down.

Last week, labour court judge Andre Venter ordered the munitions manufacturer to make payment in full by August 7, saying it had “breached the most fundamental obligation of an employer in an employment relationship”.

Denel wrote to the unions and asked for an extension to August 14.

“The union’s view is no further postponement is acceptable,” said Helgard Cronje, Solidarity sector co-ordinator for defence and aviation.

Frik van Straten, spokesperson for Uasa, said on Monday: “Denel has had long enough. We start the court process for contempt of court proceedings this week.”

Denel, one of the many SOEs embroiled in allegations of state capture, has yet to emerge from a turnaround strategy that included cutting R1bn in costs, selling noncore assets and seeking international strategic partners with the approval of the government.

The business is in a dire financial position and is facing liquidity challenges. In 2019, it received a R1.8bn recapitalisation from the government, and in 2020/2021 it was allocated a further R576m.

Denel said on Friday that it is trying to find the money and has requested more time due to “stringent time frames”, but the judgment is “being taken seriously”. It said the government and the Denel board are “relentlessly working to resolve the short-term challenges” the company faces.

“Denel remains committed to meeting its obligations and to ensuring it is able to honour the judgment at the earliest opportunity.”

In a letter to staff, outgoing CEO Danie du Toit apologised for the “stress and anxiety” caused. He has been in negotiations with the government since at least May to tackle the urgent liquidity challenges.

Du Toit, who resigned in July and will leave shortly, said in his Friday staff letter that to address cash flow challenges “we will have to make drastic and sometimes painful decisions for our business to survive and return to profitability”.

Du Toit told parliament in June that the monthly salary bill of R144m was too high for a company with an annual revenue of about R2.8bn.

In July, Du Toit resigned after less than two years at the job. Solidarity said it did not feel he had been given support by the board and the government to turn the arms maker around.

childk@businesslive.co.za