Denel says it will defend liquidation threat if necessary

Embattled state-owned arms manufacturer Denel, which is struggling to pay staff salaries, says it will defend a liquidation bid from Saab Grintek Defence if necessary, but will seek to resolve the payment dispute amicably.

Saab Grintek Defence, which is majority owned by Sweden’s Saab group, had approached the high court in Pretoria arguing that Denel was insolvent. Media reports at the weekend indicated Saab has made R126m in claims relating to a contract for the production of fire-control computers for vehicles.

Denel said in a brief statement on Tuesday that it was engaged with Saab Grintek, and “if need be, will engage its legal advisers to defend this matter”.

Denel, one of the many state-owned enterprises (SOEs) that have been embroiled in allegations of state capture, has been running at a loss for years, most recently reporting a loss of R1.9bn in the year to end-February.

It has struggled to implement a turnaround strategy that includes cutting R1bn in costs, selling noncore assets and seeking international partners.

It has also struggled to pay salaries, with the DA arguing that Denel should be put into business rescue.

The DA said in late May Denel’s decision to only pay its employees 20% of their May salaries was proof that it must be placed in business rescue as a matter of urgency.

“Bailouts and government guarantees will do nothing to turn the tide for Denel as it will not address the root of its challenges,” said DA MP Michele Clarke in a statement, adding that these included corruption and mismanagement.

“Only a credible business rescue process which is independent and overseen by credible business rescuers will turns things around at Denel,” Clarke said. /With Katharine Child

gernetzkyk@businesslive.co.za