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Real Economy News in Real Time
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Bank bails Denel out amid union demand for action on irregularities

12th July 2019 BY: Rebecca Campbell
Creamer Media Senior Deputy Editor

Public Enterprises Minister Pravin Gordhan’s spokesperson, Adrian Lackay, has clarified to Engineering News that the lender who came to the assistance of beleaguered State-owned defence industrial group Denel, allowing it to pay its staff their full salaries for June, was “a commercial bank in South Africa”. Late last month, Denel had announced that it would be paying its employees only 85% of their salaries due to them for June.

“Neither I nor the Ministry of Public Enterprises is privy to specific details of the transaction – it is a commercial transaction between a bank and its client and subject to their confidentiality rules,” he explained. “The running of Denel’s daily operations is left to the board, which exercises its oversight function over the company’s management. The Ministry has full confidence in the current Denel board and the management team to return the company to operational and financial sustainability.”

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Separately, Denel CEO Danie du Toit has assured that it has a thoroughgoing programme to turn itself around and establish itself as a sustainable entity. “The positive sentiments expressed by both President [Cyril] Ramaphosa, [in Parliament], and Gordhan will help to restore confidence in Denel among existing and prospective clients, suppliers and employees,” he observed in a statement.

“The support given to us by the President in Parliament will help us to position Denel as a reliable designer and manufacturer of world-class defence and technology systems,” added du Toit. “Our reputation took a severe battering with the revelations about State capture and widespread irregularities in the company, but we are taking determined steps to get it back on track.”

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The Denel statement quoted Gordhan’s comment that the group was “a crucial and strategic State entity that was substantially harmed by State capture”. The Minister added that Denel was renegotiating its existing contracts and improving its negotiation of new contracts to better its margins.

“We appreciate the recent opportunity to meet with the President, together with other State-owned enterprises (SOEs), to identify the challenges we experience,” affirmed Du Toit. “We are looking forward to working together in the Presidential SOE Council.”

Coincidently, at the end of the last week of June, trade union Solidarity announced that it had served a demand on Denel to institute legal proceedings against people who caused, or who contributed to, the financial straits the State-owned defence group was currently in. The demand was served in terms of Section 165 of the Companies Act.

In the opinion of Solidarity legal services head Anton van der Bijl, Section 165 allows the union to demand that the company investigate irregularities and initiate legal action within 60 days of the demand being served on Denel. Solidarity had previously, in April last year, presented a file on irregularities at the group. According to the union, this resulted in the firing of a number of people at the company.

“If the alleged irregularities are not investigated, and/or if no legal action is taken because of proven irregularities, we may take legal action against the responsible persons in Denel’s stead,” he affirmed. “The time has come to hold people accountable for their wrongdoing and to bring them to book.”

Solidarity general secretary Johan Botha pointed out that recent comments by Gordhan and Du Toit, regarding State capture at Denel and its consequences, established “compelling reason[s]” to initiate its action. The union expressed the view that the situation was unique because government officials working at State-owned companies might, in future, be held directly responsible for malpractices at these companies. 

EDITED BY: Martin Zhuwakinyu Creamer Media Senior Deputy Editor
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