Denel warns of big funding gap for key capabilities

21st October 2020 By: Reuters

South African state arms firm Denel said on Wednesday it faced a funding gap of around R2.75-billion over the next five years for key capabilities.

Denel, which makes military equipment for South Africa's armed forces and export, is in the grips of a liquidity crisis aggravated by the coronavirus crisis.

It is one of a handful of struggling state firms the government has been keeping afloat with bailouts.

Interim Chief Executive Talib Sadik told a parliamentary committee that Denel had asked the defence ministry to provide R683-million in the current 2020/21 financial year to cover the funding gap for "sovereign and strategic capabilities".

Those capabilities are ones that if lost could threaten South Africa's ability to defend itself.

A presentation to the committee showed funding gaps of R635-million, R600-million, R431-million and R400-million in the subsequent four years for sovereign and strategic capabilities.

Sadik added Denel was taking steps to cut costs, reduce debts and dispose of non-core assets.

But he said difficulties paying full salaries this year had led some important technical staff to leave.

Denel board chairperson Monhla Hlahla said: "I believe that Denel can be saved if we just do it fast."