In his statement within the State-owned defence industrial group Denel’s 2019/2020 annual report, interim CEO Talib Sadik addressed the failure of the company to fully pay the salaries of its employees last year, even though this fell within the 2020/2021 financial year. He blamed the group’s lack of liquidity and the Covid-19 pandemic.
“The most important risk that has been threatening the sustainability of the organisation over recent years is the liquidity challenge it is experiencing,” he highlighted. “Liquidity management forms the most important element of Denel’s stabilisation strategy.”
Although the pandemic hit South Africa after the end of the 2019/2020 reporting period, he addressed its effects, pointing out that the government put the country into a hard lockdown on March 27 last year and kept it in force until April 30. This lockdown effectively shut down the country (except for essential services) and sought to isolate the country from the wider world.
“This had a severe impact on the economy, and also further exacerbated Denel’s liquidity situation,” he stressed. “This impacted on production and also on the payment of salaries for the months of April to July 2020, with net salaries for the months of May to July not being fully paid to employees, and the payroll third-party statutory payments not being paid from April to July 2020.”
Regarding the 2019/2020 financial year, he cited a number of operational highlights achieved by the group’s business divisions. Denel Dynamics successfully completed the scheduled development work for that year on its Cheetah counter-rocket, artillery and mortar missile system, including completion of the System Requirements Review. Denel Land Systems delivered the 100th modular turret to Malaysia, for installation on new armoured vehicles being built for the Malaysian Army. In addition, Denel made possible the installation of a thermal imager test and repair facility at a Malaysian company, Defence Services; this was the first such facility in that country. And, later in 2019, Denel Vehicle Systems won a contract from the United Arab Emirates for 33 RG31 4x4 mine-resistant ambush-protected vehicles.
In his concluding remarks, Sadik thanked the government (Denel’s shareholder) for continuing to support the group. He also thanked government departments and organisations, the Minister of Public Enterprises and the Denel Board and Board chairperson, for their support. “Finally, I recognise each and every staff member of the organisation. The fundamental and much-needed changes that are required to stabilise Denel would not be possible without the support of such a capable and loyal workforce.”