Denel is in a desperate state. It is knee-deep in debt, unable to pay full salaries to all employees, and has a tainted reputation in the local and global weapons market.
In a recent presentation to parliament, the company said it faces a funding gap of R2.749 billion over the next five years.
The company has asked the National Treasury for R3.8 billion in financial support to stay afloat and protects its “sovereign and strategic capabilities”.
Denel is also facing leadership uncertainty after Denel CEO Danie du Toit resigned after less than two years at the company.
This leadership vacuum has resulted in poor communication with employees, who often have to read the news to find out what is happening at the company.
With many employees not receiving their full salaries and the uncertainty around the company’s future, skilled staff have lost confidence in the board and management and are jumping ship.
Denel admitted that its inability to pay full salaries and statutory obligations has led to low staff morale.
This has resulted in the loss of key technical staff, with 296 employees leaving the company between April to October.
Denel’s challenge is retaining core skills and delivering great products to clients which is now under threat, but this should not be its biggest concern.
Arguably Denel’s biggest asset – its intellectual property (IP) rights – is under threat, with many experienced and knowledgeable employees leaving to join competing weapons manufacturers.
The company has exceptional IP in various fields, including air-to-air missiles, surface target missiles, air-defence, and unmanned aerial vehicle systems.
A weapons manufacturer who wants to get their hands on this IP can either buy it, pay royalties for using it, or poach staff members who have this knowledge.
While one or two employees will not be enough to recreate this IP, numerous key technical staff from a single division will serve the purpose.
This is exactly what is happening at Denel, with many staff members with high-level technical knowledge leaving the company to join the same international arms manufacturer.
Denel’s IP is now under threat – not because of alleged theft as reported in 2019, but because its top engineers are walking out the front door to a competitor.
Letter to Denel and Ministers
Solidarity recently sent a letter to Denel’s board and several ministers, including Public Enterprises Minister Pravin Gordan and Finance Minister Tito Mboweni, to deal with the government’s inability to assist Denel appropriately in executing its turnaround plans timeously.
In the letter, Solidarity accuses the ministers of only supporting each other and Denel in public, and said their actions are not in line with their narrative.
“They are therefore not acting in the best interests of Denel and its employees, or in the public interest,” Solidarity said.
The accusation is made as Denel still has not given effect to a court ruling that obliges it to pay its employees’ salaries and other statutory deductions that are in arrears.
Solidarity’s Helgard Cronjé said it is totally unacceptable that the state does not want to accept responsibility for its entities.
“It is due to historical mistakes of mismanagement and maladministration committed by the state and its cohorts that, today, Denel cannot stay afloat financially,” he said.
“However, it is not the government employees and their cadres who bear the consequences, but loyal workers who, among other things, have to foot the bill by sacrificing their salaries.”
No comment from Denel
Denel was asked for comment, but the company did not respond by the time of publication.