State-owned arms manufacturer Denel’s financial distress is worsening and workers’ patience is running thin as the company has failed to pay annual increases.
This comes against the backdrop of already unpaid pension fund deductions.
The company last month failed to pay full salaries on time to its 4 600 staff members.
This week, Denel warned this might happen again, but salaries were paid thanks to another lifeline in the form of bridging finance from an unnamed local bank to secure the month’s paycheques.
It seems this monthly battle for money to pay salaries and other expenses could continue for a while as Denel has not made a long-term financial arrangement to ensure it can pay its staff.
Denel has also failed to pay the annual increases it committed to as part of a multiyear wage deal, a matter that, according to several well-placed sources, has caused discontent among workers.
The company had initially issued an internal communication advising that the annual increases, which were due in April, would be deferred to this month.
Sources close to the company say the increase was 6%, but City Press wasn’t able to formally confirm this.
Denel staff have again been told that there is still no certainty on the matter.
Meanwhile, the company’s employees have been notified by Denel’s retirement fund that their pension fund contributions for last month have not been paid over by the employer.
The notice, a copy of which City Press has seen, stated that Denel would be liable for penalty costs and interest.
The retirement fund said: “It is important to note that, due to the noncompliance by Denel, the fund was unable to process such members’ data sets and contributions as part of the required monthly updates on the fund’s member administration system.”
The result is that “the fund will not be able to process or effect payment of members’ benefits, which include death in service and medical disability benefits, resignation benefits, investment return updates and any other benefits payable as provided by the fund’s rules. Denel was advised of its late payment situation and, furthermore, that all such risks and concomitant costs will be borne by Denel,” read the letter to members of Denel’s retirement fund.
Denel spokesperson Pam Malinda admitted that the company failed to pay over retirement contributions last month and was in the process of negotiating with banks for enough funds until government made good on its commitment to bail the state-owned enterprise out.
“The management of Denel is working tirelessly to correct a situation in which it was unable to make the June 2019 payment of the employer’s contribution to the Denel pension fund. The organisation is also engaging with the banks to secure bridging finance to support the company until recapitalisation is received.
“This issue is connected to the current liquidity challenges experienced by Denel, which also resulted in a delayed payment of full salaries to employees in June,” Malinda said, adding that the company was in constant communication with the managers of Denel’s retirement fund about the matter.
The company said the announcement by Finance Minister Tito Mboweni this week that the company would receive additional funds was a relief, and it further confirmed plans to dispose of noncore assets.
“Denel is working hard to achieve the conditions that will accompany a recapitalisation. It remains aligned with the shareholders’ expectations that it disposes of noncore assets on an urgent basis and establishes strategic equity partnerships across the various divisions of the company,” said Malinda.
The company was mum when asked about allegations that it had not paid its SA Revenue Service tax bill.
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