Now Denel’s firing salary blanks. Why?


Now Denel’s firing salary blanks. Why?

Staff might not be paid as the arms maker's woes point to bigger debt ‘nightmare’ among state-owned enterprises


State-owned arms manufacturer Denel has such severe cash flow problems it might not be able to pay 4,200 staff members their full salaries at the end of October.
The situation is so bad that staff risk not receiving the bonuses they saved up for themselves in November; and Denel is now meeting unions each month to tell them how much they are able to afford for salaries in that specific month.
In September, for instance, senior managers were paid 15% less due to the latest cash flow problems, but later they did receive the remainder of their salaries.
Unions Solidarity, National Union of Metalworkers of SA (Numsa) and Uasa had a meeting with top management on Monday when they were informed of the situation.
The state utility was in a similar situation last year.
At the end of November staff are supposed to receive a 13th cheque, which is money that was deducted from their own salaries each month, as part of a company-wide savings scheme.
“There is no guarantee this will be paid either,” said Uasa spokesperson Willie van Eeden.
Van Eeden said Denel told unions it needed R1.3bn to pay suppliers and salaries, and for electricity and water.
Solidarity spokesperson Willie Venter said there was a turnaround plan to improve cash flow, but unions had not been permitted to see it because it had to signed off by Public Enterprises Minister Pravin Gordhan.
Venter said Denel management promised to meet unions each month to give an update on how much it would be able to pay staff that month.
Denel made headlines last week when it emerged it had no cash to buy toilet paper.
A year ago its serious cash flow problems made headlines as employees were told there was no money for Christmas salaries. However, Treasury stepped in and salaries were paid.
It is not clear what has led to the cash flow crisis but unions feel no one has faced the consequences of severe mismanagement, said Venter.
Denel has suggested voluntary retrenchment and voluntary lower pay, but the unions say Denel cannot even afford to pay retrenchment packages.
A letter written to staff represented by Solidarity said: “Denel management tabled salary cost reduction proposals in an effort to generate cash to stimulate production. The two proposals are the reduction of monthly salary costs by way of short time or a salary sacrifice to be repaid at a later stage and the initiation of a Voluntary Severance Package process without waiting for a Shareholder approved restructuring process ... Denel alleges that they cannot continue normal operations and cost saving initiatives must be considered.”
Denel spokesperson Vuyelwa Qinga said the government was working with Denel to find a solution to its cash flow difficulties.
Denel is one of many state-owned enterprises in debt.
SAA has received more than R21bn in bailouts for debt in the past 10 years.
Eskom has R320bn in debt but, with the construction of new power stations, that number is expected to reach to R600bn, three times its annual income, said economist Mike Schussler.
SA’s debt to GDP (how much money it makes) is over 50%. Adding the debt of state-owned enterprises pushes the ratio above 72%.
Schussler said this means the country’s debt is more than two-thirds of its worth.
According to the Reserve Bank’s latest figures, the state-owned enterprises have R620bn in long-term loans. Short-term debt for suppliers equals R390bn, said Schussler.
The IDC, Land Bank, Ithala Bank and the Development Bank, all owned by the state, have R100bn in debt. This means state-owned enterprises and banks together have a trillion rand in a debt.
Schussler said: “Very simply, the state-owned enterprises are becoming a nightmare.
“We are going into debt above that of the world average.”
He said SA’s debt has doubled in less than decade. “The speed at which it has grown is the concern and it is not going to go down.
“We South Africans are getting poorer and poorer.”
He predicted that SAA, SA Express and Denel would collapse within a year after the general elections in 2019.
Schussler said the SABC was also going to need a bailout soon, and the debt of Transnet and Eskom was expanding.
He said the railway authority Prasa was also facing a crisis because it had fewer and fewer trains running, which meant fewer paying passengers. The government pays subsidies to Prasa, based on passenger estimates, but with fewer passengers subsidies drop.
Schussler said he fears other SOEs too will soon struggle to pay salaries because of their debt.
The Treasury “doesn’t have room” to bail out all the state-owned enterprises.

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