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Gordhan on Denel: No clearer example of the damaging effects of state capture

About 3 500 employees were affected by Denel's cash flow problem, which resulted in them possibly receiving 85% of their salaries. The public enterprises minister says that will no longer be the case.

Public Enterprises Minister Pravin Gordhan at a press briefing at Lethabo power station. Picture: Abigail Javier/EWN

Public Enterprises Minister Pravin Gordhan said on Tuesday Denel employees would be receiving their full salaries.

The state-owned arms maker on Tuesday said it would only be able to pay 85% of salaries, due to liquidity challenges. Gordhan dealt with the matter while taking part in the debate on President Cyril Ramaphosa’s State of the Nation Address in Parliament.

* READ: Eskom, Transnet, Denel: Pravin Gordhan's full Sona debate response

“The latest update is that a lender has come to the assistance of Denel – and full salaries will be paid to all of the staff," Gordhan said.

The public enterprises minister did not name the lender who came to the rescue. But he said Denel was "a crucial and strategic state entity that was substantially harmed by state capture".

“There is no clearer example of the damaging effects of state capture than the financial strain and uncertainty that the 3 500 Denel employees and their families may face each month as a consequence…”

* READ: On a point of order: EFF stages walkout as Gordhan delivers speech in Parliament

Gordhan said the were plans for the way Denel was structured:

· The company is improving the way that it contracts as well as renegotiating existing contracts to improve the margins it earns on such business

· A new, permanent CEO was appointed in December last year, on recommendation of the Board

· Governance improved and steps are being implemented to improve the reliability of the company’s financial accounting and reporting.

· Denel is reviewing its supply chain and procurement processes to reduce costs and streamline processes.
· The company has reduced employee costs through voluntary severance packages

· Importantly, the company has a pipeline of potential contracts in excess of R30 billion

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