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Denel CEO blames cash flow problems on state capture

Du Toit said Denel worked closely with the three major banks but one of them did not approve their application this month.

Picture: Supplied.

JOHANNESBURG – Denel’s group CEO Daniel du Toit said a large portion of their cash flow problems were directly linked to state capture.

On Tuesday, Public Enterprises Minister Pravin Gordhan announced that workers would be paid the remaining 15% of their salaries.

This announcement came after the company had told workers that they would only receive 85% of their salaries for June due to liquidity issues.

Du Toit said Denel worked closely with the three major banks but one of them did not approve their application this month.

He said the company was still bleeding from the exhaustion of state funds by the previous administration.

“One has to be honest with ourselves as well; of course, there’s also an element of performance improvement and so on that we’re actively working on. But in reality, you had previous management and board who signed contracts and now we’re trying to sign out or renegotiate those contracts.”

Gordhan dealt with the matter while taking part in the debate on President Cyril Ramaphosa’s State of the Nation Address in Parliament.

“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 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.”

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 the 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.

(Edited by Leeto M Khoza)

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