Unions want Denel directors sanctioned
• Solidarity, Uasa say order to pay wages was ignored
The 15 directors of stateowned arms manufacturer Denel, including the former CEO, should be held in contempt of court for their failure to pay staff salaries as ordered by the labour court in August, unions say.
The 15 directors of state-owned arms manufacturer Denel, including the former CEO, should be held in contempt of court for their failure to pay staff salaries as ordered by the labour court in August, unions say.
Unions Uasa and Solidarity will be appearing at the Johannesburg labour court on Thursday to ask it to hold directors in breach of the law for ignoring a court order.
The court order instructed Denel to pay outstanding money due to union members who had received only 20%-60% of their salaries between May and July.
Denel, one of the many stateowned enterprises embroiled in allegations of state capture, has yet to emerge from a turnaround strategy that included cutting R1bn in costs, selling noncore assets and seeking international strategic partners with the government s approval.
The unions argue in court papers that ordinary employees are now paying the price of state capture and mismanagement.
The looters are still enjoying the benefits of their booty while innocent loyal employees are suffering and losing their homes and vehicles.”
Uasa spokesperson Johan van Niekerk explained that the union was holding the board of directors and managers to account for the first time as “it is their fiduciary responsibility to comply with the law”.
The arms manufacturer is in a dire financial position and has argued in legal papers that it has lost R5.4bn since 2017.
In 2019, it received R1.5bn in recapitalisation from the government after asking for R2.5bn, and in 2020/2021 it was allocated a further R576m instead of the R1bn it requested.
Asked why it was taking the directors to court when the government was the shareholder of Armscor and had failed to provide funds, Solidarity’s co-ordinator for defence and aviation, Helgard Cronje, said it was a “rule of law” issue.
He said companies and boards of directors need to obey court orders.
Cronje told Business Day: “It ’ s important the rule of law wins in this case, otherwise how does one enforce contracts of employment against the state if they can just plead poverty?”
In his affidavit before the court, Cronje alleges the executive directors have been earning full pay and have since October refused to answer questions he posed about this.
He argues that the directors did not do enough to turn the company around or to comply with the court order.
The unions also take issue with Denel’s claims that it continues to work with the government to explore ways to comply with the court order.
“It is not sufficient to merely explore ways to comply with the court order. Action is needed,” the unions say.
Cronje claims a 13th cheque was paid out to employees of Denel Aeronautics while some union staff got partial or low salaries and the court order was ignored.
In response, Denel’s new CEO Talib Sadik argues that the directors cannot be held liable for the non-payment of salaries as the government, the shareholder, failed to provide funding for the state-owned arms manufacturer.
Sadik says all efforts since August to secure funding from the shareholder (the government) have not been responded to favourably.
Denel does not have the liquidity to meet contractual obligations, Sadik says, and also describes in his affidavit how severe the challenges are facing the arms manufacturer.
He explains that Denel approached banks Absa, Nedbank and RMB as early as November 2019 for a short-term funding solution, but the banks would not provide more funds as they were unhappy with the Treasury ’ s conditions.
Denel has also submitted a formal request to the government to waive a condition of the R576m financing this year that specifies it must be used for debt and interest and not for running the company or for salaries.
Of the money received from the government this year, R225m has been given back to the SA Revenue Service instead of being used for salaries.
Sadik also explains that Denel had to pay creditors to prevent them approaching the court to force it into liquidation. It also had to pay utility bills to restart certain factories.
Requests for emergency funding under the Public Finance Management Act were also turned down.