Cash-strapped arms maker, Denel’s coffers may run dry in September

Another embattled state-owned entity, Denel, has told parliament its coffers are set to run dry as early as the end of this month, September. 

This comes to the attention of BusinessTech Africa following an update in the joint meeting of Parliament’s Portfolio Committee on Public Enterprises and Parliament’s Select Committee on Public Enterprises and Communications on Wednesday. 

Deputy Minister of Public Enterprises Phumulo Masualle, told members of parliament that while Denel’s leadership was decisive in improving the entity’s financial position, the road to recovery remained long.  

“There is just so much that we can do, but beyond a certain point, we would really need some sort of financial injection into the entity,” he said as per News24. 

“The interventions have really provided relief in that the guaranteed debt that National Treasury has come into play and has ensured that onerous interest on debt has been addressed. But that does not help the operational requirements going forward to place the entity on a path to sustainability.” 

The publication also indicates that the company has to raise funds to the tune of R800 million in the next few months. 

Denel also said in the long term, it planned to raise R1.8 billion through the sale of non-core assets, and the utility already raised R992 million by July – which it used to pay outstanding salaries.  

Despite paying salaries to its staff in August, Denel still owed R640 million to the South African Revenue Service and still needs to raise R800 million more in the next three months. 

The Group CEO William Hlakoane said the rebuilding and restructuring of Denel will involve leveraging the South African defence sector with its 12 500 employees.  

“We still foresee a considerable order book of about R30 billion over the next five years in the pipeline. These are some of the opportunities and projects that are lying throughout the world,” said Hlokoane. 

“The board of directors is to be subjected to delinquent proceedings in terms of the Companies Act. We are also cooperating with the SIU [Special Investigating Unit] investigations in terms of Denel proclamations.” 

To add to its financial woes, the arms manufacturer went from generating R8.2 billion in revenue in 2016 to just under R2 billion in 2022 due to liquidity constraints which led to an inability to deliver products as required by customers and on time.  

In August, the entity had to pay employees R318 million in back pay after years of struggles with paying salaries on time. 

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