Denel needs money – and warns over South Africa’s ability to defend itself

State arms firm Denel says it is facing a funding gap of around R2.75 billion over the next five years for key capabilities such as ammunition production and aircraft maintenance.

In a presentation to parliament committee on state-owned enterprises on Wednesday (21 October), the group said that it needed R683 million to cover the funding gap in 2020/2021.

This is followed by requirements of R635 million and R600 million in 2021/2022 and 2022/2023 respectively.

Denel warned that if this funding gap is not covered, it would significantly impact the organisations ‘sovereign and strategic capabilities’, which if lost could threaten South Africa’s ability to defend itself.

Denel reported an unaudited loss of R1.8 billion in 2019/20, due to a ‘significant decline in revenue and poor programme management’, it said in its presentation.

The group said that it did not have the ability to pay full salaries (R391 million) and statutory obligations has led to low staff morale. The group said that approximately 296 employees have left the company from April to date.

Denel added that the non-payment of salaries has directly led to the loss of key technical staff in some divisions.

Reuters reported that the Public Investment Corporation recently rolled over R2.5 billion of Denel bonds for a further 12 months, and the government disbursed more bailout cash to help Denel repay debt.

On top of that Denel is due to receive a further R271 million from the government this financial year.

Read: R89 million upgrades planned for South African politician residences

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Denel needs money – and warns over South Africa’s ability to defend itself