Denel announces turnaround strategy

FIFI PETERS: After a really long, hard struggle workers of Denel have now received their salaries – dating back to 2018. There is a total of around R318 million in salaries that were paid to workers from extra money from the [Denel] Medical Benefit Trust for employees.

Read: Denel settles outstanding salaries, eyes R12bn order book

We’ve got Denel chair Gloria Serobe for more on the state of affairs at Denel.

Ma’am Gloria, thanks so much for your time. I think it goes without saying that the workers must be relieved that they got their money. And I think that even you, as board members, must be relieved that you have been able to make this payment. How would you describe morale at Denel right now?

GLORIA SEROBE: It has to be very, very high morale at this point, because as much as the employees knew that we [were] trying … at some stage they [might] lose hope if it takes that long. So when it finally happens, there’s good faith brought back into the system. There is motivation for people to come to work because people have suffered quite majorly, whether it’s their cars or their houses. So you can imagine if you’re a breadwinner and you finally lay your hands on your salary, it is quite a large thing. And we can’t apologise enough really to the employees, even though we couldn’t do much about it, other than try as much as we could. It just then took longer to get to where we are. But there is big relief [for] people.

FIFI PETERS: So I guess in this situation, as you say, you can’t apologise enough, and ‘I’m sorry’ would go a very long way and ‘It will never happen again’ would go even further. So let’s talk about that. Will workers find themselves in this position again?

GLORIA SEROBE: Remember, even when we tried to source these surplus funds, at that time there [were] no salary issues. So we were trying to get to these surplus to put into the operations, because Denel has been going down for quite a while. I think from like 2015 the business was going down. So we needed to inject a lot of working capital into it to reinstate it again.

Then you had a liquidity crunch, then you had Covid, then you had non-performance in some areas. It just became a whole lot of things.

And all this theft now – whatever you want to call it – about crime, around fraud and stealing things and whatever.

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So the intention here is to use the money to build the business again, back to what it used to be.

And what it then would mean is that the working capital that we have set aside is meant to make sure that employees are never subjected to this again.

Mind you, next to us we are sitting with a shareholder who is ‘asympathetic’ to this problem – as much as you can from outside say that they are not sympathetic.

In fairness, the Department of Public Enterprises has been working very closely with us to get it right and to do right by employees. No board is proud of that. And so, between our working capital and the operations and all of that, we hope that Denel is now back on its feet again. And if that is the case, we cannot find ourselves in that situation again. Definitely not.

Read: Govt committed to rebuilding arms maker Denel, says Gordhan

FIFI PETERS: So how would you describe operations, though? Just your operational activity. How would you describe cash flow coming into the business? Is it healthy at this stage, or is it still on a path of recovery?

GLORIA SEROBE: Remember that some businesses of Denel need payments in advance from clients if you are going to build equipment. But in some cases even our credibility with the suppliers has taken a knock, and so we have to rebuild again that good faith, that credibility.

Having said that, the technical things that come from Denel are highly, highly regarded in the world, not just in South Africa.

So Denel is still that entity that people want to deal with despite our own issues. So, having the cash flow in to help with the working capital into the business, and the employees are better paid their salaries, it should then follow that the business will be back on its feet and we’ll produce again because the absence of the employees was such that some things which have to be made can’t be made. People are not at work because they [hadn’t] been paid their salaries.

FIFI PETERS: Do you expect them to come back to work now?

GLORIA SEROBE: Absolutely. People want to come to work, actually. People are still proud to be associated with Denel. Remember, Denel is a specialised company. It is the only place where you can learn about missiles, bombs, all of that. And so those engineers that have always wanted to do those things, they can only do them at Denel, and it is a specific specialised area in the country. And so in a way people want to be in Denel, but people have homes; they are breadwinners and need [a] salary.

So the emphasis on the salaries being paid back means that we have our own employees back. And those who have left […] we are comfortable that even those who have gone will come back.

FIFI PETERS: Ma’am Gloria, the world is a scary place right now. There’s a lot happening. We’ve got wars in different parts of the world. We’ve got tension in different parts of the continent. I’m wondering if this is a good thing for the business of Denel. Are you seeing any orders coming through?

GLORIA SEROBE: [It seems] the business actually is even better placed now because, as you say, [there is] chaos in the world, and chaos in the world follows with equipment – and people want this and that, because people are fighting and all that kind of thing, mindful that that pressure in [the] Ukraine and Russia space creates some other demand somewhere else in terms of our equipment – not necessarily for that. I’m saying the pressure in the system of lack of equipment is such that Denel is well placed – for some of that equipment – to be the one that provides. And the key issue is that we have the people, we have the cash flow now, and we have the market. The market couldn’t be better for Denel. What was lacking was the working capital to actually make it work. And so this injection, that is what is going to do. And people are quite excited actually to come back.

FIFI PETERS: I would definitely be excited to get my money. But Ma’am Gloria, we’ll leave it there for now. Thanks so much for your time. Gloria Serobe is the chair of Denel.