Denel, the State-owned defence industrial group, on Wednesday briefed Parliament’s Standing Committee on Appropriations about, among other issues, progress with its turnaround plan. This was initiated in 2022 and has three pillars, namely Stabilise, Sustain and Grow.
Stabilise encompasses the securing of shareholder (government) funding, the finalisation and formal implementation of the Section 189 staff retrenchment process, and the right-sizing of the group’s resources and facilities (relative to orders) and the securing of critical skills for high probability opportunities.
In terms of funding to implement Stabilise, Denel needs R5.2-billion. It has secured R3.4-billion from the National Treasury and has raised R992-million from excess funds in the Denel Medical Benefit Trust. But its hope of raising R1.8-billion from the disposal of noncore assets has been dashed by the opposition of the Department of Defence (DoD).
The result is a funding shortfall which means that legacy debt is funded using cash generated by operations, and this is not sustainable.
Regarding staff, the retrenchment process has been partly implemented, but the support staff/technical staff ratio has not been addressed in some the group’s operations. Human Resources (HR) is developing a skills-attraction mandate. The right-sizing process has been partly implemented, but again the disposal of assets has not been supported by the DoD.
