Outstanding salaries of Denel employees are settled

SPEAKER’S NOTES FOR MRS GLORIA SEROBE, CHAIRMAN OF THE DENEL BOARD AT A MEDIA BRIEFING – RE: OUTSTANDING SALARIES OF DENEL EMPLOYEES ARE SETTLED

Acting Director General, Ms Jacky Molisane; Fellow Board Members; DPE management; Denel Management; members of the Media and Ladies and Gentlemen – I welcome you

As you are all aware, Denel went through a massive liquidity crisis in the last 2 to 3 years. This Board being new together with management had to dig deep, looking for solutions to this challenge. The Board was particularly aware that like all operations of this nature, seeking solutions internally is first prize and the call for Shareholder support is the last resort.

It therefore gives me great pleasure to confirm that at long last all outstanding salaries owed to employees have now been fully paid. Payment plans are in place for SARS -Pay as You Earn as well as the PENSION FUND. The welfare of our employees and the high value we place on sound labour practices remain a firm commitment of this Board.

How did we get here to this positive point?

An opportunity in the form of the DENEL MEDICAL BENEFIT TRUST (DMBT) was seen as a possibility almost 2 years ago. DMBT was established in 2002, as a vehicle through which Denel has been meeting its contractual medical aid obligations towards employees who joined the company before 2002. Through the years, the assets of DMBT exceeded the actuarial valued liabilities by large amounts. As a defined benefit plan, it made no sense why this trust was designed such that Denel, the sponsor company had no access to this large surplus, which as at April 2022 was as high as R1.472 billion and a 465% funding level.

The exercise to start unlocking this surplus took as long as 2 years because of the nature of the trust, which also required court processes. With the great support of the members of the Pensioners’ Forum and that of the Shareholder as in DPE, we were able to get to this point. Most important, it had to be a win-win for all involved i.e. the pensioners, the members and Denel.

To make sure we had a proper fair and equitablepro cess, each of these parties had an actuary to interpret and protect them. NMG for the Fund, Willis Towers for the members and pensioners and Delloitte for Denel.

R992 million became that surplus which could be transferred to Denel on the 28th July 2022 after this elaborate exercise. We are particularly grateful to the leaders of the Members Forum’s, the Actuaries who carried us through this, the lawyers who had tobalance all the parties, the commitment of DPE to our process, however long it took.

The new restructuring plan supported by us as the Board and the Shareholder, will create a self-sustaining business with a significant order pipeline. The sale of non-core assets is well underway and together with the recapitalisation application – which the Department of Public Enterprises has applied for through the National Treasury will address the legacy debt and the introduction of liquidity. This will immediately
improve profitability, enable the company to retain and appoint able skills and leadership.

I again wish to thank the pensioner’s forum, the DMBT trustees, and employees whoc ontributed to the process to ensure the payment of the outstanding salaries. I want to thank employees for their support and commitment during the challenging period we faced. Once again, I apologise for the stress and anxieties caused to them and their families. We trust that this will contribute towards the fostering of a productive and normal relationship between Denel and its employees.

Once again, I would like to thank our Shareholder, the Department of Public Enterprises for their support and commitment throughout this journey and a special word of thanks to the Minister, Mr Pravin Gordan.

I thank you.