State-owned arms manufacturer Denel has paid out all outstanding salaries to its employees, board chairperson Gloria Serobe confirmed during a media briefing on Thursday.
According to Serobe, Denel, which was financially strained for over two years, managed to secure close to R1-billion for both its operational costs and the payment of salaries through its medical benefits trust.
Serobe said a third of the money was allocated to salaries.
“The cash utilised for the payment of the outstanding salaries were derived from a funding initiative to unlock excess funds in the Denel Medical Benefits Trust (DMBT) that was established in 2002,” said Serobe.
“The trust is the 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 the trust exceeded the actuarial valued liabilities by a significant amount. Denel then developed a strategy to unlock the excess assets while ensuring that the members’ medical benefits were not affected and the pensioners’ interests were dealt with adequately. This intervention is the first step toward starting a sustainable restructuring plan for Denel.
“Through the years, the assets of DMBT always exceeded the actual valued liabilities by huge amounts. It made no sense why this company was designed as 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.
“The exercise to start unlocking this surplus took as long as two years. Most importantly, it had to be a win-win for all involved, that is the pensioners, the members, and Denel. To make sure that we had a proper, fair and equitable process, each of these parties had an actuary to interpret and protect them.
“Fast forward to 28 July, R992-million became that surplus which could be transferred and attributed to Denel after this elaborate exercise.”
Serobe warned that although the R992-million came as a boost for the ailing state company, it was not an answer for all its problems.
“The company itself needs to be restructured. And so the new restructuring plan supported by us as the board and the shareholder will create a self-sustaining business with a significant order pipeline. Part of that plan is the sale of nine core assets and even that is communicated very well with key stakeholders.
“This will address the legacy debt … and the introduction of liquidity into the company. This will [also] immediately improve profitability and enable the company to retain and appoint skills and leadership, some of which were lost in the process,” Serobe said.
Additional information from SAnews.gov.za
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