Numsa warns Denel of legal action if job cuts are not halted

The National Union of Metalworkers of South Africa (Numsa) has sent a formal notice to Denel warning the state arms manufacturing company to halt job cuts or workers will take legal action to place the entity under business rescue.

Denel has been in financial trouble and adopted a restructuring plan to revive its fortunes, including workforce reductions. But Numsa says the intervention was more about creating future business opportunities for political cronies than improving the company’s bottom line.

In a letter to Denel interim Group CEO Michael Kgobe on March 3, Numsa general secretary Irvin Jim said: “The current attempt by Denel management and the board, on instructions of and as proxies of the department of public enterprises, to prune the business, is being done with ulterior motives.”

According to Jim, Denel wants to retrench 635 workers and spend R457-million on restructuring to save R271-million, only to immediately add R265-million in labour costs within two years, “effectively negating savings from restructuring”.

“Self-evidently the only objective is to formally secure massive terminations. The question is why?”

He said the trade union was aware of Denel’s dire financial status but “it should be stated emphatically that workers were not responsible for this”.

 He said that even public enterprises minister Pravin Gordhan told Parliament in July 2019 that former executives of the state-owned company were responsible for its collapse.

In the same speech, Gordhan mentioned the introduction of private sector players, including aerospace and defence company SAAB, as partners to Denel among the solutions to save the state entity. However, said Jim: “The introduction of strategic equity partners lies at the heart of the current desire to cut jobs.”

He said the job cuts were part of a scheme to prepare the business for privatisation, adding that “there has been a deliberate strategy to collapse Denel, which has become a clear pattern in respect of many state-owned entities”.

“The selling of so-called non-core assets is a clear attempt to loot Denel as is evident from the attempt to dispose of land valued in excess of R600-million for an amount of around R130-million.” He said, “the relocation of Mechem’s dog unit in order to favour Bidvest, is just another example of how looting is taking place under the guise of the current restructuring”.

Mechem, a subsidiary of Denel specialising in de-mining and anti-landmine technology, has a division that trains dogs.

Jim also said the chief restructuring officer at Denel, Riaz Saloojee, had links with SAAB, adding that the company was among the “major players in the massively corrupt South African arms procurement deal”.

He said: “It appears to be no coincidence that Saloojee was previously (from 2002) involved with Grintek, SAAB Grintek and SAAB South Africa and had in fact been appointed as SAAB South Africa’s president in 2008 and acting CEO of SAAB Grintek Technologies.”

Numsa spokesperson Phakamile Hlubi-Majola said this week the trade union was consulting lawyers on rescue option. She said the union “stands by every word in the Denel letter and believes it is true. We are just at a point where we are still consulting with our lawyers about what to do next.”

Denel spokesperson Pam Malinda said: “The company is making progress in the implementation of its turnaround plan and this progress is monitored monthly through established governance structures.”

Malinda said Denel had responded to all Numsa’s correspondence “through the appropriate channels”, adding that “Denel has presented its turnaround plan and rationale for restructuring, which plan was approved through relevant governance structures within the company and government”.

Jim said the public enterprises department had imposed Saloojee on Denel. “Significantly, Saloojee and his associate, Mimi Attias, had prepared the restructuring of Denel prior to Saloojee’s deployment to Denel, which raises serious concerns relevant to the legality of their actions and interventions.”

Malinda disagreed, saying Saloojee was appointed by the Denel board as the accounting authority. She said Denel was governed by the Public Finance Management Act and “any and all disposal of assets is governed by the requisite approvals”.

Hlubi-Majola referred to suspended director-general Kgathatso Tlhakudi’s allegations last year that Gordhan was disposing of state-owned enterprises in a fraudulent manner.”

Tlhakudi said then “the SAA transaction was … a template for how the rest of the state-owned entities portfolio was intended to be disposed of to the detriment of South African citizens”, and that the sale of SAA “was ill-conceived” and “an opportunity to benefit a few privileged individuals who were favoured by the minister in an irregular manner.”

In response, Gordhan said he reserved his right to sue Tlhakudi but has taken no action to date.

This week Gordhan’s spokesperson Richard Mantu declined to comment on Numsa’s allegations.

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