South Africa’s state arms maker has collapsed to the point it can’t pay salaries

Key topics:Denel PMP and Dynamics staff told salaries will not be paid this monthYears of mismanagement and corruption have left Denel near collapseSolidarity demands permanent board and accountability for failures.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..By Jan Vermeulen.Two divisions of South Africa’s once-great state-owned arms manufacturer, Denel, have reportedly informed employees that they would not receive their salaries this month.Trade union Solidarity says there have been reports that employees of Denel PMP and Denel Dynamics were informed that they would not be paid this month.Solidarity said the situation is unacceptable and deeply alarming, particularly in light of the far-reaching intervention measures introduced less than a year ago to stabilise Denel’s operations.Denel is an aerospace and military technology conglomerate established in 1992, when Armscor’s manufacturing subsidiaries were separated from the company.This was done to facilitate Armscor’s role as the procurement agency for the South African National Defence Force (SANDF), with Denel inheriting the former’s production and research facilities.Denel is a world-renowned company, but the Guptas’ hijacking of the institution during State Capture has severely harmed its reputation and left it financially crippled.The company has numerous divisions, including Aeronautics, Dynamics, Integrated Systems and Maritime, Land Systems, and Vehicle Systems..Read more:.RAF crisis deepens: CEO suspended amid corruption scandal, OUTA demands expert overhaul to save collapsing fund.Among Denel’s greatest technological achievements are the Rooivalk attack helicopter, the G6 self-propelled howitzer, the Ratel (Badger) infantry fighting vehicle, and the NTW-20 anti-materiel rifle.The NTW-20 generated a lot of media interest in August 2013 when it became known that a South African Special Forces officer had used it to make what was then the sixth-longest recorded sniper kill at 2,125m.Denel’s G6 self-propelled howitzer and G5 towed howitzer are the longest-range guns in their class worldwide.It also produced the Atlas Oryx utility helicopter, the Umkhonto vertical-launched air defence missile, the Mokopa tandem warhead anti-tank guided missile, and the A-Darter air-to-air missile.However, despite its excellent products and long history, the company was brought to its knees through mismanagement and corruption.Denel has reached a state of such collapse that it is unable to publish regular annual reports. Its last published report was for the 2019/20 financial year, which was itself delayed and only issued in February 2021.This report revealed that Denel’s revenue plummeted from R6.02 billion in 2018 to R2.73 billion in 2020.The company recorded a net loss of R1.9 billion, R493 million higher than the previous year. A decade earlier, it made a R111 million profit.Denel further revealed that it was technically insolvent and had relied on government bailouts to survive.Solidarity calls for permanent leadership structure to be appointed.Derek Mans, network coordinator at Solidarity, said that they had worked with the Denel board to establish a multidisciplinary task team at Denel PMP in 2024.“This task team included active labour participation through two trade unions — to advise Denel’s executive management and board on a sustainable turnaround strategy for PMP,” said Mans.The task team operated under approved terms of reference covering, among others, governance, safety, operations, funding, and sustainability.The team consisted of industry experts, former PMP executives, and experienced former Members of Parliament, including Kobus Marais.The strategy document was finalised in December 2024 and submitted to the Denel Board, together with comprehensive recommendations and cost estimates.At a formal board meeting on 18 February 2025, the Denel Board approved the implementation of the turnaround plan, estimated to cost approximately R120 million. Less than a year later, the following happened:Denel PMP has reportedly experienced four explosions, raising serious concerns about operational control, safety management, and maintenance.Employees at both Denel PMP and Denel Dynamics have been informed that salaries cannot be paid.There is no visible accountability for the failure to implement an approved and funded turnaround strategy.“This inevitably raises the question: where are the consequences for this continued failure in execution and oversight?” asked Mans.Mans said the growing salary crisis, now affecting more than one division, underscores a systemic governance and leadership failure at the group level.According to Solidarity, this is further aggravated by the continued absence of a permanent Denel Board, despite expectations that the appointment process would have been completed by December 2025..Read more:.SA Government nears deal to rescue ArcelorMittal’s steel mills.“Solidarity has long warned that Denel cannot be stabilised through interim leadership structures, fragmented accountability and crisis-driven decision-making,” said Mans.Solidarity said the following was now urgently required:The appointment of a new, permanent board with appropriate expertise in the defence industry, engineering, finance, and project execution.Consequence management for the non-implementation of board-approved strategies.A pragmatic management approach with zero tolerance for corruption.Serious consideration of public–private partnerships to restore sustainability, protect strategic capabilities, and secure jobs.“Employees cannot continue to pay the price for governance paralysis and leadership vacuums,” said Mans.“Denel’s strategic role, and the livelihoods of its employees, require decisive leadership, accountability and immediate intervention.”MyBroadband contacted Denel for comment, but it did not immediately respond by publication. Should the company respond, this article will be updated..This article was first published by MyBroadband and is republished with permission

South Africa’s state arms maker has collapsed to the point it can’t pay salaries

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