BusinessLive reports that cash-strapped state-owned Denel believes it can become a sustainable business within the next five years if it restructures to create a streamlined and refocused company.
The arms manufacturer has only been able to pay employees a percentage of their salaries for the past few months and does not have enough capital to fulfil its orders. The turnaround will depend, however, on a significant bailout by the state, which has apparently given its support to the group’s plan. It will also require the sale of noncore, or unprofitable assets, which Denel conservatively estimates will realise about R1.5bn over the next five years. Denel has been making losses for several years. Interim group CEO William Hlakoane said in a statement on Wednesday that the Department of Public Enterprises had acknowledged that there was a need to assist the struggling company. “I am positive that the discussions with other government departments that have keen interest in Denel’s survival, such as the department of defence and the Treasury, will soon bear positive results,” Hlakoane said. Part of the turnaround plan includes reducing Denel’s current operating divisions (plus one subsidiary) from six to two. The executive cost structure will be cut and a shared services model in areas such as supply chain management, human capital, IT and finance will be introduced. The descent of Denel into financial collapse and its difficulty in paying salaries has resulted in the loss of critical skills over the past year. Rebuilding these skills will be a priority.
- Read the full original of the report in the above regard by Linda Ensor at BusinessLive
- Read too, Denel releases radical restructuring plan to make the business sustainable, at Engineering News
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