Top court rejects Numsa application over Denel and SA Express rescue

The Constitutional Court has dismissed the National Union of Metalworkers of SA’s (Numsa) application for it to directly hear a matter involving the embattled state-owned airline SA Express and cash-strapped arms manufacturer Denel.

Numsa, the country’s biggest union with a membership of about 432,000, applied to the top court in May asking it to intervene directly and compel parliament to save the two parastatals from liquidation.

In its ruling, dated October 18, the Constitutional Court denied the union direct access, saying it has no jurisdiction over the matter.

On Wednesday, the union said it was still applying its mind on whether to approach a lower court or not.

CORRUPTION

SA Express entered business rescue in February 2020 after a court application by a creditor, before it was subsequently placed in provisional liquidation in April of the same year.

Its troubles arose from years of mismanagement and corruption linked to state capture.

Earlier this month, beleaguered arms manufacturer Denel managed to avert a liquidation attempt by Saab Grintek at the 11th hour by reaching an out-of-court agreement with it.

This came as Denel faced a Johannesburg labour court application by trade union Solidarity for the payment of more than R60m in long outstanding salaries. The settlement agreement with Saab Grintek meant that the liquidation application based on a debt of R126m was struck off the roll at the high court in Pretoria.

Denel is technically insolvent and has been making losses for the past four years, and this has continued in the current year

with the result that it has been unable to pay staff salaries. An exodus of skilled staff has made it difficult to fulfil orders.

In August, interim group CEO William Hlakoane told MPs that Denel’s available cash was insufficient to meet operational requirements, including the payment of salaries and suppliers.

He said the group owed R636m to employees and related costs, and about R900m to suppliers. The latest cash flow projections for the 2021/2022 financial year indicated a negative R600m if no mitigation action was taken.

JOBS ON THE LINE

Prior to applying to the apex court, Numsa had argued that more than 3,000 jobs would be on the line if the government refused to save Denel.

In a media statement in May, Numsa said: “The purpose of our Constitutional Court application was to compel the portfolio committee on public enterprises and the standing committee on accounts (Scopa) to hold public hearings on whether SAX [SA Express] or Denel, or any other similarly placed start-owned company, should be permitted to go insolvent and consequently to be liquidated by a court.”

Numsa argued at the time that parliament’s portfolio committee on public enterprises and/or Scopa, and ultimately the National Assembly itself, “should be the ones to make the determination on whether SA and Denel or any other major SOC [state-owned company] should be liquidated”.

“This is not something that the courts should be given the power to decide on purely from a liquidation perspective given the strategic role these companies play in the economy and the development of the country.”

Numsa said if the stateowned enterprises were no longer regarded as strategic assets then parliament needed to pass a resolution on the matter.

“If the decision is that these are strategic entities, then the executive must give effect to acts of parliament and ensure that these entities are properly funded and resourced,” the union argued at the time.

When contacted for comment on Wednesday, Numsa spokesperson Phakamile HlubiMajola said it was too early to say whether the union would approach a lower court for a ruling. “We will apply our minds and respond properly in due course,” she said.