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Cape Town - Denel's strategic direction needs to be revised
to ensure its financial sustainability, Public Enterprises Minister Malusi
Gigaba said on Wednesday.
Although Denel had made some progress since the company
embarked on a turnaround strategy in 2005, its solvency position continued to
pose serious problems, he told the National Assembly during debate on his
budget vote.
The major contributor to the entity's losses was Denel Saab
Aerostructures (DSA). A framework for the resolution of DSA had been developed
and was under way, he said.
While the trading losses in the other entities had been
brought down, the majority of Denel's business entities remained loss-making.
"Clearly, the business is not sustainable in its
current model."
A more robust turnaround plan that pursued financial
recovery and stability through improvements in its operational and financial
performance needed to be developed to secure the company's long-term viability.
A structured mechanism was required to effect the necessary
alignment of Denel's business plan with the requirements of the defence
department.
Shrinking defence budgets had resulted in the scaling back
of certain procurement programmes, with lower economies of scale and increasing
unit costs.
"There is a need to re-think Denel's strategic
direction going forward to ensure its financial sustainability.
"Denel will be expected to accelerate its efforts
towards skills development and transformation. The company must generate skills
across the full spectrum, ranging from artisan level to engineers and high-tech
technologists," he said.
Gigaba also said that better inter-departmental
coordination was critical to skills development. He said there were currently
over 9 000 learners enrolled in training processes in state-owned enterprises.
The bulk of this training was related to scarce and critical skills - 2 242 engineering, 1 064 technicians and 4 273 artisan students.
