The Labour Court on Tuesday ruled that state-owned aerospace and military technology company Denel must honour all its outstanding contractual and statutory obligations towards members of unions Solidarity and UASA by no later than 7 August.
This includes payment of all outstanding salaries for May, June and July.
The two unions had brought an application against the state-owned company after it did not pay their full salaries earlier this year.
"Denel and the state as shareholder have dealt recklessly with their employees," says Helgard Cronjé, Solidarity's sector coordinator for defence and aviation.
"Historical problems are at the root of the predicament Denel finds itself in, not being able to pay its employees. This problem has not arisen as a result of Covid-19 but is the result of years of incompetent management, corruption and state capture."
Solidarity said it had initially intended to bring an urgent court application on 30 June to obtain the outstanding payments. This application was, however, temporarily withdrawn when Denel indicated at the time that it wanted to enter into negotiations in order to try and find a solution to enable it to honour its obligations.
Cronjé told Fin24 that attempts by Denel to turn around its financial position had not been met with the funding it needed from the state. Solidarity believed it had no choice but to turn to the court.
"Solidarity is pleased by the ruling in favour of Denel's employees. It is yet another step closer to force Denel's board to take action in order to save the entity and in so doing to force the government as shareholder to also start fulfilling its role as a responsible shareholder," said Cronjé.
The union hopes that should there be insufficient funds to pay employees their salaries in response to the court order, the company might be able to get emergency funding in terms of the Public Finance Management Act due to its importance to aid the strategic capability of SA's defence force.
"The court order is a sign for government that it has run out of time to supply funding. It government is serious about the important role of Denel, then it has to intervene," opined Cronjé.
"Denel has very good products, which are well priced on the market and other countries are aware of the skills and knowledge at Denel. It is possible to save the company and our view is that the court case brings it one step closer."
Denel said it was committed to honouring its obligations to employees, Reuters reported on Tuesday. It has previously said it was "working tirelessly" to ensure that delayed portions of salaries would be paid up.
Fin24 reported in May this year that Denel told unions that it would not be able to pay salaries at the end of the month. Unions indicated that management informed them that Denel was facing liquidity woes because it had orders to the value of R101 million that it could not deliver due to the lockdown.
In July Denel announced that its CEO Danie du Toit had resigned. In a statement, Denel said Du Toit will continue to render his services until August 15. An interim group CEO would be appointed "shortly".