Prior to 2005/06, Denel's losses had reached approximately R1.5 billion and the company was on the brink of bankruptcy. Some of the challenges that had led to Denel becoming insolvent included a lack of accountability and performance, major financial losses, salaries below market level, poor programme performance, significant decreases in domestic defence spending, constraints to global market access, and an unfocused export approach. The decrease in defence spending put a burden on the budget, especially when there were high salary costs and maintenance costs.