Department and Armscor's Annual Reports: briefings

Meeting report

DEFENCE PORTFOLIO COMMITTEE
12 October 2004
DEPARTMENT AND ARMSCOR'S ANNUAL REPORTS: BRIEFINGS

Acting Chairperson: Mr G Koornhof (ANC)

Document handed out:.
Department PowerPoint presentation on their Annual Report 2003-2004
Department Annual Report 2003 - 2004 (offsite link)
Armscor PowerPoint presentation on their Annual Report

SUMMARY
Mr J Masilela (Defence Secretary) briefed the Committee on some of the challenges and weakness that had confronted the Department, such as obsolete equipment and slow progress in modernising the information systems.

Mr H Thomo (Armscor Chief Executive Officer) also briefed the Committee on the relationship between Armscor and Denel, and also their erosion of skills. Armscor treated Denel like any other local arms supplier but preferred them above external suppliers. They were implementing a number of strategies to attract young talent into the company.

MINUTES
In the absence of Professor K Asmal (ANC), the Committee Clerk asked the Committee to nominate a Chairperson for the day. Mr Koornhof (ANC) was unanimously elected.

Department briefing
Mr J Masilela briefed the Committee on their Annual Report, which he said was in line with their strategic business plan. Policy alignment with government's annual budget allocation was a major challenge. Obsolete equipment, modernisation of logistics and infrastructure including up-to-date information systems, were some of risks. Remarkable achievement had been in human resources, and they still aimed to strike a balance between civil and military expertise.

Discussion
Mr M Sayedali-Shah (DA) appreciated the difficulties of budgetary constraints. However, he expressed concern over the lack of proper management culture and accountability. This was also evidenced in the Department's peacekeeping operations where valuable assets were shipped to wrong operations and locations due to "lack of clear policy and proper management strategy".

Mr H Schmidt (DA) was worried about the multi-skilling of the Defence forces. He wondered whether deployment of troops with high training and skills to unsuitable or less challenging outposts had led to troop demoralisation.

Mr T Dodovu (ANC) acknowledged the Department's challenges, especially in the area of obsolescent equipment and facilities. He asked whether there were any systems in place to address these problems.

Mr M Booi (ANC) sought an explanation for the high expenditure levels. Why had the Department overspent by approximately R4 million?

Mr Z Madasa (ACDM) asked whether concrete steps had been taken to address information systems.

Mr Masilela responded that the Department had spent about R7 million to put the information system into shape. Some concrete progress had been made, but the pace was slow.

He also pointed out that the issue of obsolete state of the equipment was a historical problem. The Department, however, was coming out with new and innovative ways within the limits of the available funds to revamp the equipment.

Rear-Admiral R Hauter (SANDF: Chief of Strategy) said that their policy objectives had been clearly articulated in the review of the Defence White Paper. The SANDF was currently running three battalion operations externally. He did not see any mismatch between operational policy and efficient management.

Mr Sayedali- Shah asked why certain equipment had been sent overseas without any accompanying documentation. Since resources were limited, the Department and SANDF should be able to manage and properly account for what they had been given.

The Chairperson asked the Department to 'sharpen' its next report and highlight partial or concrete achievements and weaknesses. In the future, they would need detailed engagement between the Department, the Auditor-General's Office, the NCOP and the Committee on some of the issues raised today.

Armscor briefing
The Chairperson observed that due to time constraints, the presentation should rather focus on a summary of the key issues. Mr H Thomo (Armscor Chief Executive Officer) summarised his briefing into two parts: firstly, the relation between Armscor and Denel; and secondly, the erosion of skills in Armscor.

He related that Denel had been the manufacturing arm and had acquired military hardware for Armscor until 1992. Currently Denel only supplied hardware to Armscor and to the Department of Defence. Armscor treated Denel like any other local suppliers to the SANDF, but Armscor preferred Denel in the face of competition from external suppliers. Staff were resigning from Armscor to join other industries for personal reasons. He denied that Armscor was not transforming and was not able to attract new talent.

Discussion
Mr Booi asked whether staff were resigning because there was no career advancement opportunities at Armscor. What was Armscor's strategy to assist the Department in peace keeping?

The Chairperson pointed out that Armscor's report did not include the Auditor-General's report. He also wondered what accounted for the 19% increase in the past financial year.

Mr Sayedali- Shah asked what Armscor did with excess and redundant military equipment. He questioned their programme for attracting students and young people to their company.

Mr Thomo conceded that the Department had much redundant equipment, and that Armscor only disposed of equipment following instructions by the Department. The Department had recently received some arms disposal equipment from the UK government, and Armscor awaited instructions from the Department on the way forward.

He also said that there were a number of strategies to attract young people, including annual promotional visits to schools; awarding bursaries to talented students; and providing a two-year work opportunity in Armscor to some recent graduates.

With respect to peace keeping, Armscor assisted the Department in certain defence initiatives in the region. One of these was increasing 'inter-operability' in joint deployment of regional forces to ensure that equipment could 'talk to each other'.

The Chairperson asked whether Armscor had any documented strategic plan of their 'measurable outputs'. Mr Thomo responded that they had the document but it had not yet been tabled in Parliament.

The Chairperson requested Armscor to avail the document to the Committee for a more engaging discussion during their next annual reportback.

The meeting was adjourned.