Disposal of Excess Military Stock & Follow-Up on Department's Annual Report

Meeting report

DEFENCE PORTFOLIO COMMITTEE
26 August 2003
DISPOSAL OF EXCESS MILITARY STOCK & FOLLOW-UP ON DEPARTMENT'S ANNUAL REPORT

Acting Chairperson: Mr D Dlali (ANC)

Documents handed out:
Excessive Stock Management within the Department of Defence
Excessive Stock Management within the Department of Defence PowerPoint Presentation (email [email protected] for pictures)

SUMMARY
Excess stock was identified as a problem by the Auditor General in 1998. During the 2003/4 financial year, 171 disposal plans are being managed to a total value of R4,82 billion. To dispose of excess ammunition in an environmentally sound and timely manner, the Department requires a disposal plant.

Members expressed concerns about the donation of ambulances and clothing to other countries by the Army and Military Health Service, suggesting that these would be better donated to South African communities. The donation of excess clothing was being considered, however officials explained that there could be a security risk involved in donating military clothing to South Africans and the Department preferred that excess clothing not be locally donated or sold. Equipment for disposal was advertised in the media, but the Department had received little interest. The Secretary for Defence agreed that the Department would approach such disposals in a more coordinated manner in future.

The meeting was closed for the follow-up discussion of the Department's Annual Report.

MINUTES
Briefing by Department
Major General T Ntsibande (Chief Logistics) gave the introduction to the briefing. The process to deal with excess stock began with the Auditor General's report in 1998. In the report, the Auditor General expressed concern about excessive stock; the excess resulted from stockpiling during the embargo period, the transformation process, and because the Department are still determining a new force design. Each service division manages their own disposal plans. They report on progress to the Chief Logistics monthly. The progress is managed at the top level. ARMSCOR has been engaged as a disposal agent for category 1 equipment as of 1 January 2003.

During the 2003/4 financial year, 171 disposal plans are being managed to a total value of R4,82 billion. 31 of the plans are managed by the Army, to a value of R2,445 billion; 98 by the Air Force, to a value of R1,695 billion; 34 by the Navy, to a value of R643,2 million; and 8 by the Military Health Service (SAMHS), to a value of R29,299 million. Presently, R5,1 million of stock has been auctioned and R4,9 million put out to tender. 2 839 tonnes of ammunition has been donated to Namibia, with a value of R90,45 million. ARMSCOR is responsible for 102 stock sales transactions, to a value of R155 million, and transfers of category 1 equipment to the value of R 325 million.

Properly to dispose of ammunition, the Department requires an Ammunition Disposal Plant. 141 000 tonnes of ammunition, with an average age of 17 years requires disposal. 90% of it is outside the warranty period. 67 000 tonnes of the ammunition has expired, is obsolete, redundant, re-workable or un-serviceable. The manufacturer does not guarantee safety for this ammunition. Conventional disposal of the ammunition would take 34 years, with the disposal plant this period drops to seven to eight years to dispose of the ammunition in an environmentally sound manner. A request for proposals on the plant was sent to industry on 4 July 2003, and responses are expected by the end of August 2003 - some have been received already.

Local buyers of disposed stock have to register with the NCACC (National Conventional Arms Control Committee), which lengthens the process.

Army
Brigadier General I Johnson (SA Army representative) briefed the Committee on the Army's management of disposal. He explained that the Army currently operates under a transitional force design and so no responsible down scaling of serviceable equipment can be done. Thus, only equipment that is obsolete or beyond economical repair has been programmed for disposal. This has a book value of R 2,445 billion.

The focus of the efforts is dealing with the Auditor General's concern that Army depots have excessive stock. The Army have concentrated on armoured vehicles, air defence and vehicle platforms to decrease the monetary value of the stock. Other systems will be handled concurrently with a view to decreasing the number of items. General Johnson gave a detailed listing of Army vehicles, clothing and other stock for disposal.

As soon as the Affordable Force design has been approved, the Army will determine surpluses and initiate a second wave of disposal.

Air Force
Major General E Dert (SA Air Force representative) briefed the Committee on the Air Force's management of excessive stock. He stated that the process was driven by SCOPA resolutions, Treasury regulations and revenue generated from sales. The Air Force's strategy relies on this revenue. There are 98 disposal plans, with a total value of R 1,695 billion. General Dert gave a detailed listing of the Air Force's disposal plans.

Navy
Rear Admiral (JG) T Butler (SA Navy representative) briefed the Committee on the Navy's management of excessive stock. The Navy has 34 disposal plans, with a total value of R643,2 million. Admiral Butler gave a detailed listing of the disposal plans. As part of the disposal, 4 Harbour Patrol Boats would be donated by the Navy - two to Namibia and two to Mozambique.

Military Health Service
Brigadier General H Wallis (SA Military Health Service representative) briefed the Committee on the Military Health Service's (SAMHS) disposal plans. SAMHA have eight disposal plans, to a total value of R29,229 million. General Wallis gave a detailed listing of these. He noted that they had received a request from Mozambique for the donation of excess ambulances - the request was with policy planning. He cited a lack of knowledgeable personnel as hampering the process. The CCMIS has provided personnel to aid in the identification of signalling equipment.

Discussion
A member stated that the problem appeared to be with the disposal of ammunition not equipment. It appeared that the disposal of excess unstable ammunition was in crisis and some of the ammunition poses a danger. He asked what the short term solution to this would be, noting that the disposal plant was a medium term solution.

General Ntsibande replied that ammunition represented the biggest problem. The shortest term solution would be to dump the ammunition but this is not possible because of conventions the Government has signed. An alternative short term solution is the sale of ammunition stock, but the Government is against this and so the ammunition must be destroyed.

The Secretary for Defence added that the disposal of ammunition occurred within a stringent legal regime. A task team has been set up and the problem has been presented to the NCACC (National Conventional Arms Control Committee). The Department have pledges to purchase part of the ammunition, which would help fund the disposal plant. They are optimistic that the issues will be resolved in the medium term.

The member asked for the projected cost of the plant.

The Secretary for Defence replied that the projected cost is R100 million per year, with a total cost of R500 to R600 million.

Mr A Blaas (ACDP) noted that a statement had been made that surpluses would be determined based on an affordable force. How did an affordable force relate to a strategically necessary force?

General Johnson replied that the Army was disposing of equipment that is obsolete or beyond economical repair. He noted that purchasers would only buy equipment that they could support. He stated that only the Army uses 'Affordable Force' because of its personnel requirements.

The Secretary for Defence added that the Army still faced a problem of force design. The Department would give a presentation on the problem at the meeting the following week and give the projected force design then. The Air Force and Navy have completed their force designs, the Army was still working on theirs. Presentations had been made to the Minister the previous Friday. The equipment disposed of by the Army is largely obsolete material. The SANDF have R70-100 billion worth of stock by book value, with only R4-6 billion to be disposed of.

Mr G Oosthuizen (ANC) responded that there was confusion because the Committee had been told about force design and this had been linked to disposal. The presentation on force design might defeat what was said on disposal. If obsolete equipment was being sold, why would other countries be interested in it? If it was just scrap metal, why not just sell it to Iscor? Is the equipment totally beyond repair and if so, why are countries interested?

General Johnson replied that the Army had sold Ratel mark 3 vehicles, which are supportable, to Jordan. Tanks that have outlived their lifespan were sometimes bought by developing countries for use for a limited time - about three years rather than the standard lifespan of military equipment of around thirty years.

A Department Official added that some of the equipment sold was equipment that had been phased out by the SANDF but was refurbished by other countries. Local and foreign companies bid on items sold for scrap.

General Matanzima asked that questions on force design be held over to the next meeting when a presentation would be made on the subject. It was premature to go into the matter at the current meeting. The SANDF was under pressure to sell excess equipment, but did not do so lightly.

The Acting Chair suggested that members pose questions on force design to be answered at the following meeting.

Mr Blaas stated that the NCACC (National Conventional Arms Control Committee) had come up as a process that stands in the way of disposal. He asked if there were problems with the NCACC.

General Johnson replied that the NCACC was not a problem from the Army's perspective.

Mr Blaas asked if proceeds from the sale of equipment went to the SANDF or to Treasury.

General Ntsibande replied that proceeds from the sale of category 1 equipment go to the SANDF.

Mr Blaas asked where these amounts appeared in the budget.

The Secretary for Defence replied that the funds go into a pool for arms and services. Thus far the funds received have been small amounts.

The Acting Chair stated that if one looked at the Department's reports, shortage of staff was cited as a problem. Why was the money from the disposal not devoted to these problems.

General Johnson replied that the money is ploughed back into Army focus areas. They had only received funds from sales in the past few weeks and would use them to deal with shortages.

Mr N Fihla (ANC) asked if there was a problem finding a market for weapons.

Mr Fihla stated that he had seen footage of weapons destruction, including AK47s. Were these weapons destroyed because they were confiscated?

Chief K Morwamoche (ANC) noted that some dangerous stock had to be disposed of. He asked if all services received the same danger allowance. He understood that only Air Force members received the allowance.

General Ntsibande replied that the danger allowance was paid to all externally deployed military personnel. Additional allowances were paid to members of the Air Force and Navy because those services needed to retain scarce skills.

Chief Morwamoche suggested that the proceeds from the sale of disposed equipment be used to pay the taxes of members of the SANDF. He stated that in many other countries, military servicepeople do not pay tax.

The Secretary for Defence replied that the tax issue was a burning one - no-one is exempt from paying tax. The Department had engaged with SARS for certain exemptions, but had not been successful. He suggested that legislators should deal with the issue.

Mr R Jankielsohn (DA) noted that a little over 2800 tonnes of ammunition had been donated to Namibia. If there is an environmental risk associated with the ammunition, was this taken into account? Why was it stockpiled in Namibia instead of here. He likened this to removing a stone from one's own driveway and putting it in one's neighbour's driveway.

General Ntsibande replied that the NCACC (National Conventional Arms Control Committee) had investigated the donation of the ammunition to Namibia. They would be better placed to answer the question.

Mr Jankielsohn asked if the units that were to dispose of equipment had the capacity to do so.

General Johnson replied that the process had been devolved to units because it was not always viable to dispose of equipment centrally. Units only identify and classify vehicles as beyond economical repair. Headquarters then deal with the matter and finally it is handed to ARMSCOR.

Mr Jankielsohn noted that there is a huge demand for ambulances and clothing in South Africa, especially in rural areas. Could the ambulances to be disposed of not be used by local government? Had disposing of the excess clothing been discussed with the Welfare Department?

General Wallis replied that the Military Health Service (SAMHS) were disposing of first generation mine protected ambulances. These are obsolete and the Army service corps could not support them. Spare parts are not available for them, so it would not be feasible for local government to use them. SAMHS were also disposing of metro ambulances, which are not for military use only. The normal process is to offer such equipment to other Departments, but there had been no requests for these ambulances except from Mozambique. The ambulances are not fit for use in rural areas and maintaining them is very expensive.

The Acting Chair asked if local and provincial government knew about the disposal of the ambulances.

General Wallis replied that the items for disposal are advertised. He noted that whilst there had been a request for their donation from Mozambique, this was still under consideration.

Brigadier General B Links (Department of Defence Log Sup Fmn) added that the usual process is for the Department to offer equipment to other Departments, or for the Department to receive a request for equipment. He noted that the Department had donated a bus to the Education Department. All the equipment is advertised in three newspapers - including weekly and daily papers - so the process is transparent. He noted that an offer for donations of clothing was made. The Department were waiting for an answer on whether they may donate uniform pieces from the pre-1994 uniform system.

General Johnson added that the old uniform system had been used for as long as possible, so the excess stock was largely in unusual sizes.

General Matanzima stated that it was not advisable to donate full uniforms because this involved a security risk. Even if the uniforms were donated to charities, they could still be used by criminals. If authority was given to donate the clothing, donation to other countries would be considered, but it would be difficult to donate the clothing locally.

Mr Jankielsohn asked if the uniforms had been disposed of. He questioned the security risk posed by cadet uniforms and jackets.

General Johnson replied that a lot of uniforms was due for disposal recently, but disposal of it to local persons had been stopped because of concerns.

Mr Blaas asked what the value of the redundant and expired medical equipment marked for disposal was.

General Wallis replied that the Military Health Service operated on the doctrine that depots have a six week supply of medicine and units a three month supply. Given the lifespan of medicines, this meant that the number of items to be disposed of was low. It would be unethical to donate or use expired medicines even if they might still be useable. The service made an effort to redistribute redundant medicines in their own system or to the Health Department.

Chief Morwamoche stated that he had questions about the manner in which the Department gave the Committee information. There was a problem of unauthorised expenditure by the Department. The Committee were now hearing that buses had been donated to other Departments and countries. He stated that the Committee should be informed of such actions first.

The Secretary for Defence replied that nothing was disposed of except through the NCACC (National Conventional Arms Control Committee). The process was transparent.

Mr Oosthuizen stated that he was concerned that, on equipment such as ambulances, the Department did not appear to be reaching out through a system. He stated that he was satisfied that processes were being followed, but was concerned that the Department were simply giving a standard answer to the questions. The Committee were trying to suggest things. The Department should take up the suggestions, examine them and get back to the Committee on their feasibility.

General Ntsibande replied that an integrated response was needed to this problem. Donations to Algeria and Sao Tome were requested by the Foreign Affairs Department. The Secretary for Defence is drafting a policy on donations. The Department would look into the matter in detail and needed a general needs assessment through which they could interface.

The Secretary for Defence replied that the Department appreciated the exchange. He stated that the focus had been on disposal of excess stock. The issue of local contribution had been raised and information on this would be made available. The Department were merely reacting to requests. He stated that they would take the suggestions seriously and ensure that the information was made available. He agreed that 'charity begins at home'.

Mr J Schippers (NNP) noted that much of the stock went to other countries. How did the Department determine that these countries would be the end users of the stock?

The Secretary for Defence replied that there is a verification process. This includes an inspectorate which performs a physical check that what is sold to a country is used by that country. This occurred with all sales to other countries.

The Acting Chair noted that the idea of an integrated response had been raised. He asked what the Department was doing about this.

The Secretary for Defence replied that the lack of coordination was the immediate problem. Plans to deal with this were just beginning to unfold. Greater focus is needed. The Department had taken note of the problem and would act on it.

The Acting Chair noted that the Military Health Service report had stated that there were problems around their disposal of excess stock. He asked what they were doing about these.

General Wallis replied that the problems had been around the lack of knowledgeable personnel. The service lacked personnel able to identify and value signals equipment. CCMIS made personnel available to assist in this. There was also a problem with the lack of a delegation for the Surgeon General. He stated that General Ntsibande was well aware of the state of accounting in the SANDF. Accounting was not up to date and this hampered progress. For example, units might identify items for disposal only to find that whilst they had identified ten items, only five were recorded in the books, or vice versa.

The Secretary for Defence responded that he would shortly be signing the letter for the delegation. He had been waiting for the resolution of internal problems.

Mr P Groenewald suggested that when the Department disposed of equipment, letters be sent to all the Premiers since the provinces controlled health services.

A member asked about the high risk associated with pharmaceuticals. She asked what the risk involved is - did it involve pharmaceutical research?

General Wallis replied that the risk related to the length of time for disposal. This resulted in stock waiting for the completion of the process and there is a risk that expired stock would be stolen and find its way on to the market.

The meeting was closed for the follow-up discussion of the Department's Annual Report.