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DEFENCE PORTFOLIO COMMITTEE; SECURITY AND CONSTITUTIONAL AFFAIRS SELECT COMMITTEE; JOINT STANDING COMMITTEE ON DEFENCE
1 June 2001
Chairperson: Ms T Modise
Defence Budget Presentation to the Portfolio Committee on Defence
Defence Medium Term Allocation: 2001/02 Financial Year
Defence Budget and Programme Objectives: Vote 20
The Department of Defence presented their budget for the upcoming fiscal year. The estimated budget for medium-term expenditures in the fiscal year 2001/2002 was R15.8 billion. The budget focused on the Department's utilisation of the budget on administration, labour, equipment/arms purchase, support systems and special projects.
The Department expressed their frustration at not having enough funds to cover basic expenses of a functional military and also having insufficient funds for all the duties they need to perform.
Defence Secretary, Mr Masilela, declared that the new budget had no permanent increases and that all increases noted in the documentation were temporary responses to situations within the Department. The items receiving the most major expenditures would be personnel and arms.
He outlined five key challenges that the Department hoped to meet using funds:
1)Effective conduct of peace support missions (e.g., peacekeeping in the Democratic Republic of Congo, conflict resolution in Lesotho, flood disaster relief in Mozambique)
2)Management of acquiring strategic defence packages (in particular response to escalating foreign currencies and the need for improved technology)
3)Improving efficiency of the defence programme by
reducing losses caused by crime, fraud and negligence
managing the health of their labour force, with particular respect to AIDS/HIV
improving the productivity and discipline of the labour force
4)Implementation of the Public Management Act (by June 2002)
5)Alignment of the Defence policy with its budget (as per the White Paper on Defence) and the implementation of a detailed interim strategy to aid this process
Mid-Term Expenditure Fund Allocations
Mr A Visser, the Director of Budget for the Department of Defence presented on the Mid-Term Expenditures Fund (MTEF) Allocations for 2001-2002.
Visser noted the new trend promoted by the National Treasury in estimating expenditure figures called the National Estimate, established on 21 February 2001. The new format is intended to make allocations more apparent and focus on results (output) rather than funding (input).
As far as programmes are concerned, Defence has nine major programme areas:
Military Health Support
Command and Control
The R15.8 billion would be spread out among these nine categories and over 60 subprogrammes. Please see the budget details for specific allocations.
There was only one major change of programme structure from last yearâ€”the transfer of the Special Operations subprogramme from Landward Defence to Command and Control. Visser noted that subprogrammes were going through a restructuring process and it would take two to three years for the structure to be fully defined.
Mr J Theron (DP, Gauteng) queried about the level of escalation in quota expenditures.
Visser replied that it was due to a lack of funding for basic needs such as medical costs, coupled with rising inflation in the world market.
Mr R Jankielsohn (DP) asked about the Department's rationale in implementing salary increases.
Mr N Middleton (IFP) asked a related question on personnel increases.
Visser noted that actual numbers of personnel were decreasing in a downsizing effort of the number of full time employeesâ€”both civilian and uniformed. R6.1 billion of the budget is focused on salary-related costs. There will be a general salary increase in all sectors of the Department, including reserves (an increase of R150 million).
Mrs Z Kota (ANC) asked how funding was affecting the functioning of specific forces in regards to disaster relief, both abroad and within South Africa.
Visser noted that there has been a significant scale down in both the Air Force and the Navy's operating hours as a result of limited funds.
Brig Gen P Schalkwyk (DP) wondered why the Infantry on Armor funding, which he felt was a crucial sector of defence, was so low, as compared to the Command and Control allocation.
Visser reminded him that the entire Special Forces unit has been added to the Command and Control sector, along with the Information Command unit that had already been housed there.
Mr L Ngculu (ANC) posed a flurry of questions on peacekeeping, joint operations, fluctuations in personnel estimates and how shortages caused a lack of capability.
Visser did not answer these questions directly, but asked Mr J DeWitt to speak on Human Resources to clear up some issues.
Human Resource Development
DeWitt of Human Resource Development, however, did not address Ngculu's issues. Rather, he described the Department's role in youth development. The Department of Defence has had a drastic problem of recruiting younger personnel. He would like to see a higher rate of young men and women going through the ranks into leadership positions. This is to be achieved through the Military Skills Development System and the Core Cancer System. Foundation Advanced Training has provided for 165 Grade 12 Scholars to go into military technical or medical jobs. This method of recruiting seems to be much more cost-effective than having too many long-term employees that are not capable of performing their tasks.
Mr S Ntuli (ANC) asked about the gender and racial equality throughout the Department's employment.
Secretary Masilela informed him that at the bottom level, it was predominantly African and at the middle level, it was predominantly non-African. The top level seemed to be quite balanced, but Masilela agreed that there needed to be more equity throughout.
Mrs Z Kota (ANC) wanted to know more about the methods and locations of recruitment.
DeWitt detailed that the new method involved more advertisement of the Reserves to make that a more appealing option to Grade 12 students. Budgeting for the Reserves could be found as Item 10 in each of the programme's maintenance costs.
Mr T Setona (ANC, Free State) asked if their was some kind of way to gauge the need for Reserves.
DeWitt stated that such a gauge did not appear within the budget.
Mr L Ngculu (ANC) asked why there was R6.6 million being spent on administrative costs.
DeWitt noted that the funds were solely used to run their headquarters and pay for the Minister's and Secretary's staffs.
At this point, Chairperson Modise reminded the committee that a briefing of the Task Forces given by the Minister would take place soon.
Outputs and Service Delivery Indicators
Ms C van der Berg of the Department of Defence presented the budget's Outputs and Service Delivery Indicators. The role of a budget in general is a link between government policy and delivery of services to the people.
The new format of budget presentation, the National Estimate, improves transparency of government spending trends. Under this new system, outputs are much more measurable and the value of money spent is more apparent. There are also numerous accountability checks. The quantity of outputs would be measured first, soon to be followed by quality and timeliness of delivery.
Her report gave details of each subprogramme, their desired outputs and the corresponding service delivery indicators. Also, each programme had a brief synopsis of their operating capabilities under the proposed budget.
Chairperson Modise agreed with the new system wholeheartedly and praised its transparency.
Mr R Jankielsohn (DP) asked what the time frames for the service delivery would be.
Van der Berg replied that all time references would be in reference to the estimates of the prior year.
Mrs Z Kota (ANC) wanted to see these outputs and indicators in Rands and Cents, not descriptions. Was defence satisfied with the current defence package plan? Moreair defence funds were needed as this crucial sector was being neglected.
Chief of Finance Mr J Gründling replied that packages within the Special Defence Account are geared toward the Air Force as well. The three Air Force programmes are the Flange, Ukhozi and Winchester systems. Additional amounts of capital would be available for procurement. Plus, the Air Force, like other programmes, is constantly looking to use leftover funds to renew or replace their old equipment.
Mr J Theron (DP, Gauteng) asked when the figures for first-year outputs would be available and van der Berg replied that they would be ready by the start of 2002.
Visser added that it is currently difficult to estimate outputs under the new budgeting system.
Masilela also added that the Integrated Strategic Plan had to be submitted to the Treasurer by 1 June 2001 and had to be implemented by 1 April 2002.
Mr L Ngculu (ANC) asked if the forces were all in a state of readiness and were living up to the numbers presented in the budget proposal. He wanted a response to the Chief of Defence's pessimistic reports from a few weeks ago.
Gründling thought that it would be more appropriate to go into the next section and hopefully it would answer his question.
Risks of the Budget
Gründling presented on the possible risks that could arise out of the proposed budget. He noted that the Department Of Defence considers priorities and policies when determining allocations, not the needs of all the various programmes. Otherwise, the budget figures would shoot up to over R20 billion. If the Minister feels strongly that they need certain more funds, he ought to campaign to the Cabinet. However, he is not doing so and, thus, the Department must work within those limitations.
One possible strategy is to reduce the size of units, but that would diminish the capacity of the forces. It would also add to the unemployment problem in South Africa. The approach must be to focus the forces and the elements within each programme so that a more efficient Department will come out of it.
Even with the entire proposed budget of R15.8 billion, the Air Force would only be meeting 57% of its needs. The Chairperson asked if that fact also hinged on rising oil prices. Costs did have quite a lot to do with diminished capacities.
Mr S Ntuli (ANC) asked what the bottom line choices would be if they did not have enough funds to cover everything. Some soldiers not being able to even afford their own uniforms.
Gründling replied that it would depend on the level of constraint created by the allocations. There must be sacrifices made and the Chief of Army, for example, will have a difficult decision to make if he must decide between uniforms and medical expenses.
Gründling outlined ten significant risks than could lead to negative reactions from the proposed budget, along with measures that can be taken to counteract them:
1)Occurrence of contingence - this includes disaster relief (such as containing foot and mouth disease in KwaZulu-Natal) and peacekeeping missions (like in the DRC). The UN does not require a certain amount of aid to be given to peacekeeping missions, so much of the funds must come from Defence's budget. The measure against this would be to recover as much costs through the Treasury or a private client. The only problem with this is that if an issue arises in the second half of the year, the Minister of Finance must secure the funds from the general budget and he cannot exceed 2% of the national budget in additional allocations.
2)Contract cost escalation - this is expected alongside the next two risks.
3)Higher than expected inflation
4)Exchange rate escalation - risks 2-4 can be controlled via adjustments made to planned spending and reprioritising of activities. Compromises and sacrifices will surely follow.
5)Higher equipment failure rate - this is due to the fact that much equipment used by the Department Of Defence was purchased in the 1980s and early 1990s. Now would be the time to make general repairs.
6)Loss of skilled personnel - Gründling gave pilots as an example. As budgets get cut, labour treasure chests get plundered by the market. There is no need for skilled personnel to remain with lower paying jobs when they can go into the private sector and make much more money. To counteract this, the Department Of Defence can offer incentive schemes, but those too would cost budgeted money.
7)Less than planned personnel attrition rate - this is if people are not retiring or leaving the Department as quickly as they would like. To counter this, they would have to leave non-critical posts vacant and restrict promotions.
8) Decisions requiring unplanned resources - Gründling hoped that decision makers would be able to make sound decisions on behalf of the Department in order to secure possibly critical goods and services.
9)Low morale - to be countered by continuous communication efforts with employees.
10)Long-term output suffering - this is in regards to their projected five-year outputs. This important risk can be counteracted by implementing a transitional strategy that Gründling introduced with another ten points.
1)General austerity measures - reductions in unnecessary telephone, computer, paper, travel costs, etc.
2)Cutting losses - curbing the escalating problems of crime, fraud and negligence.
3)Disposing surplus equipment and stores
4)Reducing the "footprint" or size of facilities and bases.
5)Reducing the "superstructure" - the bureaucracy of the Department has become quite bloated at upper levels.
6)Reducing upkeep costs.
7)Having a realistic view of structural transformation - making sure not to be too idealistic.
8)Reviewing the outsourcing policy - outside sources for funds despite the loss of jobs that would surely accompany in order to pay for them.
9)Developing the human resources component - as outlined by DeWitt.
10)Improving the health status of workers - in response to negative reports by the surgeon general.
Mr L Ngculu (ANC) wanted Gründling's assessment of the current budget and also how he felt about seeking supplementary budgets later in the year.
Gründling replied that allocations have stabilized and are now growing because of inflation. Defence's equipment is far outdated and the labour force within the Department is suffering as well. He enjoys the flexibility the Department has with the Treasury, but notes that adjustments to the budget are only made once per year, mid-year. It is very risky.
Gründling commented on the fact that the military is currently being used by the government for tasks that should not be within its duties. Things like crowd control at major events are not a matter for the military and should be handled by local police forces. These inappropriate deployments must be taken into account when allocating funds, or re-evaluate the duties of the national military in general. The military should focus on peace support, disaster relief, border protection and the President's initiatives in Africa.
Visser stated that support from the Committee was greatly appreciated. Less surprise cuts in the budget make it much easier to function as a Department. Many of the shortcomings and challenges of the budget were omitted due to the new structure of budget writing proposed by the Treasury.
Masilela added that if the Department could ask a true wish list, it would ask for between R18-21 billion. This alignment to a R15 billion budget would be painful and would have to follow strictly to the interim strategy.
Ngculu asked why the desired amounts were so high.
Gründling replied that the purchasing budget is a fluctuating one and would go to zero rands after 2003. The Defence budget is not a budget that can be examined as a trend due to its capricious nature.
Kota asked about moneys allocated to consultants and advisors. Did the military attract female employment at higher levels (attachés).
Masilela replied that there was only one female attaché who was currently deployed in Namibia.
The Chairperson asked why women on the Committee should care about a Department that shows an attitude that it does not care about women.
The Secretary replied that it was a serious problem and that they had reviewed representation policies in a meeting just last Friday. There are several equality targets set for the future.
Gründling replied to the question on consultants, noting that their funding was shown in Item 35 of the budget. The amounts were encompassed within the Specialists category. He will fax a schedule of management consultants to the Committee very soon.
Chairperson Modise explained that the Committee had poured lots of money into consulting with poor results. The money should be spent in more useful areas and not wasting it with overpaid advisors. Is the Department satisfied with its budget for Department Intelligence?
Gründling said that for opinions on Intelligence, the committee should consult the head of Department Intelligence.
The Chairperson replied that she did not know how an intelligence agency could not have known about the planned coup in Zimbabwe that was revealed by the press this week. She wondered what the R1.7 billion was for.
The Chairperson thanked the panel from the Department of Defence for putting together a presentation at such short notice. The Department and the Portfolio Committee were getting along quite well this year. The issues of outsourcing and surpluses should be discussed further.. as the Department could not keep such large inventories. They must evaluate and reduce their current stockpiles.
Secretary Masilela thanked the committee for their support and interest. They would sharpen their focus on pressing issues and continue the dynamic relationship they had with the Portfolio Committee.
Modise closed by saying that several members of the committee had served in the military or had connections to it. The living conditions and standards for soldiers was very important to them as well as to South Africa's reputation as an African world leader. The people must gain a national consciousness of the benefits and value of the military.
The meeting was adjourned.
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