Appropriations Bill: Public submissions by Neil Galvin and Malose Kekana

Standing Committee on Appropriations

03 May 2010
Chairperson: Mr E Sogoni (ANC)
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Meeting Summary

The Committee heard public submissions on the Appropriations Bill.

Mr Neil Galvin’s submission concerned the defence budget, and he stated that the South African Defence Force (SANDF) had been systematically starved of funds over the preceding decade and a half. Whilst the country was not at war or at risk of being invaded, the SANDF was nonetheless involved in rescue work, maintained the Military Health Service, and had helped to meet the FIFA security requirements for the Soccer World Cup. The SANDF also employed many young people, and was involved in peacekeeping missions. Mr Galvin was especially concerned about the downscaling of flying hours for the new Gripen fleet, which, he stated, would make it impossible to meet the North Atlantic Treaty Organisation (NATO) standard of 200 flying hours per pilot annually, in order for them to stay qualified, and if they were not able to maintain their flying hours they would leave the South African Air Force, resulting in loss of specialised capabilities. He argued for reprioritisation of budgets, if no extra money could be found for defence, in order to fund niche capabilities. Members raised questions about the redeployment of the SANDF for safeguarding borders, the budgetary implications were, and whether the presence of the SANDF on the borders was properly recognised. The Chairperson of the Defence Portfolio Committee commented that there would be a budget shift. He commented on the position of the SANDF on the border, and the responsibilities of the Department of Public Works. Further questions by Members referred to the fact that the South African defence budget fell short of the recommendations by NATO, whether the Department could improve to the point where it did not receive qualified audits and could maintain a proper asset register. A COPE member asked if an increased budget implied a change in policy, and whether redeployment of SANDF members on peacekeeping missions and on the borders would result in shortage of soldiers. It was felt that public views should be taken.

Mr Malose Kekana, in his personal capacity, commented on some aspects of the Appropriation Bill. He felt that the fiscal policy stance reflected in the Bill was procyclical, stunted growth and affected blacks negatively. Allocations were made without regard for performance measures. Mr Kekana singled out strategies that should be pursued, particularly in the fields of education and skills development, assistance to small businesses and youth. He suggested the setting up of skills development centres with an open entry system, and development of the National Youth Service Programme. He proposed that in order to assist small, medium and micro enterprises, which were not growing in number, government must act counter-cyclically, and create small business incubation banks. Proper performance measurement was needed. In regard to youth, he was critical of the fact that more was spent on correctional services than youth training centres, sports and arts development. Members commented that several important points were made, and suggested that National Treasury should furnish its comments to the Committee. Members commented on the need for technical and artisan skills, pointing to examples of these in other developing countries, and questioned the possible restructuring of the education budget to fund training centres, steps taken to prevent school drop-outs and the way that youth viewed the Further Education and Training Colleges. Members pointed out that stringent labour laws were often an impediment to job creation and the ability of people to obtain work to support themselves, and the need for strategies to promote growth of small businesses was discussed. All Members agreed performance measurement was desirable. They concluded that more interrogation was needed and asked that researchers could identify matters to drive budgets. The Chairperson stressed that government was already reconsidering a range of matters that had been dealt with in the submission.

Meeting report

Appropriations Bill: Defence Budget: Submission by Mr Neil Galvin
Mr Neil Galvin, Finance Manager, Symphony Loans, gave a briefing in regard to the amounts allocated in the Appropriations Bill to the South African National Defence Force (SANDF) and Department of Defence (DoD). He remarked that over the last decade and a half, the SANDF had been systematically “starved of funds”. Although South Africa was not a country at war or facing invasion, the SANDF was active in rescue work, and maintained the Military Health Service. SANDF support had been crucial for the hosting of the FIFA World Cup, in order to meet FIFA’s security arrangements of enforcing no-fly zones over the match venues, through the South African Air Force (SAAF). The SANDF, as an employer, gave young people the opportunity to serve the country and better themselves.

In the current Department of Defence (DoD) strategic plan for the next three fiscal years, it was planned to cut flying hours for the new Gripen fighter fleet from 550 hours in the current year, to 250 hours annually afterwards. The North Atlantic Treaty Organisation (NATO) required 200 flying hours per pilot per year, to remain qualified. If pilots resigned, money spent training them would be lost.

Mr Galvin remarked that First World defence capabilities gave South Africa diplomatic clout. South Africa was also highly praised for its peace keeping role on the continent. NATO had recommended that a country spend 2% of its Gross Domestic Product on defence. The SANDF had had to cope without that kind of money for a long time. It was currently facing the loss of specialised capabilities.

Mr Galvin urged that if no extra money for defence was available, niche capabilities of the Forces should be properly funded through reprioritisation from within the defence budget.

Discussion
The Chairperson asked how the presence of the South African National Defence Force (SANDF) on the borders would be budgeted for. He remarked that the presence of the SANDF on the borders had to be recognised.

Mr S Booi, (ANC, Chairperson of the Defence Portfolio Committee) replied that a shift in budget had to take place. There was discussion in the defence and security cluster about what form that would take.

Mr Booi continued that conditions for the SANDF and SAPS on the borders were what he termed “pathetic”. Accommodation was depleted. There was no clarity as to the respective claims to bases enjoyed by the SANDF and the South African Police Service (SAPS). The security situation on the borders was difficult. Mothers with children could simply walk through at some points. The integrity of borders had to be maintained. There were highly organised syndicates that dealt in human trafficking. There had to be reprioritisation to allow a defence force presence on the borders. It was seemingly not a priority for Department of Public Works (DPW) to improve accommodation for soldiers at the borders. With the government policy emphasis on the environment, there would be a lot for soldiers to do on the borders. It would help keep them in a state of readiness, and keep them from being idle. Idle soldiers were prone to devote their energies to unionisation. He recommended that the Department of Public Works had to be drawn into asset management. The SANDF had not had recourse to military assets of the old Ciskei, Transkei and other military establishments. The Standing Committee on Public Accounts (SCOPA) had questioned what had gone to DPW, but that Department was unable to account for how resources had been applied.

Mr Booi noted that there had to be a cluster presence on the borders. The SANDF did not have powers to make arrests, and had to depend on the police to perform this function. Department of Home Affairs (DHA) had to maintain a presence, and the South African Revenue Service (SARS) had to handle customs. The various departments had not yet learnt to cooperate. Cabinet had created a single kitty for funding. Border control presented complex problems. At Pongola, there were people who, for instance, had to cross the border every day to attend schools. Soldiers could not deal with that. There had to be a permit system. The SANDF and SCOPA had had problems in reaching agreement about the situation.

Mr L Ramatlakane (COPE) referred to an international yardstick for defence budgeting. To be respected internationally, South Africa had to be able to resource its own defence. The Committee had been told that the international yardstick was 2% of the total budget. He asked what the figure was for South Africa. He further referred to the commonly accepted notion that South Africa did not have enemies, which in terms of a policy direction would suggest a downscaling of the military. He asked if more money requested for defence implied a change in policy.

Mr Galvin replied that exact figures were not available, but for South Africa the allocation had decreased from 1,7% of Gross Domestic Product (GDP) some years before, to a current 1,1%. This decrease had impacted severely on the budget available to retain Air Force capabilities. It had become impossible to enable pilots to spend the required flight hours in the air. The 200 hours per year that pilots needed to maintain flight readiness, had to be divided among 12 to 16 pilots. That was not enough to enable them to stay qualified. The equipment was very costly to operate. There had to be limits to defence spending, but money could be reprioritised to go to indispensable areas. There were 70 000 soldiers, and that number could be reduced, in order to find the money required to retain specialised Air Force capabilities. If the military lost one infantry soldier, the impact was not too high, but to have a pilot lose his qualification or leave the Air Force was of serious consequence. Specialised capabilities were lost.

Mr Booi noted that the budget was currently 1,4% of the GDP, well below the international standard of 2%.

The Chairperson said that the matter of flying hours would have to be raised with the Department of Defence, before the budget was passed. South Africa was a United Nations (UN) member, and as such had an obligation to maintain flight readiness.

Ms R Mashigo (ANC) said that the Committee had been told that the Department of Defence would be moving away from receiving qualified audits, over a period of 5 years, and this would be in 2011. This was an embarrassing situation. The question was whether DoD could manage the budget. There had to be a proper asset register. She remarked that if the SANDF were to be reduced in size, this must be shown to produce value for money.

Mr Booi responded that keeping track of assets was a challenge. On peacekeeping missions, Defence resources would be used by the United Nations in Burundi, for instance. SCOPA had been dissatisfied with that. The SANDF had to find a way to explain the situation to SCOPA, and to register assets. The budget could be righted by the following year. Members of the Defence Portfolio Committee agreed that the SANDF had to account properly for what was going on in the SANDF.

Ms B Ngcobo (ANC) remarked that National Treasury had to be engaged to look at budgeting.

The Chairperson explained the reason for the submissions. Funding was guided by the Money Bills Amendment Procedure and Related Matters Act, which could be amended by Parliament. One procedure for amendment was to have hearings, not only with the Department of Defence (DoD), but also those open to the public. Submissions from the public could enrich the Standing Committee report. When the Committee decided on the defence budget, the budget debate could be enriched by public inputs. He noted that the Standing Committee would continue to engage with the Defence Portfolio Committee, and appreciated the inputs made by the Chairperson of that committee.

With regard to policy implications, the Chairperson noted that border security was not properly a police function. It had to be a defence priority. A defence presence on the borders was in line with a policy decision.

The Chairperson continued that the United Nations valued the South African contribution to peacekeeping. In the African Union, South Africa was seen as the biggest contributor to peace on the continent. It had to be understood that amendments to the defence budget had to arrive at a final estimate. Once a certain figure had been accepted, it was not possible to go back later and declare it insufficient. The fiscal framework would be adapted. Consideration had to be given to amounts shifted around between different programmes. Political discussion of the issue had started late, and the window for adjustment was in July. The Minister of Finance could still approach Parliament with an urgent need. Committee members still lacked information on defence matters. Insufficient flying hours and the need to have soldiers on the borders required budget adjustments. The Defence Portfolio Committee would have to be invited to engage with the Standing Committee.

Mr Ramatlakane noted that many South African soldiers were deployed elsewhere. With a new mandate of redeployment to borders, he questioned whether there would be adequate personnel.

Mr M Swart (DA) remarked that there was a serious need to look at the budget.

The Chairperson replied that this remained a difficult matter. There had to be clear indications of the kind of support the Standing Committee could provide. The Portfolio Committee on Defence had not approached the Standing Committee about insufficient budgets. He reiterated that public views were highly important. The implications of a downscaling in flying hours were severe. The question was whether the well-deserved reputation for excellence currently enjoyed in respect of its pilots, could be maintained, as it should.

Submission by Mr Malose Kekana
Mr Malose Kekana, Chairman and Director of Khule Ithala, and Director of Alpha Coal, noted that he was making the submission in his private capacity.

Mr Kekana stated that the policy stance espoused by the Appropriations Bill was procyclical and stunted growth prospects. Allocations based on it would increase inequality and negatively affect black people. Allocations seemed to be made arbitrarily, with scant regard for performance measures.

Mr Kekana advocated that a number of strategies should be pursued. In regard to education and skills development, he noted that the National Skills Development Act (NSDA) was passed in 1999, to encourage on-the-job training programmes. However, pass rates, especially for African learners, remained low. There were high dropout rates at the basic and higher education levels. More than 65% of young people were unemployed. Those without matric were affected the worst. Jobs were not created rapidly enough to absorb first time labour market entrants. The Appropriation Bill did not contribute to reversing such trends. There was structural unemployment, which would not go away when economic growth picked up. He suggested that the government create skills development centres with an open entry system, like the Job Corps in the United States. Such centres existed under the Manpower Act in South Africa, but had been done away with under the NSDA. There had to be provision of funding towards the National Youth Service Programme (NYSP) to absorb 200 000 youth annually. The NYSP was more geared towards young people than the Expanded Public Works Programme (EPWP), and there was more quality training. He noted that work was under way to establish the Wage Subsidy to boost employment, but if the labour pool did not become more productive through skilling, it would merely push wages up.

Mr Kekana then turned to Small, Medium and Micro Enterprises (SMME) development. There had been a decline in the number of Micro Enterprises formed, even during the growth years of 2002 to 2007. The government had to be counter cyclical to support SMMEs, instead of behaving like banks, as the latter made it difficult to obtain private sector funding during a recessionary business cycle. The creation of small business incubation banks could remove obstructions facing entrepreneurs. There were such programmes in the former Bantustans for light industry.

With regard to performance measurement, Mr Kekana referred to the government-wide Monitoring and Evaluation System, adopted in 2007. Despite this, budgets were still being approved that failed to state the desired outcome of budget items, in order that performance could be verifiable and quantifiable.

Concerning equitable allocations, Mr Kekana questioned the fact that more money was allocated to offenders being held in correctional service centres than to sports development for the youth. Black universities received less subsidies than historically white universities. There were more correctional centres than Further Education and Training (FET) colleges, even though they catered for an offender population of less than 200 000 youth. More money had been spent on World Cup stadia than had been spent over the preceding 16 years on sports, arts and recreational facilities for young people. Funding allocated to the Ministry of Women, Children and People with Disabilities was less than the amounts set aside for communications under some government departments, like Department of Trade and Industry.

Discussion
The Chairperson and Mr Swart quipped that Mr Kekana appeared to have joined an opposition party.

Mr Swart commented that this was a good submission. He referred to teaching and skills development. Mr Kekana had pointed out that there were 1 700 unqualified science teachers. That meant that 50 000 learners would be affected. He remarked that there was a dire need for technical skills, and the training of artisans like welders and plumbers. He commended the proposals for re-introduction of apprentice systems.

Mr J Gelderblom (ANC) referred to the prominent role of technical schools in India and China, in order to develop skills in the building trade. Those countries followed a system of 6 weeks of training, 6 weeks practical, and a further 6 weeks of training. The ANC was headed in that direction. He considered that it had been a mistake to change the status of technical training centres like the one for electricity skills in Benoni. In local government, the best engineers were in fact from technical schools. They could proceed from there to university training. Other engineers had good academic qualifications, but lacked hands on technical training.

Mr Ramatlakane referred to talk about a task team to review university funding. He asked if Mr Kekana was aware of a report issued, and whether he would advise a different approach to such funding. He agreed that investment in education had to be counter cyclical. He asked what was to be done about large numbers of learners, between grades 1 and 12, who would fall out of the system, and whether skills centres were no longer in use. He asked if Mr Kekana would suggest that the Education budget be restructured to fund training centres. It had always been maintained that training would produce results, but it seemed not to be the case. There had to be additional deployment in the service training area. The education output problem had not yet been solved. He enquired what was being done to safeguard youth against dropping out of schooling, with reference to matters like peer pressure and environmental factors. He agreed that there had to be measurable outputs.

Mr Kekana replied that the general problem concerning teachers was that “quality was not present in quantity”. Professor Theuns Eloff of Northwest University had noted recently that the training of people to teach engineering, had virtually come to an end, causing the country to lag behind other countries, in yet another respect. He said that a funding formula for higher education had to consider checks and balances. There was little funding allocated to regions like Limpopo, and students were struggling. He was in favour of re-opening educational colleges. There had to be ongoing training of teachers. Early childhood education needed attention. The current generation of children was exposed to computers, and could acquire those skills at an early age. The Expanded Public Works Project (EPWP) had an early child development programme, which had to be fast-tracked. In China, there were children of five or six years old who already had computer skills.

Mr Kekana continued that there had to be performance management in regard to unqualified teachers. In regard to the school dropouts, he said that during his own childhood there had been missions and church bodies that assisted in education, with people from countries like Poland who provided generous assistance. In the fields of sport and recreation, there were anti-apartheid donors who funded NGOs. That movement had died out. He suggested that school clubs and sport clubs be re-energised. There were regions, like Venda, where governance and performance in education were excellent. The institution of practices like teaching on Saturdays was a positive development.

Ms Mashigo expressed satisfaction with the recommendations made. She said that help was needed to increase the amount of Further Education and Training (FET) projects. In places like Thabazimbi, there was no FET. She asked Mr Kekana how his personal experience had led him to the kind of observations he had made. She asked if he had conducted surveys. She asked about entrance into FET, and whether he thought that children saw FET as inferior to academic training.

Mr Kekana replied that he had learned the basic skills of car mechanics by matric. He had worked in the panel beating shop of his brother-in-law. In South Africa, acquisition of technical skills was often delayed till after matric. In Indonesia, for instance, children could choose between technical and academic schools at an early age. In China, capacity towards skills goals was built in advance, according to a 50 year plan. Long term planning was needed. FET had to commence before matric.

Mr Swart remarked that the State Information and Technology Agency (SITA) was non-functional. He asked if labour legislation was adverse to job creation. China had benefited from high productivity for low wages. South African labour laws were stringent. For the development of Small, Medium and Micro Enterprises (SMMEs), it was convenient if a person could work for R50 per day, if the alternative was no income at all. Employment registration was difficult, and had to be simplified. Trade unions did not promise more productivity in return for wage increases, and that had become part of labour legislation.

Mr Gelderblom urged that job creation be challenged. Hundreds of people were by the roadside, seeking jobs. Their ranks were swelling. There were qualified people asking for garden jobs.

Mr Kekana responded that with regard to labour legislation, conditions had to be relaxed. Wage subsidy had to be introduced. Small businesses found it hard to hire and fire. Capital would flow to easy business, and labour legislation conditions had to be relaxed to allow fixed foreign direct investment. South Africa would do well to not only look at the BRIC countries of Brazil, Russia, India and China. Ireland and South Korea also merited examination.

Mr Kekana continued that people who had been unemployed for several years wanted money, not unions. A cousin of his had earned R1 000 for three weeks of work on construction, and that had been the largest amount of money he had ever possessed. Things had to be made easier for small business.

Mr G Snell (ANC) opined that the submission had touched on complex but highly important issues. He suggested that researchers take the submission and package it into thoughts that could drive budgets. National Treasury had to inform the Standing Committee of its thinking about issues raised in this submission, which contained much food for thought.

The Chairperson stated that there was a need for further interrogation. Many of the points in the submission were suggesting a return to practices of the apartheid era, such as the reference to training centres like the one in Benoni. However, some of those centres were not really training centres. It would do well to consider the recent speeches of education ministers. The government had realised the shortcomings of SITA. Government was reconsidering a range of matters. A report on the development of finance institutions was awaited. Implementation was the problem. Development finance institutions had to be invited and heard out.

The Chairperson continued that members agreed about performance management allocations. He commented on Mr Kekana’s concerns that correctional service funding was excessive, and pointed out that the Department of Correctional Service was also responsible for the welfare of youth, and needed funding. He said that the critique of World Cup stadium funding was not unfounded, but in this instance the country had a legacy to uphold. In regard to sport development, he noted that the professional soccer league was a closed one, and ways had to be found to overcome that. Responses from government departments were needed. He agreed with Mr Snell that issues had to be packaged and followed up one by one. There simply had to be success with the creation of decent jobs.

The meeting was adjourned.

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