Third Quarter Expenditure Report for 2012/2013 Financial Year: briefing by Department of Defence

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Defence and Military Veterans

13 March 2013
Chairperson: Mr M Motimele (ANC)
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Meeting Summary

The Committee was briefed by the Department of Defence (DoD) on the third Quarterly Performance Report for the 2012/13 financial year. The presentation covered three main topics: the legislative framework that the DoD was required to comply with; a brief summary of quarterly performance targets; and South African National Defence (SANDF) strategic outputs and outcomes.

All of the performance indicators of the Government Information Technology Officer, defence supply chain management, legal services, and the Office of the Military Ombud, were met. The other sub-programmes had met the majority of their performance indicators. Those indicators that required major action in order to be met included:
the percentage of departmental policies authorised for promulgation; the status of the DoD research capability; the percentage of the budget allocation received for the renewal of the DoD main equipment in relation to the total DoD vote; and the percentage of the DoD expenditure on research and development in relation to the total DOD vote.
When looking at the SANDF’s strategic outcomes and outputs, a number of the quarter achievements were negative, particularly when it came to preparing mission-ready capabilities. The quarter achievements in executing ordered commitments, and providing defence and strategic direction, were all positive.
Members asked about over-expenditure and under-expenditure, unbudgeted items, and the long-term storage of aircraft. One member asked about low staff morale, which she believed had been a problem for some time. Members then wanted some clarity on the re-skilling of staff, HR issues, research capacity, litigation that affected the DoD, why some targets were not met, and border safeguarding. Some members agreed that the Committee needed to congratulate the DoD for the job well done.

Meeting report

The Legislative Framework
Mr Sam Makhudu Gulube, Secretary of Defence, Department of Defence (DoD), gave an overview of the legislative requirements that the Department was bound to. Section 38 (1) (i) and (ii) of the Public Finance Management Act (PFMA), Act 1 of 1999, as amended, which stated that the accounting officer for the Department must ensure that the Department had, and maintained, effective, efficient and transparent systems of financial and risk management and internal control, as well as systems of internal audit under the control and direction of an audit committee. The Treasury Regulations, paragraph 5.3.1, stated that the accounting officer of an institution had to establish procedures for quarterly reporting to the executive authority to facilitate effective performance monitoring, evaluation and corrective action. The Framework for Strategic Plans and Annual Plans stated that the quarterly report provided the accounting officer with an opportunity to indicate measures that would be taken to ensure that implementation of the annual performance plan remains on track. Those quarterly reports should be submitted to the National Treasury and the Auditor-General for auditing purposes.

Defence Secretariat Quarterly Performance Targets
Performance targets had been assigned red, amber or green indicators. A red indicator meant high risk or certainty, that the DoD did not meet its target and major action was required; an amber indicator meant moderate risk, and remedial or corrective action was required; a green indicator meant low risk or on course, the Department met its target and no major action was required. The main focus was on red which indicated that the DoD did not meet its target.

The Defence Secretariat consisted of the following sub-programmes: departmental direction, Government Information Technology Officer (GITO), policy and planning (defence policy, strategy and planning), finance services, acquisition services (defence material), defence supply chain integration, and defence international affairs (see attached document for details).

Under the Government Information Technology Officer (GITO) sub-programme, performance indicators included: the percentage of compliance with the six DoD Information Communication and Technology (ICT) portfolios of the Defence Enterprise Information System master plan; promulgated Department of Defence information strategy; and promulgated information and communication system policy development plan. The overall progress of these indicators was scored as green. The Department's information technology system and invoices came from the State Information and Technology Agency (SITA).

The Defence, Policy, Strategy and Planning (DPSP) sub-programme’s performance indicators were: co-ordinated defence engagement in clusters, support and resources for the Defence Review Process; the percentage of the departmental policies authorized for promulgation; the tabling of the DoD Annual Performance Plan (APP) in parliament, in line with the national prescripts on planning performance indicators; the
DOD enterprise risk management maturity level status; and finally the tabling of the DOD Annual Report in parliament in line with national prescripts.
The overall progress of these indicators was green, but there were two exceptions. The Department did not reach its target percentage of the departmental policies authorized for promulgation, due to the fact that policies were in the process of approval, In addition, the Department did not reach its target with regard to its research capability status. The Department had been in contact with the National Treasury to look at the DoD’s performance targets.

The financial services sub-programme’s performance indicators were: the number of adverse audit findings; the approval of DoD policy regulating Resource Unit costing; the status of the defence fiscal framework status; and the percentage payments in accordance with invoices/claims charges. Defence fiscal framework status and percentages in accordance with invoice/claims charges were amber. The other two targets were green, meaning that Department had met the targets. The DoD was told that it should make payment within 30 days. Payment was decentralized. 

The acquisition services sub-programme’s performance indicators were: the strategy of defence industry status (amber); the percentage of expenditure on research and development in relation to the total DoD vote (red); percentage budget allocation received of the DoD main equipment in relation to the total DoD vote (red); and the approval of defence Intangible Capital Assets (ICA) policy (green). 30 percent of the Department's acquisitions were supposed to be equipment. The Department had been asked to reprioritise its programmes. There were some concerns on the safeguarding of the Confederation of African Football (CAF) tournament in January 2013 due to limited budget.

The defence supply chain integration sub-programme’s performance indicators were: the white paper on defence industry status; and the percentage of reductions in non-compliance with the supply chain regulatory framework. These indicators were green and targets were met.

Under Defence International Affairs, targets were met on the following performance indicators: the percentage of compliance with AU and UN requirements, rules and regulations for peace missions; the percentage of Memorandum of Understanding (MOU) compliance with agreed force level for deployment in AU missions; the percentage of compliance with outputs of diplomatic missions, in line with South African foreign policy; and the percentage of positions filled against allocated quotes for international institutions. The DoD foreign relations strategy status did not meet its target. The DoD was waiting for the Department of International Relations and Co-operation (DIRCO) to come up with international strategy (see attached document for more details).

Human Resource Support Services had the following performance indicators: the percentages of Public Service Act Personnel (PSAP) cases finalized within 120 days in the DoD; the number of national youth service programme (NYSP) participants trained per year; the number of the Military Skills Development System (MSDS) members in the system per year; the status of the Defence Force Service Commission; the status of the Human Resource Development Strategy and Plan; an
Armed Forces Day policy framework; the percentage of DOD collective grievances and disputes resolved; the status of HR retention strategy; the status of the HR Performance Management System; the percentage of compliance with the annual submission and recording of Senior Management Services (SMS) financial disclosures; and the level of morale within the Defence Secretariat. The number of young people joining the defence force was reduced due to financial limitations. The Defence Force Service Commission Act had been adopted, and permanent defence forces were about to be appointed. The DoD did not meet its target on defence force service commission status; the rest of the indicators were green.
The legal services sub-programme’s performance indicator was the percentage of litigation settled in favour of the DoD and the target was met. The Department had been struggling in the area of legal framework due to a lack of legal internal capacity.

The Office of the Military Ombud’s performance indicator was the establishment of the Office of the Military Ombud and the DoD had met the target.

South African National Defence Force (SANDF) Strategic Outcomes and Outputs
Mr Gulube briefly presented the SANDF overview, and the programmes. These programmes were as follows: force employment, landward defence, air defence, maritime defence, military health support, defence intelligence and general support. The DoD summarized the SANDF strategic outcomes and outputs.

The first objective was to prepare mission-ready capabilities. This required the SANDF to ensure combat-ready defence capabilities, and to ensure material to satisfy the requirements of the SANDF. The performance indicators were: broader DoD health/fitness status; trends of deployable status on concurrent health assessment; the percentage of approved capital work plan projects as scheduled per year; the percentage of compliance with DoD refurbishment programme annual schedule; and overarching logistic strategy. Many of the quarterly achievements with regard to these indicators were negative (see the attached document for more details).

The second objective was to executive ordered commitments. This required border safeguarding, regional security, and employing the SANDF. Border safeguarding had to do with number of landward sub-units deployed. Regional security had to do with the percentage of compliance with force levels for external operations, the percentage of compliance with serviceability of equipment for external operations, and the percentage of the value claims reimbursed by the UN/AU. Payment from the United Nations did not reach the DoD in time, and that affected the DoD’s operations. The performance indicators for employing the SANDF looked at the number of internal and external operations.

The overall quarterly achievement was positive as all targets were met. The Department was faced with the challenge of equipment that was not serviceable, especially the peace-mission equipment. Defence members were deployed in peacekeeping missions internally and externally. The DoD undertook medical examinations of each member every year.

The third target was to provide defence and strategic direction. Here only one activity was mentioned – to administer the DoD (directions), and it looked at the total number of defence attaché offices. Targets were met and the quarterly achievement was positive.
The fourth goal was to comply with the regulatory framework strategy. There was only one activity listed: to administer the DoD (control), which looked at the percentage of increase in military court docket readiness, the percentage of reduction in military case backlogs, the percentage of disciplinary cases in the DoD finalized within 120 days as per SANDF order, and the percentage of litigation in favour of the DoD. Overall these achievements were negatie. 

Mr Gulube described the strategic outputs and annual targets for the Medium Term Strategic Framework (MTSF). For the output of mission-ready defence capabilities, which looked at the trends of broader SANDF health/fitness status indicators, the quarterly achievement was negative. For the output of ordered defence commitments, which looked at trends of deployable status on concurrent health assessments, quarterly achievement was negative, but positive on third quarter (see attached document for more details).
For the output of ordered defence commitments the quarterly achievement was positive.

The strategic outputs and annual targets for MTSF outcome five stressed the military direction output, and performance indicators of percentage compliance with DoD training targets (re-skilling, non-combat military development and national youth service). Quarterly achievement was achieved, except for percentage with DoD training target (re-skilling) (see attached document for more details). Mr Gulube said that the DoD had put aside a budget for re-skilling. The strategic outcomes and annual targets for MTSF outcome 11 included the defence direction, DoD morale, ordered defence commitments outputs, the performance indicators of level of DoD morale, percentage of the value claims reimbursed by UN/AU, percentage compliance with force levels for external operations, percentage compliance with serviceability of equipment for external operations, total number of the defence attaché office, approved force design and structure. Quarterly achievement was not achieved on DoD morale because it was an ongoing process, and approved design and structure did not achieve the target because they were in progress.

Mr D Maynier (DA) noted that the Department’s aim was to maintain mission-ready commitments. He wanted clarity on the operational readiness of submarines, South African Air Force aircraft in long-term storage, the downsizing of 10 000 soldiers, and the South African Navy.

Mr S Esau (DA) wanted some clarity on capital assets, under-expenditure on strategic direction, litigation which affected the DoD’s human resources, policies related to human resources, over-expenditure on acquisition, and the unbudgeted expenditure of R25 billion.  He wanted clarity on the projected percentage at the end of each year, border safety, financial disclosure, and the anti-fraud or corruption plan.

Ms N Daniels (PAC) wanted some clarity on unbudgeted expenditure, the re-skilling of members of the DoD and challenges DoD’s human resource department was faced with, and asked where the research capacity was located. She asked if the Department had put in place realistic targets, and whether members of the DoD were supposed to come for re-skilling. She wanted clarity on forced structure and design, and the moral of soldiers. She asked if there was a problem between Department of Defence and the Department of Public Works.

The Chairperson noted that through their interaction with the DoD, and the review of DoD’s report, the Portfolio Committee on Defence had come to the conclusion that the DoD needed to be resourced. He wanted clarity on how many percentages were achieved for the green indicators.

Ms H Mgabadeli (ANC) noted that the Department was shy to come forward and unpack where it hd not met its targets. She wanted clarity on participation in anti-piracy measures.

Ms N Mabedla (ANC) wanted clarity on the percentage reduction in non-compliance with the supply chain regulatory framework.

Mr L Diale (ANC) said that at some point the Committee had to congratulate the Department of Defence for a job well done. He noted that the facilities of the DoD were not in good condition. He then asked about the improvement of the Defence Intelligence Unit.

Mr Gulube responded that it was true that the public wanted to know how ready the Department of Defence was in serving the public, and the DoD had to be ready in all departments in order to serve the public. He requested his colleagues from each department to answer specific question related to their area of work.  The Department had research activities in different areas of health, human resources, policy area and other areas. Immovable assets had been audited by Auditor-General of South Africa, and the result was an unqualified audit.

The Department was on the right track, the HR issues would be dealt with, and transformation was very important at all levels. Career progression management was in place, as well as budget for re-skilling of DoD’s staff members. The DoD’s intention was to make sure that people did not remain in one position for a long time without promotion. The DoD did not publish good work that had been done.

The Department dealt with illegal immigrant, not piracy. The Department of Defence had an anti-corruption plan in place to deal with corruption or fraud. The Department had programmes in place to assist in improving the moral of staff.

Admiral Sugaten Pillay, Director of Maritime Plans, South African Navy, responded that an extensive amount of work had been done, and problems had been identified and rectified. The navy fleet and submarines were operational. There had been success stories, and the Navy always held Navy Week to disclose its successes. Information would be provided to Members.

Mr Jacob James Hhysamen, Senior Staff Officer, South African Air Force, responded by agreeing that there was no plan in place to deal with long-term storage of aircraft. However, the government had bought 26 aircrafts of which 14 would be available for a specific time, and 12 aircrafts would be stored in long-term storage. Scientifically, it was not good to put aircrafts in long-term storage.

Mr Simphiwe Sakhela, Chief Financial Officer, Department of Defence, responded that there was a control measure in place, and every time the DoD purchased assets, it looked at the nature of the assets. The Department had a procurement plan in place that provided guidance in purchasing assets, and expenditure was monitored every time. The Department's budget operation was fairly good. He did not know about unbudgeted items. He stressed that there was the process of approvals of assets in place. The official from the Department of Defence responded that there was money budgeted for anti-piracy campaign starting the April 1, 2013.

Dr Thobekile Gumede, Chief Defence Policy Strategy and Planning, Department of Defence, responded that there would be structures in place that would co-ordinate research, and that a policy formulation unit would be in place, and the DoD’s risk management had robust clusters. Every quarter, the DoD reported on risk management. The list of policy reviewed would be provided.

In conclusion the Chairperson noted that there was no ambiguity as to what was the constitutional mandate of the Department of Defence. The Committee had to show appreciation of the good work done by the DoD. The Committee had been on several oversight visits, and it would continue working with the Department of Defence. He thanked everyone for attending. 

Meeting was adjourned.

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