Department of Defence on its Strategic and Annual Performance Plans

Meeting report

Overview of Department of Defence budget
Mr Peter Daniels, Content Advisor for the DOD, presented on selected issues of the budget, Estimates of National Expenditure (ENE), Strategic Plan (SP) and Annual Performance Plan (APP) for the Department.  

The situation analysis entailed policy documents and frameworks that informed the direction, focus and spending of the Department. These policy documents and frameworks were as follows:

- National Development Plan 2030,
- Medium Term Strategic Framework 2014 – 2019,
- New Growth Path (NGP),
- Industrial Policy Action Plan (IPAP),
- 2014 and 2015 State of the Nation Addresses,
- Forum of South African Director-Generals (FOSAD) Action Plan 2014 – 2019,
- Defence Review 2014,
- National Security Strategy,
- Minister’s Delivery Agreement, and
- DOD Environmental Scan

Focus areas for expenditure analysis
The expenditure analysis consisted of three main focus areas of the Department’s expenditure for the year: maintenance and expansion of South Africa’s defence capabilities; safeguarding South Africa’s borders and territorial integrity; and cyber security.

Regarding the maintenance and expansion of South Africa’s defence capabilities, the implementation of the SA Defence Review 2014 would mean immediate, directed interventions to arrest the decline in critical defence capabilities, as well as landward defence, air defence, maritime defence and military health support programmes. There would be a focus on employing personnel and operationalising the Defence Works Formation (DWF). This would result in R951.8 million moved funds over the medium term.

New equipment would be acquired and systems developed, this would include what had been budgeted for medium and light transport aircraft; new generation mobile communication capability and precision guided air force ammunition; hydrographic vessel and offshore patrol vessels; upgrading of frigates and static communication; and replacing heavy weight torpedo capability. A Military Skills Development System (MSDS) would continue to give effect to the one-force concept and was expected to grow to 81 108 members by 2017/18.

The second focus was safeguarding South Africa’s borders and territorial integrity. This would be done with thirteen landward sub-units, which was not sufficient, as 21 landward sub-units were actually needed. The expenditure was projected to be R2.8 billion over medium term.

The last focus was on cyber security. The Department was finalising a Cyber Warfare Strategy in 2015/16 and establishing a Cyber Command by 2018/19, this was part of the Defence Intelligence programme. The projected cost for Cyber Security was R511 million.

Budget
The Department’s budget had increased by 4% in the financial year, and the budget for the 2015/2016 financial year was R44.579 billion. There were increases in programmes 1, 2, 3, 5, 6, 7 and 8, and a decrease in programme 4 which is Air Defence. This was of concern because it related to flying hours, and the decrease would reduce the already limited flying hours. Another concern was that the personnel budget needed to move from 55% to 45% as indicated in the review, which was a challenge for the Department.

With regards to performance indicators, the figures of defence attaché offices differed in the different documents (43 in the ENE as opposed to 41 in 2015 APP). This was because the number of MSDS members had decreased which was problematic because there was a great need for them. The number of flying hours that were targeted was less than the numbers flown in 2013/2014. This was also the case with regards to sea hours.

Personnel information
The number of funded posts as of 31 March 2015 was 77 605. The number of funded posts for the year 2015/2016 would be 79 445. This number was expected to grow to 81 108 in 2017/2018.
 
Programme 3 (Operational Requirements) and Programme 8 (DWF staffing) saw the biggest increases and the Air Defence programme saw the biggest decrease. Mr Daniels asked the Committee to consider challenges such as how the Department would manage the reduction to 72 000 by the end of Milestone 1? What were the exit plans? Would personnel be reskilled, what was the criteria for this and would they be retrenched or transferred to other Departments? What had caused the reduction in the Air Defence programme?

Strategic planning milestones to restore defence capabilities
Planning Milestone 1 (2015 – 2020) was to arrest the decline in critical capabilities through immediate, directed interventions. Planning Milestone 2 was to rebalance and re-organise the Defence Force as the foundation for future growth. Planning Milestone 3 was to create the sustainable Defence Force that can meet current ordered defence commitments.
Planning Milestone 4 was to enhance the Defence Force’s capacity to respond to nascent challenges in the strategic environment. Planning Milestone 5 was to defend the Republic against insurgency and/or armed conflict to the level of limited war. Milestone 5 reflects the Constitutional mandate to its fullest possible extent.

Defence Enterprise Risks
The Department reported a disconnect between the Defence Mandate and the Budget Vote, arguing that the budget had left them with an inability to execute the Constitutional mandate. Further, there was inadequate DOD organisational structure which could compromise expected defence output. An ineffective feeder system and exit mechanism was impairing defence for rejuvenation. DOD facilities and infrastructure were deteriorating, which had a negative effect on morale and could result in litigation and non-compliance.

Non-verifiable DOD performance information may lead to unreliable financial and non-financial information. There had also been an increase in fraud and corruption, due to weaknesses in internal controls. The inability of the DOD to abide by its prescribed policies and procedures was resulting in a high prevalence of litigation. Finally, possible land claims could impact defence readiness and deployment capabilities as they may result in forfeited rights on DOD Property.

Ministerial priorities
Ministerial priorities included strategic leadership, which entailed the development of directives and implementation mandates, and the appointment of leadership and project teams. The defence funding model involved the development of the model and the identification and direction of preservation funding. Organisational renewal entailed the re-positioning of the Defence Secretariat, establishment of a defence accountability concept and establishing a delegation regime. Human resources (HR) renewal, which involved right-sizing the personnel component and strengthening the DOD HR Value Chain. Capacity renewal, which entailed enhancing domain awareness and establishing Special Operations Forces. Defence Industry involved the development and implementation of the Defence Industry Strategy and establishing a focussed and aligned defence industry. Defence commitments entailed optimising border safeguarding and internal operations, intervention operations, peace missions and regional assistance operations.

Priorities of the Chief South African National Defence Force (SANDF)
He also highlighted the priorities of the Chief South African National Defence Force (SANDF). The priorities included the strategic direction, outlined in the Defence Review 2014; the restructuring of the SANDF according to Defence Review guidelines; the renovation of DOD facilities, including Defence Works Formation; the development and maintenance of strategic Reserves, which was important for possible future eventualities; the implementation of HR strategy, including downsizing and the one force concept; the revitalisation and effective utilisation of Reserves, including increased utilisation of borders and peacekeeping; the enforcement of military discipline; and the development of SANDF capabilities.

Analysis of Departmental budget
Wilhelm Janse van Rensburg, Researcher: Joint Standing Committee (JSC) on Defence, presented an analysis of the Department’s budget for the 2015/16 financial year. In terms of the Minister’s priorities and the strategic plan, he pointed out a few issues of concern to the Committee. These issues were: the repositioning of the Defence Secretariat; the right-sizing of the SANDF; the organisational restructuring; the decentralisation of the procurement system; capability renewal and the Defence Review Implementation Plan.

With regards to the Chief SANDF’s key priorities he pointed out the following points for inquiry: the key features of the HR strategy; how would the revitalisation of the Reserves be conducted? The possible development of a Coast Guard; and aspects other than Project Hoefyster that would serve to renew the Landward Defence Capability.

The following trends were identified during the first three quarters of 2014/2015. Generally spending was lower than expected. There was an overall slow spending in the general support programme, the air defence programme, the administration programme, on goods and services, and on buildings and fixed structures. However, there was high spending on machinery and equipment and a high balance of the special defence account. In terms of the adjusted estimates, National Treasury also noted a reduction in the reimbursement by the United Nations (UN).

Areas of concern in the 2015/2016 budget and Annual Performance Plan

It was suggested that the Committee look into several key areas of concern in the 2015/2016 budget and Annual Performance Plan for the Department. There was decreased allocation for oil, fuel and gas and decreased spending on specialised military equipment, which would impact operations, flying and sea hours, and the Cyber Security initiative.

In terms of personnel figures, the Department was not aligned with Milestone 1 of the Defence Review which stipulated that there should be a total of 72 000 regulars, Reserves and defence civilians, yet the Department had 77 605 at that time. This number was expected to increase to 81 108 in 2015/2016 financial year.

In Programme 1: Administration, there was an increased personnel allocation and associated costs (mostly new personnel additions to DOD for this programme) that the Committee should enquire about. The 2015/16 Annual Performance Plans combined the performance indicators of the Secretariat and the DOD. Some performance targets were difficult to measure, the Department needed to set targets that were actually measureable; information was scarce on the National Youth Service Plan; there was a low MSDS intake but an increased call-up for the Reserves; there was an increase in Defence Attaché offices; and lastly legal support for SANDF deployments.

In Programme 2: Force Employment, Sub-programme 4: Regional Security was decreased. Mr Janse van Rensburg urged the Committee to ask how this would impact existing deployment, Southern African Development Community (SADC) Standby Force (SSF) Training and African Capacity for Immediate Response to Crises (Acirc) preparation. Spending on training and development had decreased which was of concern. He also urged the Committee to enquire why the performance targets were being classified, and to enquire about static performance targets in terms of border safeguarding.

In Programme 3: Landward Defence, areas of concern were Sub-programme 1: Strategic Direction being prioritised and increases in Sub-programme 4: Artillery Capability and Sub-programme 5: Air Defence Artillery Capability. Sub-programme 7: Operational Intelligence should be commended and followed up on. Other concerns included the increase in the use of contractors; the decrease in clothing spending and the impact of Project Hoefyster.

In Programme 4: Air Defence, Sub-programme 4: Transport and Maritime Capability saw a decrease in its budget and there were concerns about the impact on support to the South African Navy and Maritime patrols. Sub-programme 7: Command and Control Capability saw an increase in its budget; Mr Janse van Rensburg encouraged the Committee to question what contributed to this large increase. Sub-programme 10: Training Capability also saw a decrease in its budget, which was of concern because it had a possible negative impact of reduced training. Other issues of concern included decreased allocation of fuel, oil and gas; the acquisition of medium to light transport aircraft; new generation mobile communication capacity to be acquired and no increase in flying hours.

In Programme 5: Maritime Defence, Sub-programme 3: Maritime Logistic Support Capability saw a decrease in its budget; Mr W Janse van Rensburg encouraged the Committee to question the impact this had on the South African Navy operations. Sub-programme 4: Maritime Human Resources and Training Capability saw an increase in its budget, he encouraged the Committee to question what this would mean in relation to deceased MSDS intake. Other aspects noted in this programme included: the decrease in “Inventory (Other Supplies)”, it was not clear what these other supplies were; the reduced use of contractors; the purpose of an increased budget in 2016/2017; the breakdown of sea hours required and the patrolling of South Africa’s offshore interests.

In Programme 6: Military Health Support, both Sub-programme 2: Mobile Military Health Support and Sub-programme 5: Military Health Product Support Capability saw a decrease in their budgets. The Committee was encouraged to question the impact the decrease in Sub-programme 2 would have on SANDF Operational deployments and what the impact of the decrease in Sub-programme 5 would be. The Committee was urged to inquire how much was spent on outsourcing patients, and concerns were raised about a R300 million increase in the compensation of employees.

In Programme 7: Defence Intelligence, Sub-programme 2: Operations saw a decrease in its budget, which may have an impact on Defence Intelligence (DI) products and vetting. 75 Members would be added to this programme, which may not be enough to handle increased requirements for Vetting and Cyber Security. There was an overall reduction in Defence intelligence products.

In Programme 8: General Support, Sub-programme 1: Joint Logistic Services saw an
increase in its budget, the reasons for this expansion were questioned. Sub-programme 5: Departmental Support saw a decrease in its budget, the impact of which should be investigated. There was an increase in the compensation of employees, no allocation for Specialised Military Equipment and a decreased target for Capital Works Plan Projects.

Discussion
The Chairperson opened up the floor for any questions, points of clarity and engagement.

Mr D Maynier (DA) thanked the content advisor and research team, he complimented them on an outstanding job on their analysis and questions raised, which he felt prepared the Committee for the budget debate and the presentation by the Department. He asked if it was possible for the researchers to apply their minds and produce further information which would assist the Committee in deliberating on the budget and debate. He asked if it was possible to determine how much was actually spent on defence in the 2015/2016 budget. What proportion of the total expenditure was being spent on personnel? What was the total budgeted expenditure for acquisition and the eight programmes? What was the total surplus in the special defence account at the end of the financial year, and what was committed and what was not committed?

He asked for the Coast Guard reference in the Defence Review book to be pointed out to him because he had not come across it.

The Chairperson asked what was meant by slow and high spending in relation to the Public Financial Management Act.
 
Mr Janse van Rensburg explained that it was in relation to the Department’s own targets, what they had expected or planned to spend. So they were either spending lower or higher than they had anticipated or set. It therefore revealed something about the Department’s planning.

Second Term Committee programme
The programme was considered and adopted.

Department of Defence presentation of its allocated budget and 2015-2020 Strategic Plan & 2015 Annual Performance Plan
Dr Sam Gulube, Secretary for Defence and Military Veterans, explained that his presentation would focus on the budget.

Dr Gulube stated that South Africa’s defence budget was 1.1% of the country’s Gross Domestic Profit (GDP), which was low compared to other countries. He asked why it was so low and what the implications of this were. R5 million has been set-aside for Cyber Security. R280 million was needed for helicopters which had been acquired or they would have to be returned to their places of purchase.

He went through the number of various public entities that report to the executive authority, entities such as the Armaments Corporation of South Africa (ARMSCOR), their mandates and output deliverables.

The DOD had no conditional grants within the appropriated budget. The DOD had not entered into any Public-Private Partnership agreement but would like to establish such partnerships.

Discussion
Mr Maynier thanked the Secretary of Defence for his presentation and recognised and applauded that the key programmes were referenced in the estimates of national expenditure, which was the first in the past 6 years, which they needed to go further.

He was very concerned with the issue of acquisition and wanted to be clear on the question of the acquisition of a VIP aircraft. He asked if the Secretary of Defence would be willing to go on record and say that he was not aware of it and that nothing has been brought to his attention regarding approval or the signage. In the past there had been attempts to circumvent the ordinary Defence acquisition system. There was clear evidence that in 2012 the Department had tried to acquire these aircrafts through the Department of Enterprises and South African Airways (SAA) procurement system. The Department also tried circumventing Treasury systems and acquiring aircraft outside the ARMSCOR normal procurement system. Mr Maynier asked again if the Secretary of Defence was absolutely sure that there was no acquisition or procurement process currently under way in another Department, such as the Department of Enterprise or SAA. He asked if the Secretary of Defence could confirm on record that no VIP aircraft would be acquired or procured this year.

Dr Gulube explained that he was still waiting for the Airforce to give him a list of their requirements and wishes, which entail medium and light transport. He could say that at that moment he did not have that policy or document, but assured the Committee that if he did get it he would follow the correct processes to make sure that proper procedures were followed.

Mr Maynier asked if the Committee could be briefed on the name of each acquisition project and the estimated budget for these projects this year. If the Secretary of Defence was unable to do so, he wanted to know why because he had already disclosed a project and how much it cost, that project was the Landward programme which was allocated R1.8 billion.

Dr Gulube explained that at the beginning, the Department did not release any information but as the process went on they began releasing some information. Project names were not revealed due to confidentiality and in order to protect information. The money set aside was confidential, they could not share or release that information because other people in the Department would set the same figure for their projects.

In terms of policy, Mr Maynier commended the overview and said it was a good overview of where the Department was with the Defence Review. He asked who served on the Defence implementation committee and how the committee would interact with Treasury in order to ensure that the implementation plan was costed and funded and would be able to be implemented.

Dr Gulube explained that they were still working on a plan. They already had numbers as to how much it would cost and that the implementation plan still had to go to the mandate committee. When they presented the plan to the committee, they would also present the structure. The Department acknowledged the fact that the committee drove the plan and structure.

Mr Maynier said he was excited about Cyber Security. He wanted to know whether the government had a national security strategy and if so, where was it.

Dr Gulube responded that the Department of Justice and Constitutional Correction had established a Cyber Security Policy Framework and developed a Cyber Security Policy Framework that the cabinet approved. This policy framework was classified and not for public consumption. Departments were required to develop their own Cyber Security policy that was in line with the Cyber Security Policy Framework.

Mr Maynier was very concerned with the language used in the presentation and Defence Review where it said “reposition Defence Secretariat’. He wanted clarity on what this meant and wanted the Secretary of Defence to assure him that it did not mean that the Secretary of Defence was considering relinquishing his powers as accounting officer.

Dr Gulube assured the Committee that the accounting powers of the Secretariat would not be removed or relinquished. He acknowledged that this was not clear in the review and explained that debate took place on this matter.

Mr Maynier suggested that an amendment be made in the review in order to get rid of any confusion surrounding the matter.

Mr Maynier was concerned about the establishment of a Coast Guard and wanted the Secretary of Defence to comment on this on two fronts, firstly on the constitutionality of it, and secondly, on the efficiency of it, he wanted to know why a Coast Guard was being established when the country already had a navy.
 
Dr Gulube asked if questions related to this could be put on hold. The establishment of a Coast Guard was still under consideration, when plans became clearer on the matter he would let the Committee know. The Border Management Agency was currently meeting with the Department of Home Affairs to discuss it and this process had many implications for the establishment of a Coast Guard.

Mr Esau (DA) asked for clarity on the capacity within the Department to implement Cyber Security and he asked for the warfare plan.

He spoke about the successful decrease in maritime piracy on the East Coast and how South Africa was effective in achieving this, and asked whether there was consideration to extend this security to the West Coast of the African continent.

Dr Gulube responded that there were no plans to extend security to the West Coast of the African continent.

Mr Esau pointed out that Milestone 1 clearly stipulated that there should be a permanent force of 72 000 soldiers yet the Department was moving up to 81 000 soldiers. What were the financial implications of this problem? If the Department did not deal with the super numeracy within the Defence Force, the Department would face problems in the future especially in terms of paying compensation.

Maj Gen Michael Ramantswana, Chief of Military Policy, Strategy and Planning, explained that as you retain, the numbers are translated into a career service figure, which is why the review reads 81 000 soldiers.

Mr Esau asked for clarity around the accountability concept mentioned in the presentation. He wanted to know what it meant, what it implied and how it would be different from what was currently happening, because there was currently a hierarchical structure within the Department and there was civilian oversight.

He asked what the communication strategy entailed and how effective it was. What were the implications of decentralising recruitment? Did the Department had the capacity, and were there measures in place to ensure that nepotism and corruption did not creep into the system? Capacity needed to be built at the lowest levels where appointments take place.

He wanted to know what was meant by ‘delegation regime’ and what the implications were.
Restructuring came with many complications and financial implications. What was the vision? What did the Department plan to do? Was it in line with the Defence Review and the core structure and design? What do we understand by restructuring?

Maj Gen Ramantswana explained that restructuring was dealt with adequately in the Defence Review.

With regards to procurement and decentralisation, Mr Esau agreed that there was a need to share and give more responsibility but argued that there needed to be clear standards of procedures in place to prevent fraud and corruption, which were a great challenge.

Dr Gulube responded that decentralisation had taken place in three places, Simonstown, Bloemfontein and Port Elizabeth. He also wanted one in Durban but the Department could not expand until it had gotten the balance right.

Mr Esau asked for the implications of enhancing intelligence at all levels and how it affected the expansion of the tactical and defence intelligence.

Which countries had the Department identified and what agreements had been made in order to establish forward bases? Chartering flights was a huge cost, he asked whether the country could afford it and suggested that the costs be shared with other countries.

Dr Gulube said no agreements had been signed. There were defence cooperation deals with the United States, Canada, Europe and a number of other Republics. 

With regards to border safeguarding, Mr Esau said that it was problematic that there was an increasing number of Reserves being used in safeguarding borders because it also meant an increase in the cost and promotion of Reserves. How could Reserves be incorporated more into the Department in order to cut the costs of Reserves?

Mr Nesi (ANC) was confused by the idea of Reserves; he asked why they exist when soldiers could be used. He was also opposed to the idea of Reserves working for other country’s armies while working for the South African army, he saw this as a problem of accountability and loyalty. He suggested that Reserves strictly work for one army, the South African army.

Maj Gen Ramantswana answered the questions and concerns around the issue of Reserves generally. Reserves were cheaper to maintain. Reserves and soldiers were trained in the same way. The only difference was that Reserves were not full time cut could be called upon at any time. He acknowledged the concerns of the Committee, but explained that Reserves were a required balancing act and were needed as a backup plan.
 
Mr Esau asked for the ‘cradle to grave’ concept to be explained, how the concept was designed and how it worked. How many people were over-aged in their rank?

Maj Gen Ramantswana said that the ‘cradle to grave’ concept was more a military GPS or compass to the future. He understood and acknowledged the fact that it implied organisational renewal, but it was more related to the management of soldiers. It helped the Department manage recruitment, development and training. It informed the Department how they should train and develop their soldiers, and it helped them determine the right age for certain training and what qualifications were needed.

Mr Esau was concerned with the amount of risk the soldiers were being placed in, especially when they were involved in warfare, due to flying hours and fuel costs being cut. How did these changes impact the performance of the pilots and navy, as it compromised their performance and put them at risk?

Dr Gulube explained that there was not much that could be said around this matter because it was a matter of the Department needing more money so that it did not need to decrease fuel or flying hours.

Mr Esau asked what the 36 promotional events involved and what events there were for the permanent force, because currently the events taking place were mostly for soldiers.
He asked for clarity around the concept of ‘defence ethics management’, could the concept be defined and put into perspective with relation to target setting?

Maj Gen Ramantswana explained that it was a new concept that was emerging and it was one that could not be ignored. It had to do with the issue of ethics which the Department took seriously especially in the fight against corruption.

Mr Esau noted that the budget allocation for office accommodation had increased tremendously. How protected was the previous space was and what service did the office actually render?

Dr Gulube responded that they were currently dealing with the laws around this.

Mr Esau noted that on the issue of UN Remittance, the previous year there was a 75% repayment indicated in the budget but in the current year it had been removed. South Africa always paid upfront for all its missions, if the country did not get the money back the Department budget suffered. It was a problem when South Africa suffered from international or continental missions that they were involved in. He asked why this information was classified because if the UN was responsible for paying back the money, the Committee needed to place pressure on them to pay back the money.

Mr Bongo (ANC) expressed the Committee’s appreciation of the work the Department did and emphasised that their work was not taken lightly. He suggested that a legislative process be established in terms of Reserves. He was very impressed by the Cyber Security initiative. How was the Department interacting with the state security on this matter?

Dr Gulube explained that the Department was cooperating with state security. He agreed that a legislative process needed to be established.

Mr Bongo sympathises with the Secretary of Defence on the matter of acquisition, but explained that the Department could not afford to have R120 million go down the drain. If the Department needed these aircrafts, then a decision must be taken by management to get these aircrafts. He suggested that the Department look at medium term payment, payment over three or five years, for acquiring these aircrafts.

He was weary of the Secretary of Defence disclosing project names and budgets, especially if they had nothing to do with the Committee and its role in oversight. He suggested that the Committee focus on issues that fall under oversight. He excused himself from the meeting due to other commitments.

Mr Nesi was worried about the budget decreases. He rejected the decreases made by the budget because they compromised the professionalism and quality of the army. He also spoke on the transformation of the army and asked how young black people were going to make it up the ranks.

Maj Gen Ramantswana responded that the review was referring to transformation in terms of equipment, personnel and so on. It spoke of transformation in order to enable the force to meet its Constitutional mandate.

The Chairperson suggested that further questions or issues of concern be sent to the Secretary of Defence. The Committee agreed to this but asked that the Secretary of Defence ensure that he sent the responses before the budget debate.

The meeting was adjourned.