Department of Defence 4th Quarter Performance Report 2014/15 & progress on strengthening Defence Works Formation; DMV 4th Quarter Performance Report 2014/15 & update on establishing & maintaining a reliable military veterans database

Meeting report

Opening Remarks

After the Chairperson had welcomed all those present and outlined the agenda of the meeting, Mr D Maynier (DA) objected and complained that the Committee was not in receipt of the primary documents that had previously been requested. These included a copy of the Defence Secretary’s Quarterly Performance Report and the National Treasury Expenditure Report. The reports would assist the Committee in holding the Department accountable. The Department should explain why the reports were being withheld from the Committee.

The Chairperson acknowledged the objection and said that the matter would be dealt with at an appropriate time during the course of the meeting.

Department of Defence presentation

Dr Sam Gulube, Secretary for Defence (SD), presented on the Department of Defence’s (DOD’s) expenditure and performance report for the fourth quarter of financial year 2014-15, which was the period from January to March 2015. He said that the Defence Secretariat consisted of a number of sub-programmes, which included policy and planning, financial services, acquisition services and defence international affairs. He gave a summary of the quarterly performance targets, and outlined the programmes of the South African National Defence Force (SANDF). These included Landward Defence, Air Defence, Military Health Support and Defence Intelligence. The budget allocation was R42.856 billion, of which the Department had spent R42.842 billion, or 99.97%. Factors that contributed to the under-spending per programme were presented.

Discussion

Mr D Maynier (DA) made reference to the current situation in Uganda, where one of the South African battalions taken out of the Democratic Republic of Congo (DRC) were reportedly stranded at Entebbe in Uganda and could not be transported back to SA. Could the Secretary of Defence clarify the status of the battalion and if the facts were indeed true. If they were true, was there a plan in place to transfer that battalion back to SA? There should be an inquiry into the matter in order to ensure that a similar situation did not occur again. The reports presented had been designed to obscure the real facts which were contained in three reports. These were the Secretary of Defence’s performance report, the Chief of the SA National Defence Force’s quarterly performance report and the National Treasury quarterly expenditure report. Why were these reports being withheld from the Committee? The claim was that the Department had spent more than 99% of its budget, R14.8 million had been repatriated to the National Treasury and the under-spending rate was about 0.03%. This was either a misstatement or an understatement. The surplus unspent in the Special Defence account -- whether committed or not committed -- was about R3.5 billion, which would mean that the under-spending rate, depending on the size of the surplus, was somewhere between 8% and 10%, which was R3.8 billion to R5 billion. Could that be clarified? Reference had been made to under-spending in the Landward Programme because of incapacity in the defence industry. He asked the Secretary of Defence to be more specific. What was that referring to – specifically, which programme and what company in the defence industry was responsible and did not have the capacity to deal with the issue.

Mr L Mbinda (PAC) said that risk management told exactly what was happening in a department, and therefore he did not understand why the Secretary had said that the Department was awaiting results from Treasury. Could the Secretary provide clarity on this? There were key performance areas that were concerning, such as the issue of 30 days’ payment, which was one that was affecting departments throughout the country and must be looked into. The issue of financial disclosure should also be dealt with, because it was a matter of misconduct. The report presented had not been audited, but had there been no internal process to audit or verify the information that had been presented? At what point did one say that the information reflected the situation in a department if there was no internal audit process? The issue of not dealing with disputes meant that somebody was not doing their job. Grievances would obviously affect the performance of the overall department. Had the organisation’s structure been populated properly? There were a lot of vacancies that needed to be filled. If the spending pattern was a true reflection of what was happening on the ground, then the Department must be commended for it.

Mr J Skosana (ANC) applauded the Department for the work done. He pointed out that the issue of disclosure was a government policy matter. A follow-up must be made, so that everybody was on board. Although some were deployed outside the country, there must be a mechanism put in place on how to get hold of them to make sure that they disclosed their interests. The delays within the Public Works Department were worrisome because when working with two or three departments, there were some challenges. What mechanisms had been put in pIace to make sure that the issues of delays were addressed? If it were political, it needed a political solution and if it was administrative, it needed an administrative solution.

Mr S Esau (DA) said that there were a number of targets that reflected on issues that were connected to each other and if there was a failure within the internal audit it, had a direct impact on the performance of the rest. It was no surprise that there had been a lack of performance in other areas, because the one area that was a problem was the internal audit area. The Committee had been promised that those issues would be addressed as a matter of urgency, besides that ICT system that needed to be upgraded. Referring to Senior Management Service (SMS) disclosures, he said there had been 89% disclosure in the fourth quarter report, but for the three other quarters the individuals concerned had not been taken to task, yet that was considered as an act of misconduct. All the SMS disclosures must be signed in the first quarter, so there should be answers provided on this matter, since this was a fourth quarter report. He agreed with the Defence Secretary about verified receipts, and asked if there had been a 100% performance. If so, then the balance would mean that people had not complied and submitted the proper documentation for the processing, and the accounts were normally suspended. What was the actual status of that arrangement? In terms of government policy there was a 30-day deadline to pay for all accounts that were verified and in order, and the balance of the accounts was suspended. If suspended, did they go to a 60-day period, a 90-day period, a 120-day period or beyond that? The Chief Financial Officer (CFO) was fully aware of the status of all accounts.

Mr Esau referred to the foreign policy issue, saying that the country had been involved in many matters but the foreign policy had not yet been approved. The Department of International Relations and Cooperation claimed that the foreign policy was there, but the reality was whether this foreign policy had been officially adopted as the foreign policy of SA? It had been on the website and was then removed from it. Was the DOD acting under uncertainty where there is no formal document that governs external relations with other countries as well as the missions that we are involved in? Was there uncertainty when there was no formal document that governed external relations with other countries, as well as the missions that the country was involved in? The defence policies must be in order. Was analysis of the DOD done in the absence of the SDA account? If it was done with the SDA then certainly it was outside the variants that were provided for by government which means it was in contravention of government regulation. He could not agree that there had been no improvement in respect of grievances, as that was one of the worst things that impacted on the morale of any department or soldier, and that should be addressed. The performance level indicated was pathetic.

The Department had admitted that it was exposed to litigation and the chances were that they would lose the cases. Had that been quantified and had a contingency budget been put in place to cater for those eventualities where the Department had to pay out by court order? How did that impact on the budget of a department that was already complaining of insufficient funds to provide for all its operations. Litigation was the unknown factor which had a direct impact on performance and where money was spent, besides the unfunded mandates. The internal audit had been accepted as partly functional. Could somebody operate something that was partly functional -- because that could not work? The Department’s audit report had been qualified, and one of the matters raised had been on tangible assets. Leeway had been given to the Department to fix all those things and make adjustments to the policies. This had been happening for the past few years. Why had this not yet been addressed? The report stated that the structure and organisation was in place but this should not be indicated in the presentation as green (achieved), but rather red (not achieved).

The Chairperson asked Mr Esau to clarify what suspended accounts in verified invoices were.

Mr Esau replied that this referred to the work that had been done by service providers to the Department. Once they had been accepted and awarded the tender, they finished the job and they handed in their receipts to be paid out. If all the receipts were in order and verified, it meant the Department could be efficient and have money issued. If all the documents were not submitted, the Department then delayed the payment and the account was suspended for 30, 60 or 90 days. The CFO managed all that.

Mr B Bongo (ANC) commended the Department for its effort and work. He said that the issues raised by the internal audit should be dealt with, because it gave an idea of what would happen with the external audit. He asked what efforts had been made in improving border controls, as discussed in previous meetings. The discretion to increase the retirement age from 60 years to 65 years must be regulated, because the Department might face litigation over it. It was a matter that affected other legislation, such as public service legislation. There were reports that military hospitals were unable to service patients, so what measures had been put in place to deal with the matter? What was the status of Operation Caribbean in terms of training young people and dealing with unemployment? The Department needed to move at a faster pace on transformation.

Mr D Gamede (ANC) suggested that there should be a Plan B in dealing with the 30-day payment matter. He proposed that invoices be verified on delivery. Why not do verification at the point of entry, before they were processed? He asked if the Department had ever called the suppliers and service providers to discuss this issue and educate them on how they themselves could speed up the process. When could the Human Resource Development Strategy (HRDS) be approved? A timeframe should be given to resolve the matter. At one stage, around the second quarter of 2014, there had been 100% disclosure, but currently it was at 89%. This means that there were people who had tainted this process and they must be identified. Soldiers must be happy at all times, so this was one department where there should not be many disputes and grievances. The presence of an Ombudsman was a good move by the Department, and there were quite a number of avenues to take when resolving disputes. In the fourth quarter, none of the disputes had been resolved. Was this because no disputes and grievances had been recorded or logged? This was because there had been a 0% resolution of disputes.

Mr Mbinda said that he was concerned because when one looks at the performance of the Department, it was appalling. Other Members were not doing justice by commending the Department on the work that it was doing. The Secretary for Defence had a duty to ensure that everybody was doing their work, although there were some areas where there had been an improvement. In order for managers to improve on their work, they needed to understand the issues involved. Even if the information in the report had been audited, there was potential for a disclaimer. The reports must still be verified and there should be evidence supporting what the Department said it had achieved, and it seems that would not be easy. He encouraged the Members to use the platform to highlight areas that should be improved on.

Mr Bongo replied on a point of order, that Members were required to comment on the report and not on the comments of other Members.

The Chairperson agreed that the comments should focus on the report.

Ms N Mnisi (ANC) made reference to the Ministerial Medical Task Team and how there had been a number of factors which were implicating negatively on the military health system. She asked how far the Department had gone in translating the recommendations by the task team into implementation.

Mr Maynier said it would help to know the individuals in the South African National Defence Force (SANDF) who had not disclosed, especially those who had not done so over a period of time. He proposed that the Secretary for Defence should make available the name, designation, rank and period of non-disclosure in writing.

Mr Bongo disagreed, saying that this move would amount to micro-management. The Committee should have trust in the system and follow the procedure that had to be followed when dealing with people who did not disclose.

Mr Esau referred to the reported over-spending in advertising, catering, and business and advisory services. When looking at the maintenance budget, had there been an impact because of the reduction in maintenance costs for the building upgrades? Was there a direct correlation with the use of the Defence Works Formation and cutting costs, by employing military veterans and former soldiers in the Formation to do work for the Department? Had that had an impact on the reduction of maintenance, because the costs were now lower, or had the cost been lowered and had an impact on the upgrade of facilities? The Department had met the target of 50% allocation of medical stock and had reported 54% medical stock allocation but clearly the military hospitals that offered services to the soldiers were operating on a 50% stock basis that needed to be replenished all the time. This was also prevalent in other general hospitals and clinics where stock was not always available, and patients had to wait in line. Were the soldiers and military veterans treated the same way, despite their service to the country?

The Chairperson asked that if the Committee were to oversee the Department on paying 100% of verified invoices, what measures were in place to determine whether non-payment was because of a delay in verifying.

Dr Gulube, Secretary of Defence, replied that there was an independent institution that audited the work of the DOD. It was unacceptable to say that the report presented was a disclaimer -- only the Auditor General could declare it a disclaimer. The situation in Uganda was mainly not of the Department’s making, and was due to the procurement process of the United Nations (UN). A chartered aircraft had not been given permission by the SA Department of Transport to fly to SA. The only engagement that he could do was to find out from the Department of Transport why the aircraft had not been given permission. The Department would investigate and see how a similar situation could be avoided in future. The report format was a dashboard as prescribed by the Presidency. The Department assured the Committee that it had committed itself to providing the same format used by National Treasury from the first quarter of 2015/16. The SDA was governed by law, to which the DOD had to comply. If funds allocated to the Department could not be spent during the stipulated time, then they could be rolled over to the following years and transferred to the SDA. The Secretary for Defence had transferred the money to the SDA and as far as the accounts were concerned, the DOD had spent 100% of its allocation. This year the figures showed that the Department had R9 billion in the SDA – R6 billion from this financial year and R3 billion from what had been rolled over from the previous year.

The incapacity of the defence industry was related to the maintenance of big vehicles. When taken for maintenance they could be kept for six months. In Operation Caribbean, the government had entered into an agreement with the Cuban armed forces. About 60 Cuban technicians and engineers were in the country, assisting with army vehicle repairs and maintenance. They were also training youngsters in military skills development. The number of young women who were being trained as mechanics was impressive. A report would be presented to Parliament and the Committee might like to visit some of the sites and see the work being done. Invoices showed that the work done on one of the vehicles would have cost the department R400 000, but with the assistance of the Cuban technicians and the local skilled soldiers, the vehicle had been repaired for R75 000.

Dr Gulube agreed that the issue on financial disclosure amounted to misconduct, and as the accounting officer he would do something about it. It might not be a good idea to name and shame the culprits in public, as this would cause more conflict. At one point he had wanted to withdraw the salaries of the people who had not disclosed, but had been advised that that was against the labour law. The National Treasury set the standards for risk management and had asked the Department to submit its risk management registry. The Department was dealing with that. On the issue of disputes, the Department reported on collective disputes and during the period reported on, there were no new collective disputes. However, concerning individual disputes, the Department was running at between 80% and 90% of disputes settled. The delays caused by other departments were true, and this posed as a challenge. There had been problems with delays in the Department of Public Works, but things were changing because the maintenance costs had been reduced. In one of the facilities, the private industry had quoted R5.2 million for repairs, and the Department had been able to do it for just above R2 million, including salaries.

The Committee should assist the Department with the 30-day payment issue, because the Department, the South African Police Service (SAPS) and the DPW were highlighted as the worst culprits. The verification should be done at the point of delivery. The problem was that at the point of delivery, there was an element of fraud and corruption. There were contingency measures in place to deal with the issue of litigation. 60% of the cases were labour-related, 20% were medical, accidents, fires were 10%, and 10% were contractual claims. The tangible assets were indicated as achieved in the presentation, because of the target that had been set, and there was a policy in place whose implementation was being monitored. Armscor wanted a 25% black economic empowerment (BEE) development policy for their contracts, because they wanted transformation in the defence industry, and as an accounting officer, the Secretary for Defence supported Armscor. The Auditor General had said that was irregular. The AG said that they were going to conduct an integrated audit which meant that the acquisition process would be audited, and not just the outcome. They had been happy with the intangible assets and had asked for a registry for them. This had been submitted and was yet to be sampled.

In terms of safeguarding South Africa’s borders, there was a need for 22 companies. Currently, however, there were 13 and therefore the borders were porous and that was a major challenge. In order for the Department to deploy 22 companies, an additional R4.4 billion was needed and training people for deployment would take a number of years. The Minister highlighted the intention to increase the companies to 15 this year. Increasing the retirement age to 65 was also the Minister’s call. The concern was the retention of strategic skills that were in the defence force. The Dockyard’s return to the Navy was being discussed, and the Minister had said that the issue should be resolved in the next 30 days. The human resource strategy approval was being awaited. The military health sector was losing a lot of doctors. The conditions of service for the doctors were being addressed, and progress was being made. An audit was under way, with those who passed the audit receiving back pay. The level of care was also improving and all the recommendations of the task team were being implemented. The matter of overspending on consultation and contractors had been addressed, and the over-spending was as a result of classification. There were army vehicles, navy ships and air force aircraft that had needed to be repaired and maintained, and all that work had been classified as consultancy. That explanation had been accepted, but had yet to be clarified with the National Treasury. The 50% allocation of medical stocks was unacceptable, but that was all the budget could afford. The Department wanted the medical stocks to be at a 70% level, but they were currently at 54% because of financial constraints.

Mr Maynier asked if there was a plan in place for the soldiers who were in Uganda to be transferred back to SA.

Mr Esau asked for clarity on what incapacity in the defence industry meant, and on the defence foreign policy that had not yet been finalised.

Dr Gulube replied that he could not confirm the plan for bringing the soldiers back to South Africa, but the Department had been working on a solution. The focus was on getting the DOT to issue a licence for the aircraft to travel. The issue on incapacity had been dealt with in relation to the army vehicles, which had previously been discussed.

Status update: Strengthening of the Defence Works Formation

The Secretary of Defence gave a brief update on the status of the Defence Works Formation. Cooperation between the DOD and the Department of Public Works (DPW) had greatly improved and joint plans between the two entities had been developed. The Director General was a former Chief Financial Officer in the DOD, and therefore there was a personal relationship between the task teams. Unfortunately, most of the plans failed to be implemented, because delays in service delivery from the DPW were still being experienced. A lot was being learnt in the process because the DPW did not do the work itself -- its consults and outsources to private companies. These processes take time. The constitution did not allow the DOD to do the work itself, therefore it allocates funds to the DPW. The National Treasury had said that since the DOD had the capacity to do the work itself, then it could do some of it. In financial year 2014/15, the DOD had been allowed to take R350 million that would normally have been given to the DPW. This was the first year that National Treasury had officially allocated funds to the Department for developing capacity internally. According to the Memorandum of Understanding (MOU), the Department was ready to take over 24% of the defence environment facilities. 72% were DPW facilities -- government buildings where the DOD was paying rentals -- and the rest were leased from the private sector through the DPW. 55% of the facilities were in a fair condition and 38% were in good condition. 2% were very poor, and 4% were in a poor condition. 

Discussion

Mr Esau sought clarity on the indication that certain buildings would be demolished.

Mr Gulube replied that it was best to engage with management on that matter.  The Department had said that the demolition programme had been set up with the DPW because they had the expertise. 

Military Veterans presentation

Mr Tsepe Motumi, Director General: Department of Military Veterans (DMV), outlined the mandate of the Department. He briefed the Committee on the fourth quarter (January to March 2015) expenditure and performance report, and outlined the mandate of the Department and the programmes, which were administration, socio-economic support and empowerment and stakeholder management. The overall performance per programme was outlined, as well as the performance against set targets as per the annual performance plan (APP). The DG gave an update on the establishment and maintenance of a reliable Military Veteran (MV) database, where there were currently 58 302 listed military veterans, of which 21 340 had been updated into the database during the year under review. The DMV was currently designing military veterans’ identification cards which would accommodate all the services that an individual MV was receiving.

Discussion

Mr Esau pointed out that performance levels indicated for programmes two and three were at 40% and 33%. That was unacceptable, because those were the services and benefits that the military veterans received. Administration had performed at 77%, which was not bad, because administration ensured the delivery of services. If one looked at the performance for the expenditure on employees, it was at R83 million. 92% of the salary bill had been spent, but the staff was not performing. An amount of R83 million for 131 employees meant their average salary was quite high. He requested a breakdown of the salary scales within the Department. The contract staff and interns amounted to an addition of only 95 people. The figures on the staff allocations were not accurate. Were there critical posts that had to be filled in order for the Department to perform better? To date, 20 750 records had been updated and verified. According to previous records, this should have been 22 800. In another presentation, the figure had been shown as 21 340. This showed a lack of consistency.

Could the Director General give some idea of the management report that preceded the final verdict of the Auditor General? Could the Department indicate the actual level of achievement of enterprise risk maturity out of the four levels that were there? What was the average number of days for payments for invoices? If they were verified, were they paid within 30 days? If they were not verified, were they suspended? Had the service level agreements (SLAs) on houses that were supposed to be allocated, been put in place? 1 000 houses had been planned for last year and this had not been achieved, but R78 million had been transferred. The average cost per house had been estimated at R78 000, but that was below the amount that had been allocated in terms of the policy, of R140 000. That needed to be adjusted. There was a target for unemployment that had been set in percentages, and the report showed figures. What was the one strategic objective that had been achieved, and what did it entail?

Ms Mnisi noted the improvement in different programmes and their targets. She commended the Department for providing 100% burial support to the veterans. She asked for clarity on how far the Department had gone in attending to a better facilitation for standardised funerals for military veterans through an initiative of burial support. Was there any time frame for when this was going to be operational? The DMV was in the process of amending the Military Veterans Act to accommodate dependents of military veterans, particularly with regard to the provision of health care. When could this be expected in Parliament?

The Chairperson said that there were gaps which had been identified and the Department should find out why there were those gaps and respond by letter to the Chairperson. In the next meeting, those gaps would be discussed.

Mr Mbinda asked for a breakdown of information on the database.

Mr Motumi replied that the Department would look into verifying the figures that had been pointed out as being inconsistent. The report of the Auditor General was not yet readily available. The issue on disclosure, figures and percentages had been reported to according to what the Department had currently attained, but it would report back on the enterprise risk maturity aspect. There were some invoices that had not been paid within 30 days for reasons such as the need for verification of the details of the entity which delivered the service, goods or products. That verification was being done with National Treasury, following the stipulated process. Incomplete documents submitted by the suppliers also resulted in delays of payment. Anyone who claimed military veteran status was checked and verified on the database. The Department was awaiting finalization of the amendment to the Act with regards to the dependents of military veterans. The standardisation of the burial support project had not yet been concluded. The Department was releasing the money to the family as gazetted, but had not got to the point of standardising support. The Department would make available a breakdown of the data base.

Mr Esau said that anybody who served in the forces before or after 1994 who was no longer an active soldier in the force be declared a military veteran, even though they may not receive any benefits. Why did the Department not put everybody on to a data base and sort them out in terms of the criteria. One either qualified or one did not. As it stood, there were people who had served in the military and this was not acknowledged, even though they did not receive any benefits. 

The Chairperson adjourned the meeting.