The Department of Defence (DOD) presented its 2016/17 Annual Performance Plan and budget. The Secretary for Defence noted that budget remained a major concern, and the fact that the budget was nowhere near the ideal figure meant that the SA Defence Review, a plan that would unfold over the next 25 years to make the Defence Force able to defend the country against any directed threat, was no closer to fruition. Further delays would make the process even longer. The first of the five milestones, that was intended to arrest the decline in critical capabilities through immediate directed interventions, could not even be implemented yet. Furthermore, the DOD had been told about a substantial decrease in the Special Defence Account which meant that major projects there would need to be put on hold. There was some doubt over the security of national borders as six more sub-units were needed, but there was no budget for them so that they were no longer included in the targets. However, he noted that there was a major project on the borders using advanced technology to distinguish between movements, and this was a project that was led by black women and used young upcoming black engineers. The Department had plans to leverage extra funding, but requested the assistance of the Committee to get those funds ring-fenced. It had taken certain steps even before National Treasury had agreed to the ring-fencing, and thought that the Minister of Finance might be able to give special approval, although the Public Finance Management Act had not yet been amended to make the movement of the funding primarily possible. The planned actions included disposal of redundant and surplus equipment, raising charges for intellectual property use, the possibility of public/private partnerships. Another challenge raised, both by the Secretary of Defence and the Committee, related to compensation of the 78 000 DOD employees. The compensation of employees budget amounted to 57% of the Department’s total budget, in contrast to the ideal 40%, and Cabinet had lowered the budget. Here too, the DOD was already working on plans to maximise the talent it had available by offering expertise, at a fee, to other departments. Some of the expenditure trends and major targets in the landward defence, air defence and maritime programmes were described. R4.6 billion over the medium-term was provided for five external operations which includes UN/AU mandated peace support operations in the Democratic Republic of the Congo (DRC) and Sudan and supporting the Mozambican government with counter piracy operations. The Cyber-warfare strategy should be ready for implementation in this year and a Cyber Command Centre was being established. The DOD was constructing a Base hospital in Port Elizabeth.
Member asked questions about the defence milestones, the payment of invoices within 30 days targets, and how the DOD was dealing with an ageing army, and what it was doing for military veterans. One Member thought that it would be important to have a workshop, to address issues such as the overall strategy, the border controls, sea borders, whether more defence operations should not be included in Operation Phakisa. They asked about the maintenance figures, the use of foreign trainers, what the main priorities were, and questioned allocations for fuel, oil and gas, which appeared to be contradictory to declining flying hours in the Air Force. In general, Members supported the idea of ring-fencing but one Member thought that perhaps policy needed to be re-thought so that not everything was directed to one central fund. Members were worried whether the first stage of the Defence Review could be funded at all, and asked what exactly the Committee was expected to do. Members were pleased to hear about the initiatives in using engineering capacity and asked for further details on how this had been deployed already. Members also asked for clarity on the Darfur withdrawal and the effect of this on the budget, asked for updates on specific projects, why there were problems in getting medicine to soldiers, questioned the apparent conflict in figures for the Military Skills Development Systems enrolments, and what the DOD was doing about its legal cases, and the progress on the the Military Discipline Bill. They also asked for a status report on Denel and the Saudi-Arabia project mentioned in the press. They also asked for a report on the Border Management Agency, and the DOD asked that this Committee should keep in close contact with the Portfolio Committee on Home Affairs considered the Bill. All Members agreed that a workshop would be a good idea to address many of the issues raised.
Department of Defence (DOD) on its 2016 Annual Performance Plan and budget
Dr Sam Gulube, Secretary of Defence, tabled the Department of Defence (DOD or the Department) Annual Performance Plan and budget. He assured the Committee that his presentation had been formatted to meet the requirements of National Treasury and the Presidency. The Department was proud that the Presidency has selected the DOD and the public entities within the DOD as the benchmark for strategic planning for all government departments and public entities.
Dr Gulube noted that main challenge facing the DOD was one of funding. A budget figure of around 2.5% to 3% of total GDP was considered to be based on good practices and scientifically evaluated systems, yet South Africa’s defence budget for 2016/17 is only 1.05% of the expected GDP, which fell below even the minimum of 1.5% that the DOD thought workable.
The SA Defence Review 2015 had consisted of five strategic planning milestones - the first being “to arrest the decline in critical capabilities through immediate directed inventions”. However, this could not yet be implemented due to no additional funding to fund the implementation. He noted that DOD had asked for an amount of R1.8 billion in July 2015.
The other milestones, in the approved SA Defence Review, are:
- Rebalance and re-organise the Defence Force as the foundation for future growth,
- Create a sustainable Defence Force able to meet ordered defence commitments,
- Enhance the Defence Force’s capacity to respond to emerging threats and a wide range of strategic challenges,
- Ensure defence of the Republic against any directed threat.
Each of these milestones will take five years to complete, although the process will be an integrated one involving all milestones from the start. The estimated total cost for the SA Defence Review is approximately R118 billion.
Dr Gulube said currently the DOD is running a risk of losing some of its capabilities, thus compromising national security. The decline is visible in the slow pace of renewal, maintenance and repair of prime mission equipment. Poor equipment hampers UN reimbursements in the battlefield, for the UN only reimburses operational equipment.
Dr Gulube shared with the Committee that furthermore the DOD was recently informed that it will not receive a R350 million budget allocation in the Special Defence Account (SDA)
Another major challenge is the compensation of 78 000 DOD employees. The compensation of employees constitutes 57% of the Department’s total expenditure. As part of Cabinet’s decision to lower the national aggregate expenditure ceiling, the DOD’s budget has been reduced by R1.9 billion for 2017/18 and R2.9 billion for 2018/19.
The DOD had done work on the 2017/18 Medium Term Expenditure Framework (MTEF) to identify domains in which cost savings can be achieved as well as identifying domains that may be practically used to provide funding leverage for the DOD in the short, medium and long term. Dr Gulube’s repeated plea to the Committee was to help the DOD to ring fence these potential leverage funds. Rather than waiting for National Treasury to do so, the DOD had in the meantime already identified three categories for potential leverage funds. These were: long term leasing; the provision of services for payment (this entails being reimbursed by local government for disaster management services) and obsolete equipment (as the mandate to dispose already existing defence material)
The plans that the DOD had under each of these included:
- Reimbursements for operations conducted under a UN mandate,
- Disposals of redundant and/or surplus defence equipment,
- Ensuring that intellectual property is adequately and appropriately compensated for when used by third parties,
- Public private partnerships,
- Compensation/or recovery of cost when work is done for other Department,
- Partnerships and agreements with external partners.
Dr Gulube said that the DOD was convinced they could meet the shortfall if such funds can be leveraged and ring fenced for the DOD.
He commented on the National Development Plan (NDP) requirements. The DOD believed it had one of the largest interns-intake figures of all Departments. Outside of the military, it usually took in around 1 500 interns.
In the Landward Defence programme, as an expenditure trend, the Department will be replacing the infantry combat vehicle, developing a mobile water provisioning system and a mass field feeding system. Dr Gulube joked that a hungry soldier could be an angry soldier.
For 2018/19 the increase in the Air Defence programme is for the development of 3D radar and “smart bombs”. The main reason for the large increase in expenditure in the Maritime Combat Capability programme is to update static communication in the SA Navy by 2017/18.
An amount of R4.6 billion over the medium-term is provided for five external operations which includes UN/AU mandated peace support operations in the Democratic Republic of the Congo (DRC) and Sudan and supporting the Mozambican government with counter piracy operations.
As part of meeting the the government outcome that “all people in South Africa are and feel safe” the Department’s cyber warfare strategy is expected to be ready for implementation by 2016/17. Ten South African National Defence Force (SANDF) members are working on the establishment of a Cyber Command Centre - a classified project – for which R340 million has been budgeted. It will be fully established by 2018/19.
Dr Gulube said that, although there is a need for hospitals in KwaZulu Natal and Limpopo as well, the DOD’s large infrastructure project for the moment was the construction of a Base hospital in Port Elizabeth.
6 000 members are being trained for border safeguarding. Although 21 sub-units, for border safeguarding, are needed ideally, the projected figure (due to budget constraints) for 2016/17 up to 2018/19 is 15 such units.
DOD concluded by giving a break-down of 12 end states for milestone 1 of the SA Defence Review 2015. Dr Gulube said that by the end of July the full cost for milestone 1 will be finalised.
The Chairperson thanked Dr Gulube and noted that the milestones of the SA Defence Review were not all inter-related, and questioned the time frames for implementation of each milestone.
Mr D Gamede (ANC) raised the issue of payment of invoices within 30 days, and asked if the target of making such payments in 75% of cases was not too low. Many small and medium enterprises (SMEs) had to close down because of payments not received on time.
He also asked how DOD was dealing with an ageing army, in which new employees were needed, but it already had 57% of its budget going to HR costs, compared to other departments that had around 40% of budget for such costs. He asked if the DOD was anticipating that it would lose some employees, and if it perhaps had other plans to lower employee costs.
The Chairperson elaborated on the 75% target for paying invoices within 30 days and asked how the 25% of SMEs who were not paid in time would cope.
Mr S Marais (DA) observed that so many challenges were highlighted by the Secretary of Defence that he believed that it was necessary to arrange a workshop between the Committee and the Department, to work out the conflicting issues. He noted that the Department had a “fantastic” Defence Review and National Development Plan, but no money to implement them. If milestone 1 was not addressed soon, it would take longer for the Defence Review to be completed.
He asked whether that was maybe leading the Committee and the Department to review the strategy of the SANDF, and he asked whether the focus should be on peacekeeping, border control or traditional warfare? He said that he sees protection of South Africa’s sovereignty as the major focus for the SANDF, and therefore he was very concerned about having only 13 to 15 border control sub-units. He knew the SANDF could probably not protect the border with so few units and asked if a complement to that should not be then to enhance air-lift capabilities.
He noted that South Africa also has a major problem with its sea borders and was of the opinion that included in Operation Phakisa (which was an initiative designed to fast track the implementation of solutions on critical development issues) should then be air-lift capabilities as well.
Mr Marais said that the same point was true also for peace keeping operations in Africa, for it had been reported to the Committee that troops are having problems losing rebels in swamps, because the rebels are faster in their own territory. Not having air-lift capabilities weakens the Defence Force tremendously.
Another concern was the decline in maintenance, including problems with the Presidential jet Inkwazi, as well as the decrease in transport and maritime capability, which would certainly affects Operation Phakisa and South Africa's border control.
Mr Marais asked about the priorities and the increase in fuel, oil and gas allocations, especially in the light of a decrease in flying hours, which seemed to be contradictory. He asked about the impact of Armscor on this.
Mr Marais would support the idea of ring fencing money but commented that government policy is to have only one central fund into which everything goes, and that was giving rise to the intense competition between departments. He suggested that government policy would need to be amended. Realistically, he thought that milestone 1 will not be funded if National Treasury had already declined the request for funding. He asked if was not necessary for the Minister of Defence and Military Veterans to meet up with the Department of Finance and ask how the country was to position the Defence Force into the future. He would not like the DOD to be “fooled” into thinking that the Committee's efforts might achieve more funding, if the money was not there in the first place.
Mr Marais mentioned that the old C-133 aircraft did not have refuel capabilities and said that this surely made it impossible to do proper patrols and go back to base.
He was also concerned that South Africa had very little training capabilities so that money was going out of the country, to Russia and Cuba specifically, and he asked what specifically was the problem with the capabilities.
Mr B Bongo (ANC) said he appreciated that the DOD was doing a good job. He wondered if it should not be upscaling technology to help with the problem of border control. He did not agree that ring-fencing money leveraged by the DOD would be likely to be a problem, and suggested that the Committee should meet with National Treasury. He said DOD should move with speed implementing the leasing of properties. He agreed with the Chairperson on the issue of an integrated approach for the Defence Review.
He mentioned that Department of Public Works will also benefit from the maintenance of Defence Force equipment and was worried about people left without work amidst the employment crisis. Finally, he commented that he was pleased to see progressive steps made by the DOD.
Dr Gulube firstly dealt with the question of payment of suppliers within 30 days. The 75% target for 30-days payment was submitted to National Treasury in November 2015. He was at that stage personally assisting with a project, involving training and modernising IT-systems, to improve the DOD’s timeous payments, and over the past three months this figure had actually gone up to 85%, although it could not be changed in the document approved in November. Internally, the DOD had set new targets of 90% already. He was quite aware of the impact that late payments had on SMEs. However, the efforts to pay on time were sometimes hampered, and he cited an example of invoices for fuel arriving at his desk before the actual fuel arrived at a Defence Force Base, which should clearly not be paid in advance of the goods arriving.
The DOD would be happy to hold a workshop with the Committee.
Dr Gulube said that it was necessary to analyse the challenges around the HR budget, and to think about what the DOD might have done better. The DOD had certainly had challenges in amalgamating the different forces and units since the SANDF was established, and that might have hindered the SANDF from effectively rejuvenating itself at the same time. However, it had submitted a HR plan to the Department of Public Service and Administration. This involves Military Exit Mechanisms (MEMs), but once these are in the domain of Public Service and Administration, there can still be some frustrations, for that is then subject to transformation imperatives as well. He cited the example of a 65-year old soldier who might be told that he cannot leave because he is black, and the policies have effectively then tied the hands of the SANDF. It might be that the Minister might need to be approached to give individual approvals and exceptions.
Attrition, which implies that a member leaving need not necessarily be replaced, might be another solution. Dr Gulube said that he was working very closely with the Chief of the Defence Force, on re-scaling, and considering, for instance, the major role that SANDF employees might play in other fields, such as engineers for local municipalities in their water reticulation and vehicle maintenance. With the help of a contract signed with Cuban technicians, 140 army vehicles such as Ratels and others that had been lying unused were refurbished in the last three months, to be now combat ready and available for the Southern African Development Community (SADC) Stand By Force and the African Stand By Force. He commented that Levels 1 and 2 maintenance can now be done in-house. These are all examples of rescaling and the Defence Works Formation that will, slowly but surely, work towards a decrease in the DOD’s Wage bill.
He emphasised that DOD needed user friendly HR policies from the Department for Public Service and Administration. He said that the DOD hoped to gradually move down to the ideal 40% wage bill marker without retrenching, but rather through restructuring and rescaling.
Dr Gulube noted that DOD needed Parliament to kindly assist in solving the challenges. The DOD was still waiting for the amendment of the Public Finance Management Act (PFMA) that was drafted in Parliament. He was under the impression that the Minister of Finance is able to give exemptions in certain circumstances and the DOD will be very specific about the areas of funds it wished to withhold for itself.
Dr Gulube mentioned an interesting research and development (R&D) programme for which a substantial budget was put aside. Through the Council for Science and Industrial Research (CSIR) a radar system is being developed that can differentiate between and humans and animals on the border. This research was being run by black women who are hiring young black technologically-advanced engineers and he hoped to have reports on their progress in a year’s time.
Dr Gulube shared his knowledge that the SA Air Force (SAAF) is in the process of reprioritising its budget towards air-lifting and air-refuelling. The discussion about C1-30’s is still continuing and Dr Gulube will become involved once those discussions have been finalised. The decline in maintenance of Air Force equipment is partially due to the limited fleet and the fact that the Air Force has to hold back longer when the time comes to service one of its aircraft.
He explained that the flying hours does not include the hours needed for training, but only the hours for employment, and it was those hours that showed a decline.
He agreed that operating leases were a challenge because the SAAF had to lease when it did not have aircraft available.
He noted that the SANDF in general did want all training to be done locally, but had found, after trying this for some time that there were limitations when trying to have pilots (in particular) trained locally. The short and medium term solution is now to train the pilots overseas. He admitted that it is a major challenge and it is being addressed in the Defence Review.
Dr Gulube agreed with Mr Bongo that 15 sub units for border defence and control were not enough, but the reason for the target having dropped was simply that DOD should not put an increased target in, if it knew that it would not reach that because of the budget constraints. He also agreed about the need for technology.
Dr Gulube conceded that it was true that the Defence Review ideals were in clear conflict with the DOD’s budget, and said that this is the right place and time to ask what kind of Defence Force South Africa wants. He expressed the hope that the budget vote will be a debate about exactly that issue. He would be asking the Minister, next week, to request Parliament to assist with the request for funding for the Defence Review. This had been a major issue since he took the position as Secretary of Defence in 2012.
The Chairperson agreed that a debate was a good idea, and said the Defence Review is an important document. He assured the DOD that the Committee will look at all the matters raised, and make an informed decision.
Mr B Nesi (ANC) said he was happy to hear that the Committee and DOD were discussing the implementation of the Defence Review. He was pleased to hear about the possible help to municipalities, and he asked whether, as part of the rescaling programme, bridges might be built in rural areas where rain did damage to roads and people were unable to access schools and clinics.
Mr S Esau (DA) asked for clarity on the Darfur withdrawal and if that would not lead to reduction in the budget. He said the question about the additional fuel bought by the Department was not answered, and repeated the question what it was used for. This was the first time that he had seen the DOD speak of flying hours in the report. He noted that the sea hours were reduced from 16 000 to 12 000 and that there was a decrease for fuel and gas in the maritime section that will result in less patrols.
He wanted an update on Project Biro (six new offshore and inshore patrol vessels) and Project Hotel (a new hydrographic vessel).
Mr Esau wanted to know why, when there is more money for health, there was still a problem getting medicine to soldiers.
He also noted conflicting figures for the enrolments in the Military Skills Development System (MSDS), pointing out that one figure mentioned 4000 and another mentioned 6000.
He was concerned that the DOD appeared to be ignoring its legal matters and not dealing with the situation, with current litigation such as the “Portugal Case” and asked whether there were contingency plans. He noted that despite talk over the last two years on the Military Disciplinary Bill, the Bill had not yet been tabled and he asked why there had not been any appointments of military judges.
He asked for the real status on the matters reported in the press about Denel and the weapons factory in Saudi Arabia?
Mr Marais asked if questions about the Special Defence Account (SDA) can be asked in this meeting, and he told the Chairperson, in answer to the Chairperson's query, that it was mentioned in the report.
Mr Bongo felt that the Committee should only be raising issues that related to the budget; there would be another meeting in the next two weeks.
The Chairperson agreed that that is the understanding.
Mr Marais asked why there was a huge reduction of R350 million in the SDA – the account out of which specialised equipment is bought. He thought it was likely to have massive implications. He asked how this would affect the country's capability to acquire aircraft.
He pointed out that getting in foreigners, such as Cubans, to work seemed to be contradictory to the NDP. He asked what the restructuring of the DOD meant in “layman’s terms”. He also wanted to hear about the status and involvement of the Border Control Management Agency on border control.
Mr N Khosa (EFF) asked how the DOD saw Parliament’s contribution to the co-ordination of funding and what exactly the DOD was asking Parliament to do. He asked for more detail whether the military veterans were being taken into account in respect of the refurbishments happening in the DOD. He said he also wanted to ask about the legal matters. He acknowledged that the DOD does not have a lot of authority over what happens with the SDA.
Dr Gulube answered that the Defence Force had additional equipment for bridges that were no longer required, and that Bailey Bridges were built in Limpopo and the Eastern Cape. The Defence Force ran out of this equipment, but if the Department of Public Works were to buy leftover equipment from elsewhere in the public sector, the DOD would be happy to use its engineers to roll-out bridges again.
He said that if there were any savings from withdrawing in Darfur those would be re-prioritised, perhaps towards operations in the DRC. He said the UN was reimbursing the DOD for its operations in Darfur and that it would therefore now lose these reimbursements so that the savings would not in fact be that substantial.
He said the clarity on the issue about fuel and flying hours lies in the fact that the SAAF was only reporting about operational hours, not including training and preparation, and that additional fuel was required for additional deployment from time to time.
Project Biro and Project Hotel were in the process of privatisation. Tenders have gone out, preliminary reports were received and it was indicated that the DOD does not have the money so new proposals are needed.
Dr Gulube said that up to now, medicines had been something that were under-budgeted, but the DOD was now happy that the budget seemed to be more realistic although perhaps the deliverables will not increase that much.
Dr Gulube explained that there was some confusion over the numbers in the MSDS. He reminded the Committee that the programme lasted over two years. This year, there were an extra 2 000 in the programme, but although there used to be 10 000 enrolled people, this figure had dropped. Dr Gulube said he has pleaded with the Minister to have 6 000 enrollees in the programme, given the importance of it in the Defence Review.
He agreed that the legal environment was a challenge, but as the quarterly report soon to be presented would show, the DOD had had some improved successes. As advised by National Treasury a Compliance Unit, to make sure the DOD was complying with labour regulations and other issues, had been established.
He said that the status of the Military Disciplinary Bill was very important. It was with the State Law Advisors, who had raised the question of how independent a judge could be if s/he was part of the Defence Force. However, Dr Gulube had made the point that the position of a military judge was similar to a military doctor. Both were in uniform but this would not keep them from making the right decisions according to their professions.
Dr Gulube did not know what the problem was with Denel and the visit to Saudi Arabia. He said he was part of the visit. Denel, which was a state-owned entity had assisted the Military Industry Company, which was a state-owned counterpart entity in Saudi Arabia, to build a plant to manufacture projectiles. These were the same Rheinmetall Denel projectiles that are manufactured in Potchefstroom. Engineers from Rheinmetall Denel, including around 25 young black engineers, went to Saudi Arabia to build the factory. The President went there to open the factory and the media, including the SABC were present. Dr Gulube said that he was concerned that the media had been very unscientific in their approach and could in fact have sourced the correct information on the internet rather than approaching the DOD. He commented that this was a ridiculous matter.
Dr Gulube noted that he got a letter from National Treasury saying there is a R350 million reduction in the SDA, and that DOD would have to reprioritise. This would definitely have an impact because projects such as Biro and Hotel are put on hold.
He clarified the issue of the Cubans in the vehicle maintenance project by saying they were there to train the SANDF to do the maintenance themselves. Dr Gulube said soldiers should be able to fix the vehicles themselves when they are out in the field, and this would also apply to the SAAF and the Marine forces. This would, in the long run, save money. The contract with the Cuban trainers was extended for another year after the good work on skills transfer that they did in Potchefstroom and Bloemfontein. Dr Gulube said he is always being questioned by the DA about training MSDS, and then releasing them to society without other plans, but this was an area in which there would be benefits.
Dr Gulube attempted to put the issue of restructuring to rest by explaining all the different structures within the Department, such as the Internal Audit unit under the Public Finance Management Act (PFMA) and the Inspector General under the Defence Act. He said restructuring is simply changing these structures to a way that will bring efficiency. He said the Border Management Agency falls under the Department of Home Affairs. A multi-party agreement has just been signed. Dr Gulube said it was a “story for another day”.
Mr Marais suggested that this might be something to be addressed in the workshop.
Dr Gulube said that there was confusion over soldiers not having authority to arrest when it is expected of them to control border lines and coastal lines. That authority lies with border guards and coastal guards. He said the DOD was co-operating with the Border Management Agency Bill and asked this Committee to assist and interrogate although the Bill itself would be dealt with by the Portfolio Committee on Home Affairs, when it came from the National Economic Development and Labour Council (NEDLAC),
He appreciated the question about what the Committee can do and said that he would be asking it to assist the DOD.
The DOD was in the process of signing a memorandum of understanding with Military Veterans.
Dr Gulube said that it would be naive to think there is no threat for South Africa. A country with such a fragile economy as South Africa's could not afford any suggestion that it was not secure, as tourism will go down, jobs will be lost and the economy will suffer.
The meeting was adjourned.
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