The Committee was briefed by the Department of Defence (DoD) on its third quarter financial and non-financial performance report. The scope of the briefing by the Secretary of Defence included legislative requirements, non-financial performance information, the overall quarterly performance status, financial performance information and the Budgetary Review and Recommendations (BRRR) dashboard feedback for the second and third quarters. The Department had recorded high performances against targets in most of its programmes during the quarter.
Areas where the DoD recorded a 100% achievement against its targets in Administration (Programme One) were the timely submission of all accountability documents – such as annual reports, early warning reports, senior management service (SMS) financial disclosures – and ensuring relevant and quality policy products in pursuit of defence diplomacy. Under Programme Two (Force Employment), 100% had been recorded in regional security, force employment for border safeguarding and for safety and security support, search and rescue, compliance with the Southern African Development Community (SADC) force pledge, and the joint, interdepartmental, interagency and multinational military exercises conducted in the year, while in Programme Three (Landward Defence), the targets were achieved for general military assistance and compliance with DoD training. Programme Seven (Defence Intelligence) saw the achievement of targets for compliance with the DoD’s governance promulgation schedule.
Areas of under-achievement included the number of hours at sea by the naval forces, and the target for having modernised, sustainable departmental information communication technology (ICT) with integrated prime systems capabilities. Reasons given for the shortfalls were the serviceability of the naval fleet, which made it impossible to achieve the number of hours committed by the navy. With regard to the naval fleet, the DoD had completed the acquisition of a new inshore patrol vessel, three offshore patrol vessels and hydro vessels, to improve the future performance of the naval force. Various management interventions were in place to ensure modernised, sustainable ICT capabilities.
The unaudited expenditure of the Department as at 31 December 2016 was R34.004 billion (72.1%) against the approved planned expenditure of R33.575 billion (71.2%) from the R47.170 billion appropriated budget, resulting in an over-expenditure of R428.2 million (1.3%). Both the actual and planned expenditures of most of the programmes were almost the same.
Actions taken by the DoD on the recommendations of the Committee on the Budgetary Review and Recommendations Report (BRRR) were also presented. It reported that the clerks and secretaries who had been remunerated at salary levels exceeding their grade determination had been placed on the correct salary notches. Also, priority had been given to expedite the Military Discipline Bill, and it would be served at the Justice, Crime Prevention and Security (JCPS) cluster development committee for approval to submit to Cabinet by June 2017.
Questions asked by Members included whether the DoD had presented reports on the Special Defence Account (SDA), what the Department’s expenses and challenges were in respect of border control, what the impact and objective of its targets were, whether it had fully consulted with other departments on the Military Discipline Bill, what the cost implications were of training more soldiers instead of using the money for other prevailing issues, why it proposed to train 150 pilots under the Medium Term Strategic Framework (MTSF) when the planes and flying hours were not enough, and why the DoD did not replace the VIP squadron aircraft to ensure long-term savings instead of hiring. They also wanted to know why the Military Discipline Bill presented in 2014 had not yet been finalised, and why there were sudden under and over expenditures in planning, advertising, machinery, leases, accommodation, and border control. They sought clarity on whether only a delegated small group would undertake an oversight visit to the Congo, and the reason for invalidated invoices which prevented the Department from meeting the 30-day settlement requirement.
Department of Defence performance report
Dr Sam Gulube, Secretary for Defence, said the presentation would be based on legislative requirements, non-financial performance information, the overall quarterly performance status, financial performance information and the Budgetary Review and Recommendations (BRRR) dashboard feedback for the second and third quarters. Actions taken on the recommendations made by the Committee on the BRRR had been captured under the dashboard feedback in the report. The Department of Defence (DoD) had eight programmes, with each having performance indicators which had been examined. These were Administration, Force Employment, Landward Defence, Air Defence, Maritime Defence, Military Health Support, Defence Intelligence and General Support.
Within Programme One (Administration), the main areas that was monitored were the submission of accountability documents, policy/strategy approval, human resource requirements, corruption and fraud identified (including litigation) and other general matters relating to the implementation of the medium term sector finance outcomes. The noteworthy achievements for the third quarter were that all accountability documents, such as annual reports, early warning reports, and senior management service (SMS) financial disclosures, were submitted on time; 83% of legitimate invoices were paid within 30 days; 72% of armament acquisition and 90% of technology development commitments were approved and were on track; and 100% of relevant and quality policy products were implemented in pursuit of defence diplomacy.
Under Programme Two (Force Employment), the DoD had a 100% compliance on the number of ordered commitments -- internal and external -- and also in respect of the number of landward sub-units deployed on border safeguarding per year. The South African National Defence Force (SANDF) continued to participate in United Nations peace support operations in the Democratic Republic of Congo (DRC) and provided counter piracy operations support in the Mozambique Channel during this quarter. On internal operations, 15 sub-units were deployed as part of border safe-guarding in all the border-lying provinces. The successes during this quarter were that 17 weapons were recovered along the border, 1 303 illegal immigrants were apprehended, 126 criminal were arrested, 37 stolen vehicles were recovered, stolen stock, illicit gold and silver were recovered, and contraband was also confiscated. There was a 100% compliance with the Southern African Development Community (SADC) standby force pledge.
In Programme Three (Landward Defense), the general military assistance focused on support given to the countries in terms of training and the development of military strategies. The training for the DRC had been completed, but the opportunity for further training was still open. The DoD had targeted to train 280 members of the army, but had trained 830 during this period because they had more people to be trained for the rotational duties that lay ahead.
Programme Four (Air Defence) had targeted 5 000 hours of force employment hours for the year, but had achieved about 2 908, with 2 752 hours flown by force employment and about 155 hours on VIP flights. The DoD training target was 22% (207) but 27% (240) had been achieved.
On Programme Five (Maritime Defence), the Navy had a less than 50% achievement after three quarters in the number of hours at sea. This was due to the serviceability of their fleet -- equipment had not always been available to meet the number of hours committed. The DoD had completed the acquisition of a new inshore patrol vessel, three offshore patrol vessels and the hydro vessels, which should help to achieve future targets The Navy had surpassed the target for the number of personnel that were trained.
On Programme Six (Military Health Support), there had been a target of 535 137 health care consultations, but 501 411 consultations had taken place. Although the third quarter target had been slightly under achieved due to fewer routine consultations in December 2016, the cumulative health care activities for the first three quarters were on-track. The targets for training under military health support had also been achieved.
For Programme Seven (Defence Intelligence), one of the objectives was to develop a cyber warfare strategy. The strategy was expected to reach its target in the fourth quarter, but this would not be possible due to financial constraints. Defence Intelligence was also responsible for developing the sensor strategy used for border safeguarding and coastal lines of defence, for which the draft had been produced and was in the process of internal consultation.
In Programme Eight (General Support), logistics services were meant to produce procurement policies by revising existing policies to to reflect the changes that were taking place, for example, in the National Treasury. The Department might not achieve its target on logistics, because it was waiting for National Treasury to conclude its procurement policy so that the DoD could align its policy. The logistics department had completed about 98% of procurement requests within 90 days. There had been 96% utilisation of endowment properties. Only 14% of information communication technology (ICT) strategy had been realised against a target of 22.88%.
Various management interventions had been put in place to ensure modernised, sustainable ICT capabilities. The DoD ICT strategy had been updated and was awaiting approval, the DoD ICT capability plan was ready for promulgation after the approval of the ICT strategy had been obtained, and the ICT capability project – the Milestones Delivery Plan -- had been revised in order to ensure completion of the approved milestones by the end of 2016/17 Financial year. The DoD was behind in its ICT targets because it was in consultation with the National Treasury and the Department of Public Service and Administration (DPSA), to ensure uniformity in human resources (HR) and the supply chain.
The military police had exceeded its targets in the projected number of deliberate crime prevention operations, the back-log of criminal cases investigated and the number of criminal cases investigated within the year. It had achieved 100% of its target for the investigation of fraud and corruption.
On financial performance, the unaudited expenditure of the DoD as at 31 December 2016 had been R34.004 billion (72.1%) against the approved planned expenditure of R33.575 billion (71.2%) from a R47.170 billion appropriated budget, resulting in an over-expenditure of R428.2 million (1.3%) which fell within the accepted guideline for expenditure variance. The planned and actual expenditures of most of the programmes were almost equal. Factors that had contributed to negative or positive balances of more than 8% of actual drawings per economic classification were that the over-expenditure of R348.5 million (258.1%) was mainly due to accrual payments from the 2015/16 financial year for the mobility packages used in operations, the Department of Public Works’ capital works programme, and passenger motor vehicles. Available funds were presented in the budget as approved by Parliament and excluded internal fund reallocations, which would be included within the appropriation statement at financial year-end. Also, the over-expenditure of R1.5 million (100%) was mainly due to transactions that created or increased outstanding debtors’ amounts, as well as foreign exchange losses, thefts and other losses. Funds had been reserved for this purpose and would be part of the final virement at the year-end.
Dr Gulube continued by giving a feedback on the BRRR recommendations received by the DoD from the Portfolio Committee. He said the Committee had recommended that the DoD should reduce the number of members that were remunerated at salary levels exceeding grade determination. Clerks and secretaries that were remunerated at salary levels exceeding their grade determination had been placed on the correct salary notches, but the DOD had not yet instituted any action to recover overpayment because it was waiting for the outcome of arbitration.
On recommendations that the DoD should finalise the Military Disciplinary Bill as a matter of urgency, there were still issues of alignment between military justice and civil justice which had brought about a number of debates, such as whether military judges should be members of the Defence Force. Action had been expedited on the Bill, and it was hoped the Committee would give their support to ensure that it was finalised.
On the request to update the Committee on progress related to the finalisation of outstanding policies and strategies, a total of 167 from all functional environments were on record as being promulgated, against which the Department had been audited. The relevance/validity of the requirement of 45 policies that had been registered as “policies in development” was currently being reviewed. Nine policies had been processed and were awaiting corporate approval.
Regarding the payment of service providers within the stipulated 30 days, the DoD had had difficulty in complying with the payment of all invoices within the prescribed timeframe, but had still managed to pay 100 205 legitimate invoices out of the 120 985 invoices received. This achievement implied a 5% increase in the percentage of payments compared to those concluded in the previous quarter, and could be attributed to interim interventions and actions, such as the implementation of an invoice tracking system within the limited capabilities of the financial management system and the non-integrated logistical systems. There had also been integrated training of personnel to improve the capacity and capability to reduce invoice processing time and improve the accuracy of the invoice tracking system. Efforts had been made to ensure that only legitimate and payable invoices were measured in the performance evaluation process. The problem of 30-day payment was limited to the validation of invoices, but as soon as invoices were validated, payments were guaranteed between seven to ten days. He promised to give a progress report on quicker validation of invoices.
The Minister had requested that the Committee should provide the names of Committee Members who had committed to going on the oversight visit to the peace-keeping operation to Monasco in the DRC, which was currently one of the major operations of the DoD. The implementation plan for the 2015 Defence Review was ready with the costing. It had three costing options, and the DoD was ready to present it to the Committee. The DoD had compensated because of the withdrawal of the operation in Sudan and in not calling up the Military Skills Development System (MSDS), and by cutting down targets had helped to survive the 2016/17financial year. The DoD did not have a clear-cut view of how to survive the next financial year, but it would continue to engage with the National Treasury.
The Chairperson observed that the report stated that the military health support programme had under-achieved due to fewer consultations, and asked if the Portfolio Committee should appraise the DoD as an under-achiever.
Mr S Marais (DA) said that looking at the targets, the DoD had performed well, but on a critical assessment of the deliverables that any Defence Force should have -- specifically in terms of the Constitution and the Defence Review -- it was not performing excellently. In the presentation for second and third quarters, there was the anomaly of having a target of 25% and an achievement of around 24%. The assumption would be a 50% achievement for the two quarters, hence he requested a clarification. The Department had spoken about the administration performance indicators, but had not mentioned the Special Defence Account (SDA). He wanted clarification on whether the DoD had presented reports on the SDA, and to whom. He asked if the achievement of 15 targets deployed (slide 13) was at a specific date, or whether at any period there were always 15 units on ground, because during President Zuma’s visit to the northern border of KwaZulu-Natal, he had requested an increase in the number of soldiers on ground. He asked how the DoD proposed to achieve the remaining target of 2 000 target hours, because the squadron aircraft was presently grounded, and this implies that if all of the targeted 5 000 hours were flown, this would be in excess of the budget. He asked why the DoD trained staff to fly the VIP Squadron when the President, Deputy Present and the Ministers had not flown in the aircraft since June, 2016. How did the DoD propose to meet the 12 000 hours target on maritime defence output when it was presently below 50% at the end of the third quarter. The Portfolio Committee had to assist with the serviceability of the budget, because without a budget the DoD’s vessels could not fulfil their function. He wanted clarity on how 100% of the budget would be expended, when the reports showed that the DoD was far below the critical budget outcomes stated on slide 37 -- air defence 99.7% and maritime defence 97% -- and it was presently far below the targeted flying and maritime hours.
Ms B Dambuza (ANC) observed that border control expenditures were a priority and the Committee needed to be informed about the expenses. The DoD had to state its challenges with border control, and she encouraged it to set timeframe targets on strategies developed, as merely stating that strategies were in place was not enough. She supported Mr Marais’ submission that the 100% budget expenditure needed clarification, and asked the DoD to state the impact and objective of the targets set and the achievements. It should state whether it had defence mechanisms against departments that would later complain that they were not consulted on the Bill, and asked the DoD to provide a list of its objectives and its policies to the Portfolio Committee.
Mr S Esau (DA) complimented the DoD on its consequence management on corruption practices that impacted negatively on the DoD. Actions to clamp down on contraband and illegal trade across the border had exceeded targets, despite the resources available, but the DoD could improve. Exceeding the landward defence output target by 20% was a positive development, but he asked the DoD to state what the cost implication was of training more soldiers instead of using the money for other prevailing issues. He suggested that there should be a contingency on home loans for all the armed forces in case of any eventualities. Why did the DoD propose to train 150 pilots under the Medium Term Strategic Framework (MTSF) when the planes and flying hours were not enough? How did it propose to achieve its budgeted targets when it presently struggled with serviceability and maintenance of its vessels, which impacted on anti-piracy and sea hours? He asked about the status of the Armaments Corporation of South Africa (ARMSCOR) alternative development funding project, because the SANDF should have already generated the feasibility reports. He sought clarification of whether the Treasury had been misinterpreted due to the conflicting budget amounts stated by DoD and Treasury under the Defence Review, including clarity on the “milestones,” because the Committee understood “milestones” to mean packages, but Treasury’s position was different, which concerned the Committee. He expressed concern over the R127 million put towards compensation for defence intelligence from the Special Defence Account (SDA), as it was over and above what had been planned. He requested an update on the retrenchment of armed forces proposed by Treasury that had been implemented by DoD, despite assurances that retrenchments would not occur. He asked if the DoD had military judges before the military disciplinary Bill was resolved, to ensure the Bill was not rendered useless. He also expressed concern over the under-performance of the Department in the ICT area, when the State Information Technology Agency (SITA) had been able to assist other departments. He sought an update on the Durban facility, and an explanation for why there were sudden under and over expenditures in planning, advertising, machinery, leases, accommodation and border control, and for clarity on why only a delegated small group would visit the Congo. Why were salaries capped, and what were the reasons for invalidated invoices, because if people were constantly non-compliant with regulations they should be removed from the register of service providers, as they made the Department fail to make payments within 30 days?
Mr B Bongo (ANC) advised the DoD to implement measures that checked if invoices met the yardstick of revalidation; examine the issues of over and under expenditure on assets, because they might lead to challenges with the Auditor General; clarify if the DoD was in tune with Treasury for funding for the peace-keeping forces; and submit the implementation plan for the Defence Review to the Portfolio Committee. He asked why it did not replace the VIP squadron aircraft to ensure long-term savings, instead of hiring. Why had the Military Discipline Bill presented in 2014 not been finalised? The Department should address the force multiplier issue on technology, and getting past the issues would assist in getting the Border Management Bill passed.
The Chairperson remarked that the Committee had no reason to address the critical and non-critical deliverables at another time, because it was charged with oversight of the DoD’s annual performance plans, so it would always want to have feedback on the critical and non-critical deliverables within the framework of the APP of the financial year when the Department presented its quarterly reports.
Dr Gulube committed to present its critical and non-critical deliverables and agreed with the Chairperson in terms of the military health Indicators, but pointed out that when the military did not have so many consultations as against the targets, it was actually good news because more members of the SANDF were healthy. On targets and their impact, a consideration of the assessments on border safeguarding showed that 22 companies were needed to be deployed to safeguard the Botswana, Namibian, Mozambique and Lesotho borders, but the when the allocated budget had been received, 22 companies could not be deployed. National Treasury (NT) had therefore advised the DoD to work within the budget limits, which allowed only 15 companies to be deployed. The impact was that the SA’s borders were still porous, but according to NT the target was 100% achieved, but the impact had not been 100% because fewer companies had been deployed to the border. This matter required engagements with the Portfolio Committee and when the DoD presented the Defence Review, the strategy to achieve all targets and the impacts on the targets would be addressed. During the brief, he had focused on only the third quarter, therefore the source document that covered all quarters would be circulated to the Committee, the report concerning the SDA had been presented in a closed meeting, and had been submitted to the Auditor General (AG). The DoD would work with the Chairperson, because the SDA report was a sensitive matter. Even when the AG indicated that sensitive matters had limited scope, these sensitive matters constituted less than 1% of the DoD’s budget.
Mr Marais said that he had asked for the information because the DoD had never reported on the SDA to the Committee, even in a closed session.
The Chairperson responded that it was up to the Committee to request a closed meeting with the DoD.
Mr Marais replied that that would be his request.
Dr Gulube said that the DoD would be happy work with the Committee to achieve its objectives. Despite the sea hours achieved when the activities after the quarter ended were considered, it was possible to achieve the targeted sea hours. The exercises included going down to the Gulf of Guinea, where the naval forces passed by Nigeria, Angola and Namibia, and the exercise of Good Hope would assist the DoD in meeting the targets. The DoD still had challenges on the serviceability of its vessels, but would be able to do better if provided with more resources. The Chief of the Air Force was engaging on the challenges of the VIP squadron aircraft. Training of air officers was still on-going, based on the Defence Review, and the DoD hoped to get more equipment when the economy of the country improved. The DoD would like to do better, but the performance so far was good, based on the funds available. The Sensor Strategy was a vital part of the Defence Review. The first step had been developed and would address the force multipliers specifically in the DoD’s coastal lines.
He agreed that the Military Discipline Bill should be fast tracked. The Minister of Defence had prioritised the Bill and a lot of time had been spent on consultation, and he therefore believed that this should not be an issue. A strong infrastructure, internal audit and military policies were all used to ensure that the DoD fought corruption and fraud effectively. The number of pilots trained was based on the request of the air force. There was a decline in the availability of pilots in the air force and this required a catch-up on the backlog.
Dr Gulube said that the DoD was engaging with the National Treasury on projects like leveraging assets, and working together with the Armaments Corporation of South Africa (ARMSCOR) and United the Nations (UN) on the re-investment funds for the deployment of DoD members in peace-keeping operations. The DoD would get back to the Committee as soon as conclusions were reached on the deliberations. The movement of funds from the SDA for the compensation of employees had been done with the approval of the National Treasury, and the Auditor General would not have allowed the DoD to move funds if regulations had not been adhered to. The rejuvenation of the SANDF was still a matter for internal consultation. The Minister had promised to present the rejuvenation of the SANDF and the issues with the compensation of employees to the Committee.
The SITA Act required that a letter must be collected from SITA saying that SITA had failed to assist, therefore giving permission to the Department to acquire its own ICT, and since SITA would not want to issue this kind of letter, the DoD had been working on improving its relationship with SITA to avoid non-performance in the area of ICT. The DoD was engaged in a discussion with the National Treasury and the Department of Public Service to find a system that could validate the invoices more quickly than it was currently. There was a need to replace the VIP squadron’s aircraft, and this was a project of the SANDF, but the replacement would depend on time and budget availability.
After a robust engagement, the DoD and Department of Home Affairs had come to an agreement on the border management, and there was a commitment for the two departments to work together. The border line protection (land and coastal lines) would be the responsibility of the SANDF, but the law enforcement of the border lines would be the responsibility of the law enforcement agency. The protection and law enforcement of the air space was the responsibility of the SANDF.
Mr Siphiwe Sokhela, Chief Financial Officer, DoD, said information on over payment and over expenditure would be sent in writing to the Committee. The DoD evaluated programmes quarterly to identify those that were not spending accordingly, and hence did a virement in terms of section 43 of the Procurement and Finance Management Act. The law required that the virement could not be more than 8% and was also audited by the Auditor General. At no stage had the DoD used the SDA as a ‘slush fund’ because it was guided by the SDA Act. He was surprised and found it disturbing that the National Treasury had given a figure of R1.6 billion against the DoD’s figure of R43 Billion. This had been done without engaging with the DoD, and he did not know how the National Treasury had arrived at such a figure.
Major General Michael Ramantswana, Chief of Military Police Strategy and Planning, said the role players working to operationalise the naval dockyard were AMSCO, who were the contracting agents, and Denel, which had the management role. The final takeover would possibly take place by the end of the financial year. He emphasised that the upgrade of the facilities in Durban was critical, because they were centra; to two planning streams -- the Departmental planning process and the Defence Review. It was important to establish them into a full-fledged naval base so as to assist in maritime security on the eastern side of the country.
Mr Marais said the budget did not give a breakdown of the number of VIP aircraft and lease hours, as had been done in the previous year. He asked if the DoD planned to sell the VIP squadron aircraft in order to buy a new aircraft, because there was no need for two.
Mr Esau asked the DOD to state the six targets of the defence intelligence; explain why vehicles were not dispatched to the borders when there were thousands of refurbished vehicles in Pretoria; why the border patrol lacked patrol vans to monitor the perimeter; and advised the DoD to look into how security could be improved at the defence bases.
Dr Gulube said the six targets of defence intelligence were different kinds of intelligence reports. He also promised to take the issue of improving security at the defence force bases to the National Command Council.
The Chairperson asked if the delegates had found the questions of the Committee Members helpful and said the responses were helpful in sharpening the oversight role of the Committee. He said that the Committee had been advised that the National Treasury was in support of re-investing in the UN fund by the DoD.
Mr Marais commended the Secretary of Defence for his openness and accessibility, which was evident in the way that he dealt with issues.
The meeting was adjourned.
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