The Department of Defence and Military Veterans briefed the Committee on its first quarterly performance report for the 2017/18 financial year. 24 targets (71%) had been achieved, while ten targets (29%) were not achieved. With regard to financial performance, the unaudited expenditure of the Department as at 30 June 2017 had been R11.38 billion (23.4%), compared to the approved planned expenditure of R10.97 billion (22.6%) from the full year appropriated budget of R48.62 billion. This had resulted in an over-expenditure for the quarter of R413.782 million (3.8%). The Department was projecting an over-expenditure of R1.972 billion on the compensation of employees for the 2017/18 financial year.
Members expressed unhappiness over the performance of the Department. Questions were asked about how its work could generate money to fund its operations; whether 15 sub-units were capable of defending and safeguarding the country’s borders; whether the Committee could be briefed on cyber warfare strategy; how the air force’s flying hours were budgeted for; which squadrons had been affected; how often chartered aircraft were used to transport equipment; whether the Department’s human resource capacity was adequate and effective; and how to deal with the persistent challenge of South Africa’s porous borders.
The Committee was also briefed by the Department on its procurement challenges and the progress made with renovation projects.
The training of staff and officials, dealing with corrupt officials and the lengthy reviewing process were identified as some of the internal procurement challenges they encountered. Suppliers not delivering according to contracted government orders, poor invoicing and collusion by suppliers, were some of the external challenges. The DOD also provided an update on the progress made so far by the South African Military Health Service (SAMHS), with most of its projects being in their pre-design, design or construction stages.
Members raised issues related to the vetting of all DOD procurement personnel, and stressed the importance of having three bid adjudication committees. They criticised the Department’s database inefficiencies, pointing out that the DOD was causing its own problems because of this. They highlighted the significance of having well-functioning information communication technology (ICT) to avoid wasting money on procurement. They expressed concern over the slow progress of construction at 1 Military Hospital, and questioned the effectiveness of the involvement of the Department of Public Works (DPW) in the projects.
Regarding vetting, the DOD claimed that where there were any irregularities, they followed due processes when, for instance, people were seen to be living beyond their means. With regard to the bid evaluation committees, they said that there were indeed three committees -- a specification committee, an evaluation committee and an adjudication committee – and that furthermore each committee was guided by a constitution. They argued that the database was an efficient system, and while it might not always be efficient in pricing, it was always efficient in rotation.
The DOD assured the Committee that it was taking over responsibility for the progress of 1 Military Hospital from the DPW, and would be fully accountable for it. Members agreed to visit the projects themselves to verify the Department’s progress.
The Chairperson said that the first matter to be dealt would be the first quarter report, as Dr Sam Gulube, the Secretary of Defence, who would present it, would have to leave the meeting early.
Dr Gulube apologised for the absence of Ms Nosiviwe Mapisa-Nqakula, Minister of Defence, who was not well. He had to leave the meeting early to travel to Pretoria to attend a Southern African Development Community (SADC) summit meeting that afternoon. He proceeded to introduce General Jabu Mbuli as the new Chief of Logistics, who was attending the Portfolio Committee for the first time in his new capacity.
Department of Defence: Performance Report
Dr Gulube said the presentation included an analysis of the Department’s performance indicators for the Medium Term Strategic Framework (MTSF). He said that 24 targets (71%) had been achieved, while ten targets (29%) were not achieved. With regard to financial performance, the unaudited expenditure of the Department as at 30 June 2017 had been R11.38 billion (23.4%), compared to the approved planned expenditure of R10.97 billion (22.6%) from the full year appropriated budget of R48.62 billion. This had resulted in an over-expenditure for the quarter of R413.782 million (3.8%).
He advised the Committee that the Department was projecting an over-expenditure of R1.972 billion on the compensation of employees for the 2017/18 financial year.
Factors which had contributed to the negative or positive balances of more than 8% of actual drawings per programme were:
- Military Health Support: Over-expenditure of R141.871 million (13.8%) was due to the implementation of salary increases, payment of medical outsourcing, and roll-over payments for medical equipment from the 2016/17 financial year.
- General Support: Over-expenditure of R102.020 million (8.6%) was due to the implementation of the salary increases and the payment made to the Department of Public Works for the refurbishing of the Department’s facilities.
- Payments for Capital Assets: The over-expenditure of R44.569 million (36.6%) was mainly within the Medical Health Support Programme, this was as a result of roll-over payments from the 2016/17 financial year for medical and surgical equipment utilised in military hospitals.
- Payments for Financial Assets: The over-expenditure of R394 000 (100%) was mainly due to transactions that created or increased outstanding debtors’ amounts, as well as foreign exchange losses, thefts and other losses. Funds were reserved for this purpose and would be part of the final virement at year-end.
The Chairperson thanked Dr Gulube for the presentation, and welcomed General Mbuli as Chief of Logistics. He informed the meeting that the Border Management Authority (BMA) Bill had been passed in Parliament. He commented that he had been happy to receive the report from the Department in good time, as he had emphasised at the last meeting. By the end of the financial year, the Committee expected the Department to have achieved 100% of its targets.
Mr B Bongo (ANC) said there was a need to deal with the shortfall, as the matter had been discussed repeatedly. A dashboard ought to be developed to deal with the shortfall and to monitor progress in reducing the shortfall. He recalled that on the oversight visit, Members had seen the scraps that could be sold to generate money, and this could be followed up. The National Treasury made money through programmes, and these funds ought to come back to the Department. Could an endowment be developed and discussed at the next meeting, otherwise Members would keep speaking about shortfall till the end of the term? Programmes to empower rural communities could also generate money which should come back to the Department.
Mr S Marais (DA) acknowledged that Dr Gulube, as the Secretary of the Department, did not have an easy job, given the recent budget cuts. He asked whether the Department covered all the borders with the 15 sub-units that had been deployed. Limpopo and Mpumalanga had long borders -- were the 15 sub-units effective or just scratching the surface? What was needed to do the job? Were 15 sub-units enough or do were 30 sub-units needed perhaps? He wanted to understand what challenges the Department was facing and what was needed to safeguard the borders.
He went on to ask if the Committee had been briefed on the cyber warfare strategy. What was expected of the Committee -- to interrogate the strategy or to rubber stamp it? It should not be used only as a last resort. It was important for the Committee to be kept in the loop right from the beginning. This would assist it to know exactly from the beginning what might be needed, and would enable it to support the Department and not just rubber-stamp decisions.
Mr Marais said the Committee was aware that the budget cuts meant that flying time and sea hours had been cut. With reference to the flying hours reported, what had the budget been used for -- was it for training, actual involvement in border control, or physical actions? Was the Department training people, given that it was losing pilots because the flying hours were inadequate? Which squadrons had been affected, besides the VVIP aircraft? With regard to the work in the Democratic Republic of Congo (DRC), he asked how often chartered craft were used to transport equipment. Was this done only within the flying hours? He commented that the presidential jet Inkwazi had been flying all over the country -- to Langebaan, East London, Bloemfontein and Caledon and the reason given was for training. Training for what, and for what purpose? It appeared that Inkwazi was only used during flying hours to train pilots.
Mr Marais said the Department had asked for the Committee’s support for the R1.972 billion projected over-expenditure for the compensation of employees. It seemed like it thought the resolution of the situation relied on increasing the budget. Drawing on the Defence Review Report, as well as other reports, the problem involved human resources, operations and equipment. In this case, the human resources share stood at 60%. Was this not a problem? This problem had been noted by the Treasury and the Minister. The solution to the problem should be found in prioritising and reviewing the human resource capacity.
Mr S Esau (DA) asked for clarity regarding the quarterly targets, as a different number of targets were being allocated to different quarters, and in some quarters there was nothing listed, which meant nothing would be achieved in those quarters. An explanation was needed for Members to be able to ask more questions.
The Committee had made several requests, to which no answers had been provided. References had instead been made to technological developments in terms of usage by the private sector. The question of the porous borders persisted. However, the Department should be congratulated for the operations resulting in the confiscation of so much contraband and weapons from 15 companies.
The focus should be on the force multipliers, because if a high number of physical soldiers were down, it was possible to increase performance only by using technology effectively. He had noticed that the sensors strategy was going through, but he could not see the timeframe. What exactly was happening, especially those aircraft flying below the radar, and which could not be monitored? There were aircraft flying over the border to and from South African airports unmonitored, and without being detected. What was the Department doing about people flying over the borders undetected? He welcomed the border safeguarding strategy. Commenting on the BMA Bill that had been signed into law, he said he was not expecting a major change in the cooperation between Departments or stakeholders.
When would the issues of cyber and sensor technology be resolved? What were the timeframes for the adoption of the safeguarding strategy and its implementation? Were there funds for rolling out such a strategy? What was the cost attached to the sensor strategy? Commenting on the cyber warfare plan in terms of its Phase One to Phase Six approach, he asked how long it would take to implement these phases. He commented that cyber attacks were an international issue which had become a huge threat to all countries. An urgent response to that problem was needed.
Mr Esau welcomed the note made on the 44 defence attaches. There had been 46 defence attaches, and two had been cut back. He expressed happiness about the attaches deployed in the SADC region, but remarked that the more defence attaches the Department opened up, the more money was spent in other countries. Were there any benefits drawn from the defence attaches, such as marketing the country’s technology? What was the feasibility of defence attaches? Was the defence unit attached in other countries merely for intelligence reasons? Was South Africa getting good intelligence? If not, the defence attaches were not serving their purpose. A more accurate report on these issues was required. Had the DIRCO submitted performance reports on the attaches? The Committee had not yet been briefed on their performance in respect of what they really did for the country. Were they deployed for the purpose of promoting and selling the country’s technology? Could there be returns on investments made in the peace missions?
Regarding the efficiency of the operations in the Democratic Republic of the Congo (DRC), Mr Esau said that he saw that there had been a suspension, irrespective of the fact that the President had signed a letter of deployment. If the money had been allocated, such money should be paid. However, the operation had been suspended. Soldiers ought to be paid, even though the operation had been suspended. What was the reason for the under-spending on employment? He saw that there was training taking a place. What about the African Union’s (AU’s) standby force -- had its operations been suspended? To his knowledge, there was huge instability in the DRC. There was a serious crisis. What was the situation if the operation was suspended while the soldiers and the equipment were still in the DRC?
The Committee had not been updated on various issues, including the piracy and the copper operations. There was no official report, except for the news in the media. What was the Department’s performance in that regard? Could Simon’s Town keep up with the repair of navy fleets? The Durban harbour was still under construction. The Military Skills Development System (MSDS) was another concern. There was a problem of graduates who were not employed. Why should the Department train people if their skills would not be retained? The issue of rejuvenating the force was important. The Department was producing about 4 000 graduates per year and was not putting them into the reserve force or the force itself. A lot of money was spent on training them, but they were on the street. What was the solution? The Department was using old soldiers in its reserve force on peace missions and on its borders. It should make it clear to the Committee as to where they were going with that old force. There was a need to rejuvenate, and to make changes.
There was the issue of R1.9 billion for the compensation of employees. He thought there had been a request to save R1 billion in expenditure, but there was compensation of R2 billion that was needed to be paid. The saving had become impossible. Every time, over-spending was reported by the Department. The issue of flying hours had been reported on. Why was it was not meeting the flying or sea hours targets? According to the budget, not enough gas and fuel could be acquired.
The performance of 71% was not excellent. It was just above average, and needed to be improved. The Department could perform better and there was a need for the Committee to support it. There was the performance agreement and financial disclosure which he was extremely happy about. He said that officials and senior members ought to comply within the first month of every financial year and that this should be applied across the whole government. He asked when the matter of the huge costs of outsourcing of medical supplies would be dealt with.
Ms N Mnisi (ANC), referring to the cyber warfare plan, said that the Department had reported that they were still awaiting approval and had indicated a budgeting problem. Would it possible to implement the plan during second and third quarters? In the Department’s view, could it be considered and implemented during the budget review process? She remarked that it was clear that complaints had not yet been finalised, and requested that the Committee get an indication of who the stakeholders were and what the reasons were for the delay.
Mr Marais commented that the total actual expenditure per economic classification had been 23.4%, and found a problem with the actual transfers and subsidies, which stood at 23.9% of the total budget. It was necessary to cut the transfers and subsides down in the next quarters, otherwise they could accumulate or there could be a snowball effect.
Dr Gulube thanked the Chairperson and the Committee for their kind words about the Department’s report. He referred to the budget shortfall regarding the cost of employees and the plan presented for the generation of revenue, such as the disposal of equipment and the leveraging of endowment property in order to raise funds to meet this shortfall. A task team of the Department and the Treasury on budget had been established to look at all the issues, including the generation of revenue and funding the defence review, in order to stop the decline in the capabilities of the defence force. The task team had since developed a costing for a defence review in various work packages. There were a total of five work packages. Some did not require additional funds, as the task team was making the system more efficient. If one took Option One, where the arrest of the decline funding was to be achieved within the first three years, one would agree with him that it would cost so much, but the disadvantage might be that the Department might not have the capability to spend the additional funding if it was done so quickly. Option Two’s duration was six years. The Third Option could be implemented over a nine-year period. The Department had considered these options and found that Option Three – which could be implemented within nine years – was unreasonable. It would cost a lot if the decline continued for a period of nine years. If the Department had to pay over a long period of time, it would cost more simply because the payment was being made over a long period. It was apparent that the financing model made it more expensive.
Dr Gulube said that Option Two had been recommended. The Department expected to arrest the decline within six years. It would like to come back to the Committee to brief it on the funding model and the plan for the funding of the defence review. The task team had developed a report which had been looked at by the senior management of the Department, and was ready to be presented to the Committee. With regard to the generation of revenue, he said that these matters could not be embarked upon until the plan for the funding of the defence review had been finalised. The Department also indicated the need for additional funding if they were to retain the reinvestment from the United Nations Peace Mission and the management of the defence endowment fund. The Department looked forward to making presentation on the generation of revenues, which would also cover the empowerment of rural communities in this respect.
On the question of effectiveness and the adequacy of the deployment of units along borders, Dr Gulube said that the country was in all respects defended and secure. Defence might not be that effective and efficient according to the assessment that had been done to establish what was required. The assessment had found that 22 sub-units were required. It was true that the 15 units were few and far between, and thin along the border. When the Department saw a surge along on the border between Mozambique and Kwazulu-Natal, it already had six companies along that border. It had two companies and three units along the border between Swaziland and South Africa. In response, the Department had had to move two units from the Swaziland border to the Mozambican border.
Due to the increase in cross-border crime, the Department moved units from one border area to another, and sometimes they got stuck, wondering when would it would be suitable to move them back to where they had come from. It continued the strategy of moving units from one place to another. It wanted to have 22 companies, but had only 15 companies to ensure that the borders were effectively and sufficiently defended. The number of companies was inadequate, but the Department would do its best. As the Committee might be aware, good achievements had been recorded with regard to arresting illegal immigrants and the confiscation of illicit goods along borders.
On the question of flying hours, Dr Gulube responded that this was elaborated on in the report. The flying hours amounted to 1 218 during that period, of which the VVIP portion was 174 hours. Flying hours included force employment. The flying hours for training were not included in the report. It was a prerequisite for Inkwazi. The training of pilots included training on various platforms, whether the platform was Inkwazi or other platforms. Flying hours were divided into two: training and operational hours.
Dr Gulube said he had spoken about the budget shortage of R1.972 billion for the compensation of employees, and this issue gave him an opportunity to address the question about rejuvenation of the force, which was a major project that the Department was working on. The project could be broken down in terms of 40:30:30. Referring to North Atlantic Treaty Organisation (NATO) operations, he said that the expenditure for the compensation of employees within most of the NATO forces was 50% of their budget. Looking at South Africa, five to seven years ago the compensation of employees had been 40% of the budget. The reason for the budget allocated to employees being close to 50%, or moving from 50% to 54%, was due to the budget cut. The Department had reduced its headcount over the last three to four years from 78 000 to 75 000. For this financial year and the following one, it was budgeting for 75 500 employees, as this was the minimum of workforce requirement for its strategic and policy plans.
Dr Gulube agreed that the Department had a component of its defence force that might be older than was suitable for deployment. Usually, those aged between 45 and 50 might not be eligible for deployment. Despite this, they were still part of the Department. It was trying to find ways to ensure that the old component exited and a new component was recruited. At all times, the force should stand at 75 500 as a minimum requirement to ensure that the Department could fulfil its constitutional mandate.
Dr Gulube said that he agreed with Mr Esau regarding the Border Safeguarding Plan. South Africa was exposed at risk due to undetected and unmonitored movements in relation with the landing strips and airports along the borders that led to various cross-border crimes. The Department had noticed that most of the cross-border crimes committed were along these landing strips. There was a big concern with the borders in North West province and the Northern Cape with the borders of Namibia and Botswana, where the illicit wildlife trade sometimes affected these areas. He agreed that there was a need to increase and intensify the security, as much as the resources allowed.
He said that the defence attaches had been cut down from 46 to 44 as part of the cost containment measures. South Africa’s integrated participation in various defence components, diplomacy and foreign policy, was designed to benefit the country. The defence attaches worked closely with embassies and other intelligence services, such as State Security and Police Intelligence. It would be helpful if the Department engaged more with the Department of International Relations and Cooperation (DIRCO) to quantify the benefit derived from the deployment of the Defence Attaches. They had their own performance plans and agreements. They submitted reports to the Department in terms of their deployment and performance.
When it was said that the deployment in the DRC had been suspended, there might be a misunderstanding. The DRC deployment was going ahead, especially in the eastern parts of the DRC, under the United Nations Organization Stabilization Mission in the Democratic Republic of the Congo (MONUSCO). There was no change there. What the Department was referring to was the training base called Mission Thebe, where it had trainers on site. With regard to the DRC, no battalion had been brought for training, as with previous arrangements. Instead, the DRC wanted the Department to train the trainers. That was being arranged and would resume once they were ready with the trainers. The Department had to give their DRC counterparts the competencies required as trainers, as opposed to training the whole battalion. This was being rearranged during the quarter under review, and the training would be resumed on time.
Dr Gulube admitted that from time to time, there were challenges with the repair of the navy’s fleets due to the various costs involved. However, the navy had done proper prioritisation to ensure that repairing facilities’ targets in Simon’s Town and Durban were actually achieved.
There were services that would be prioritised in the Department’s effort to address the question of overspending. It was looking at prioritised matters in order to set out the budget and to see how best they could be achieved. He agreed that the overall performance, at 71%, needed to be improved. Performance would be improved bit by bit as the Department went into the financial year.
Dr Gulube said the fact that disciplinary cases were not finalised within 90 days as required, had mostly been due to external chairpersons and coordinators not being available from time to time. The Department of Public Service and Administration (DPSA) provided the panel for disciplinary hearings, and the time of that panel was very limited. Working on its own schedule made it difficult to achieve the targets.
He said there was a need to revamp the medical equipment, as patients had to be referred to other service providers simply because certain medical equipment did not work as it was supposed to. This included dental and radiology equipment, which should be revamped, refurbished or replaced in order to ensure that militarily medical services were provided by military health facilities in South Africa.
Gen Xundu said the duty to develop a cyber response capacity for the nation or the Republic lay with the security sector departments. It rested entirely on the national framework and not only on the Department or the SA National Defence Force (SANDF) because other departments within the security sector had various roles to play. Joint Defense Capabilities Study (JDCS) was developing another set of documents, while the SA Police Servie (SAPS) was developing a document on cybercrime. The Department of Justice was also developing another document. The role of the SANDF or the Department was to develop a cyber-warfare strategy that included an offensive and defensive capability to deal with cyber threats. The JDCS cluster had taken a decision that the product it was developing was similar to that being developed by other departments, and funding should take a similar model. There was a need to develop the capability. The Department did not want the existing one to be old, without a new one in place. Within the means available, funds were available for the implementation of warfare plan -- in particular, Phase One to Phase Four. Phase Four was implementation. This was the first tangible output that made sure that offensive and defensive warfare capability was developed.
On the question of flying hours, Gen Xundu responded that flying hours involved force employment hours and operational hours. At the last workshop, the Department had contemplated including everything. It would, however, depend on the inputs from the air force, and would need to go through approval processes. The squadron involved had always been the 21 squadron. The flying hours were actually accumulated from external operations, i.e. peace operations. The Department focused only on South African air platforms when counting flying hours.
Gen Xundu said that the sensor strategy involved the use of sensors in defending the borders of the country. The border safeguarding strategy would indicate to the Department whether it used a mobile approach in the border safeguarding operations, or whether they would not be restricted to units but be extended to include the use of technology to multiply the effects of the units’ operations. This should include mobility packs, such as motorbikes and aircraft. To increase the effectiveness of units, the two strategies would be aligned. Because the sensor strategy had not been approved, it had not been budgeted. The Committee should advise the Department on whether it wanted a briefing on cyber warfare strategy, and when the strategy would be approved in the Department and within the JCPS. The developed product had to be scrutinised by the Department in the security cluster. There ought to be consensus and endorsement by the ministers.
The Chief Director: Finance said that the transfers in the Department were actually in line. In the first quarter, R47 million was allowed because it was within the deviation.
Dr Gulube said that for the Military Skills Development System (MSDS), he fully agreed that the training aim was to rejuvenate the defence force, so that the Department could recruit them into the SANDF. Because of the limited budget, the recruitment was too limited. However, because of the age profile, the Department had engaged with the Treasury on the issue, and it viewed the recruitment as a major contribution toward social cohesion, integration and transformation. The contribution that was made in terms of reunifying all forces during the transition from apartheid to democracy had been a major contribution to the country and to the stability of its democracy. This ought to be recognised. The Department had been left with an age profile that was not adequate for the country’s missions.
Mr Esau asked whether the Department was leading the security cluster in the context of the border safeguarding strategy. There had to be a department that was championing the safeguarding strategy.
Mr Marais asked whether the flying hours were used by 21 squadron, or whether there were other squadrons that were also using the force employment hours. Where were training hours reflected in the budget and reported? If they were reported in various areas, the first would be the force employment, and why was that not reported on in other areas? The total budget would include the cost of getting the aircraft. The Committee wanted the full picture of flying hours. It appeared that the Department leased the aircraft, and that flying hours was reported in the force employment. The full picture of flying hours would indicate the picture of the total budget and whether the Department needed more money.
Dr Gulube responded that he would be happy to submit in writing the report in a format which was guided by the Committee. The brief was a report developed according to the performance indicators as set out in terms of the auditing and performance standards. The report was also developed under the guidance of the Department of Performance Monitoring and Evaluation. Sometimes, the DPME would remove those indicators that appeared to it to be irrelevant. The issue raised by Mr Marais was true. The information was available and could be reported on in whatever format the Committee would like. These indicators were cast in stone. The Department would return with similar indicators next quarter, as the DPME would not allow it to change them during the year. It might consider changing the indicators next year.
The Department was leading the security cluster and the border safeguarding strategy. State Security was coordinating cyber security, whereas the Department was focussed on cyber warfare.
Dr Gulube said he would provide the flying hours recorded by other squadrons as requested, as well as all other information requested. In the second quarter report, the Department would report that the information communication technology (ICT) strategy had been adopted. It was being finalised.
Defence procurement challenges and related matters: Briefing
Colonel M Mongo, Director of Procurement Management, South African National Defence Force (SANDF), said he would describe the challenges encountered in the Department of Defence (DOD) with regards to procurement. However, this would not be a form of complaining, because each challenge was coupled to a possible solution. There were internal and external procurement challenges. The internal challenges referred to those that they found in-house in the Department of Defence, while the external challenges were linked mainly to external influences, like suppliers.
Internal procurement challenges:
Col Bongo listed the following challenges, and the DOD’s strategies to meet them:
- Training of staff/officials --a new curriculum was under review for the school of logistic training;
- Retention of procurement skills -- establishment of procurement mastering;
- Payment of suppliers within 30 days -- establishment of a payment forum at the Chief Financial Officer’s (CFO’s) office;
- Corrupt procurement officials -- vetting of all DOD procurement personnel and Bid Adjudication Committee members;
- Database inefficiencies (filtering of relevant suppliers) -- engaging the Department of Trade and Industry (DTI) and National Treasury to support the correct selection of suppliers’ abilities;
- Lead time for end-users to receive goods and services was too long -- reviewing process to be shorter, as it was the only internal process that could be changed.
External procurement challenges
- Procurement “scams,” whereby suppliers were issued with fraudulent/bogus government orders -- establishment of a call centre at the Logistics Division which would work in conjunction with the Military Police and the South African Police Service (SAPS).
- Suppliers not delivering according to contracted government orders -- returning back of delivery, resulting in delays to the end-user.
- The impact of National Treasury prescripts to the fighting force, which results in many deviations -- the DOD was still busy with suggested solutions to the Treasury.
- The distance for delivery increased costs – rejection of quotations and then re-invite quotations (e-procure determines suppliers).
- Suppliers ceding without informing procurement centres -- requests for quotations to include the phrase, “No ceding or ceding only if procurement centre was informed and agreed officially”.
- Collusion by suppliers for price increases -- a cap on price increases was put down in the terms of reference.
- Suppliers “fishing” for faults for purposes of litigation after the award of a tender -- tightening the terms of reference, and briefings during suppliers’ days.
- Partial deliveries, especially from suppliers not well resourced -- go for further quotations, despite the delay to the end-user, involving the process for invoicing and payment delays.
- Suppliers poor invoicing, where the invoices were not according to Government Orders (GOs) and/or delivery notes, which was the main contributing factor to late payments -- procurement entities to increase their capacity to handle invoices.
The Chairperson said that at the last meeting, the Committee had asked the DOD to state their challenges and how they would mitigate those challenges. The first part was done. He asked if Members wanted to give advice, seeing that the Department had done what the Committee had asked them to do.
Mr S Marais (DA) said that he had three brief questions. When the Committee was at Special Forces in Pretoria, the biggest complaint was about replacing tyres, which was a huge process. From the delegations that he had seen, did that imply that this problem had been resolved and that they did not have to wait for a couple of weeks for just a tyre to be replaced?
Regarding the internal challenges, specifically the vetting of all DOD procurement personnel, he asked if that was happening only at the beginning, when they were appointed, and what process was continuously going on to ensure that they were still at that vetting standard.
Regarding the database, did the DOD use a specifically designed package, or was there a generic one that integrated with the whole system that was being used?
Mr S Esau (DA) thought there were a number of questions that arose from the input of the DOD. It was concerning for him, because the training of staff and officials was problematic. People were trained, but they did not spend a lot of time in a post and a lot of money was being wasted on training people because of this. Procurement and logistics appointments were being used as part of promotion -- people just moved in for transitional periods, and then they moved out. This was a big concern.
He felt there was a serious problem with the Department itself. If one put a proper system in place -- a filtering system -- with all the necessary parameters and criteria, nobody could sign up as a supplier unless they could provide full details of their physical address, their warehouses, good standing at the bank, the SA Revenue Service (SARS) tax clearance, etc. This database needed to be linked to the SARS database, because if a person was fraudulent then they needed to be blacklisted immediately. He did not know if the database referred to by the DOD was linked to other government databases such as those of SARS or the Department of Home Affairs.
He asked whether the DOD could check on people’s credentials, because Home Affairs was supposed to check for that. Could they check the Companies and Intellectual Property Commission (CIPC), where all the businesses were supposed to be registered, along with who the shareholders and directors were, and some background of the people involved. The demands of the DOD required more prudence, and they needed to do more thorough research on each and every institution, business and individual in the business, so that when a contract was given there was peace of mind that the person had the capability to serve that mandate.
The DOD itself, because of its inefficiencies and failures, created its own problems as a consequence, and that itself resulted in delays in the delivery of goods and services to the Department. They were also being taken to court unnecessarily, and then goods could not be delivered because they were in a contract and they had to deal with litigation on the other side. The whole matter was delayed at the expense of the DOD -- the very people who required the item.
He drew attention to the DOD’s problems at Silvermine. People were standing with dogs, marching and trying to impress everyone that they were on patrol, yet on the very same night they had all gone, the place had been broken into again. Cables had been cut, and nothing was operating at Silvermine -- that was the reality. Simple things could have been repaired, like cables and some transformers, but there was the Simonstown procurement centre which delayed everything, and costs were so much higher with the procurement centre. The issue could have been resolved at a much lower price.
He asked to what extent the commanding officers and units were empowered to deal with delegations. What authority were they given, because they spoke of R30 000 to R100 000, yet there was bureaucracy involved. It was highly questionable, if something cost R10 and one was selling it to someone for R100, then there was something wrong. It had been found that even bread was being sold for R50 instead of R10, and this was totally unacceptable. If people said that they were in charge of this procurement, they should be removed immediately.
What did the vetting involve? Was there a check on bank accounts? Did they check on their behaviour regularly or their relationships? Were there financial disclosures or lifestyle audits? Many people were building homes which they could not afford with the salary they had, so lifestyle audits were important for procurement officers. Those were the things that needed to be looked at. Certain challenges could be mitigated, but the Department did create its own problems.
Mr Esau referred to the Bid Adjudication Committee (BAC), and suggested there should be three adjudication committees. When a tender went out, the first adjudication committee would receive it, then it would move on to another and then the final adjudication committee would get it. Were these systems in place, because it was already a good practice in many other government institutions? Did the DOD not follow this best practice? What processes did it follow?
The database inefficiency was unacceptable. The DOD’s Information Communication Technology (ICT) efficiency was standing at about 24%. The Department itself was shooting itself in the foot because it did not have the infrastructure to monitor these people. The only way to connect with other databases was to have an interface in the system that could communicate with other departments’ information and details. If that was not in place, the DOD would continue with the problem because information could not be verified quickly and people got away with murder. People could literally rob them and get away with it.
The Committee had engaged with the Department of Military Veterans (DMV), and they had signed an agreement with the State Information Technology Agency (SITA) and also with ARMSCOR to try and resolve the database issues. What was wrong with the DOD, and more specifically, procurement? Procurement was one of those areas where one needed to have huge binoculars on hand. The DOD knew that this was the area where people were stealing and where officials were colluding all the time. It was a fact -- it was known and it was shown in every report the Committee received. With Defence, there was irregular expenditure taking place, and he already knew that he was going to get a report that confirmed this.
In the presentation, the DOD had spoken of the delivery of goods and services taking too long. He did not have a problem with processes getting shorter just as long as they were efficient and considerate of the necessary criteria and issues that needed to be addressed. If that was the case, then they could cut the process, because people were responsible for signing off, and it moved from one person to another. That way, people could check. There was a document management system (DMS) where one signed off and the next person signed off, and it was easy to pick up where the irregularity happened very quickly in the forensic search. At the moment, there was no DMS system that was run on the computer, so people had to dig into files in order to find somebody who had signed off on something and hold them accountable. The DOD needed to improve on those things -- they were basic matters where they could spend their money in order to be effective. He had a serious problem with the Department because to a large extent they caused their own problems.
With regards to the establishment of a call centre at the Logistics Division to work in conjunction with the Military Police and SAPS, that was no problem. There had in fact been a discussion that the National Prosecuting Authority (NPA) and the police must come into their meetings, so that if someone was accused of an offence, they could have them locked up immediately. The Committee did not have a problem with that, and agreed with the DOD that SARS, the NPA and SAPS could come into their meetings and if there was anybody known to be part of criminal activities, then they should be dealt with immediately.
With regard to the suppliers not delivering according to contracted government orders, again there was a problem because the DOD had not assessed the company and its resources, as well as its capability. There were people who were simply tempting the Department on paper, but actually had nothing to offer -- they could not even build a shack. Then they would come and sell it to somebody who had been given 10% -- how did they get this contract in the first place? How was it possible that a person who could not even build, or buy themselves a decent pair of shoes, could get a contract?
The Department must take responsibility when contracts were awarded regarding what processes had been followed and whether the information was put into the proper databases. If this was not there, then they would continue to make the same mistakes.
If If the DOD wanted to cut down on the cost of transportation, they had to try to localise. If people lived right next door, there was no cost involved except the supplier’s cost. If one tries to find out the cost of a product, one simply needed to call the wholesalers and retailers in the area and one would know the price range. Somebody could not charge R50 for bread and deliver it from next door. One could even go online to find these things out. The Department needed to take further responsibility and do the necessary homework so that they know the range that people could tender for in order to avoid being overpriced.
The Department had a R2 billion deficit, and then they wasted money on procurement. They could not afford to waste a cent. Although the challenges may also be external, it came down to good governance and good governance also meant having ICT in place so that they could manage processes well and that they could deal with people effectively. In other government departments, one did not hear about these problems, as they were functioning exceptionally well.
Poor invoicing was a problem. If there was a company with an accounting programme, the invoicing system was built into the programme, even in the cheapest accounting pack. This meant that the company’s name, and its “PTY” or “cc” number, came up and the invoice generation number fell into order as one added up -- and it would not repeat the same invoice number. There was a need to have suppliers trained to run basic packages or to use a central system to do proper invoicing and receipting so that they could comply with the basic requirements of SARS, the Auditor General and the Public Finance Management Act (PFMA).
The Chairperson said the delegation did not need to respond to all the issues that had been raised, because some had been raised before, and they were merely emphasising the need for implementation. He invited the delegation to respond.
Brigadier General Jabulani Mbuli, Chief of Logistics, SANDF, responded that the DOD had listed in their presentation how they would correct those ills internally. Most of the issues raised were internal issues which they were correcting. They were not saying they were doing window dressing when Members of the Committee came on oversight visits, as it was part of their routine.
Col Mongo said the replacement of tyres was a National Treasury contract, and that was where the DOD had to source its tyres. They were resolving the problem. It was a question of not having certain sizes of tyres, but that contract was not necessarily sourced through the DOD, but through National Treasury.
Regarding vetting, where there were any irregularities, the Defence Intelligence did make some follow-ups on certain activities where there appeared to be something suspicious. In general in the Defence Force, if one was seen to be living above one’s lifestyle, one was tagged and due processes were followed.
Regarding the database, it was contracted by tender through the SITA, and was running administration, unit and planning administration, and e-procure. That system was efficient, according to its design. The only problem the DOD encountered was what one does as a human, where for example one realises that at Macro an item was cheaper than at Game, and so one becomes comparative in terms of bidding. Yet there were certain suppliers that were cloned by the system. One would only realise this when they quoted, because the system would give one seven suppliers. When one gave the suppliers to the client, the client would handle the quotations. When the quotations came back, because there was a segregation of duties, the people who received them were not the people who invited the quotations. If those receiving the quotation discovered that this was above the market-related price, then it was reported to pre-order and pre-order would generate the quotations again until it was reasonable. Procurement officials knew on average what the market related price was, so that was working.
He said the e-procure system was very efficient, because it was sourcing information to the Treasury Central Supplier Database (CSD). It updated data overnight, which was why they sometimes got people complaining. For instance, bank details often changed, and if these changed and the system registered one with certain bank details, then one must have reasons for the changes. If a person’s tax was not in good order, and the tax clearance ended yesterday, then today -- when the DOD was sourcing suppliers -- their data would not be there. So the system did not always keep data like that permanently. If the data became invalid then it did not filter through, but remained only on the CSD and did not come through to e-procure.
With regards to the bid adjudication committees -- the initial stage of processing any business in their units -- they had business plans and then from there the budget holder, together with his/her budget managers, come to an agreement in terms of sourcing a particular requirement. Then it goes through the necessary processes and goes through a specification committee. All the people on that specification committee must be vetted, and there was also a constitution for each committee. So there was a specification committee, an evaluation committee and an adjudication committee. This happened at all the procurement units.
The e-procure made sure it filtered down all the necessary suppliers. For instance, one could filter for “only Southern Suburbs,” and it would only look for “Southern Suburbs”. Initially, he had spoken of the Department of Trade and Industry, where people were registered. Currently, they had “PTYs,” but close corporations (CCs) were still operating. One would find that when people registered a CC, they would say that they were selling shoes and meat. They would even have licences for selling meat, but one would find out that the company was strong in Langebaan, with an office in Cape Town, only when sourcing it through e-procure, and that was where they picked up problems. When they found a supplier was not appropriate, they turned back and reported it. There was a register for reporting such situations.
The biggest problem was suppliers. They were not doing justice when they ticked the boxes for registering on the CSD. The e-procure filtered them, and that was where the problem was. The best way of resolving this in most cases was by getting contracts. Where an entity was found to be wrong, the DOD reported that it had to be restricted. In the last month, they had restricted one. If there were gross violations, they did restrict them but there must be evidence. Sometimes the suppliers came and apologised, but they did not work on apologies.
On the ceding issue, he gave an example of the buses. If the bus company’s paperwork in terms of what had to be evaluated was correct, it would be difficult to reject it. However, one might discovered only when the buses were driving that the company had a different name, so they needed to check if it was still the same company to which the tender had been awarded.
Regarding the tyre contract, they had found out that the company was a block of flats. They had gone to investigate, and Treasury was now aware and were going to stop that tyre contract. The DOD had been ordering tyres because their workshop had the capability of fitting, so it involved less labour. After they had discovered the supplier was a block of flats, it had delayed everything as they had had to report this to Treasury.
Renovation Projects by Defence Works Formation: Surgeon General briefing
Brigadier General Nneke Ledwaba, General Officer Commanding Defence Works Formation, Department of Defence (DOD), said they would be presenting on progress made with renovation projects by the Defence Works Formation, and as the Committee wanted to see all registered projects with the South African Military Health Service (SAMHS), the presentation would deal with that.
The projects were divided into two -- there were those that they were being carried out with the help of the Department of Public Works (DPW), and there were those they were being done without them. The projects which were listed were largely executed by the DPW, with the exception of 1 Military Hospital, which was being executed by the DOD. The Committee was given a progress report on the SAMHS’s capital works, refurbishment and decentralised projects.
Mr L Tlhaole (EFF) indicated that since he had started as a Member of the Committee in February, he had observed progress and was happy with the work that the DOD was doing. His experience had taught him that the Department of Public Works (DPW) was always behind in terms of delivery. Moving forward, he suggested that they assure any work that the DPW did for them met their implementation requirements. For example, the DOD says the Pretoria Military Hospital was complete, yet maybe they needed the Chairperson of the Committee to verify that. This was only because he thought that the DPW nationally was not doing its work.
He suggested that at the next meeting concerning projects that were being carried out in conjunction with the DPW, someone from the DPW could be part of the delegation that was presenting so that in future they did not just shift the blame on to the DOD.
The Chairperson reminded the Members that they had agreed to do continuous oversight, and therefore he would not be the only one to verify implementation. They would go and verify as a Committee.
Mr Esau brought up the issue on machinery, particularly when the whole process was being delayed at 1 Military Hospital because the medical technology was not working. He asked whether the same system was followed by 2 Military Hospital, which had managed to execute it and had been approved. He questioned why 1 Military Hospital had subjected itself to the requirement of having a specialist come in when they could have done the same as 2 Military Hospital with the renovations and refurbishment.
2 Military Hospital had completed the project with the DPW in a much shorter time and with fewer overrunning costs, unlike 1 Military Hospital. 1 Military Hospital was running millions of rands over budget because of all the delays. It was important that the Committee went to see the hospital because the last time it had not been complete.
1 Military Hospital’s status was “four.” In other projects, status four meant that the projects were at their design stage, yet it had been indicated that 1 Military Hospital’s status four was at the stage of procurement of services of health technologies, so why did the status four have different meanings? Was there an explanation for that?
The Committee had visited 2 Military Hospital a few times, and he believed it looks excellent. They could see a big difference between 1 Military Hospital and 2 Military Hospital. Although many other hospitals were still in the design and construction phases, the Committee should still visit them. He added that he would still like to see what the costs of the projects were.
The Chairperson invited Gen Ledwaba to explain “status four.”
Gen Ledwaba said that on the issue of 1 Military Hospital, as opposed to 2 Military Hospital, the Defence Works Formation had taken it over in 2014, and one thing which he believed was hindsight more than science, 2 Military Hospital had been done and there were issues which had been picked up. If they had not worked on medical equipment first, then they would have built walls and not a hospital. A hospital was built around equipment, so the issue of health technology was a new thing to avoid building and then having to break down and rebuild. Once they were at the design stage, they brought in people that knew health technologies and understood the equipment, and what equipment should be where, so that when building you already build to accommodate that equipment and those services to give the doctor the space to work.
With regard to 1 Military Hospital, the DOD was taking it over from the DPW. However, there were certain services which they were still allowing the DPW to deliver, such as uninterrupted power supply (UPS). The DOD was now looking to complete the whole hospital properly and were fully accountable for it.
Mr Esau referred to the loss of skilled personnel, he gave the example of the intensive care unit (ICU) at 2 Military Hospital that was not functioning. With regard to the issue of the use of doctors, the normal civilian doctors were not being hired anymore and there was nobody else employed to take up those positions. Furthermore, the applications to get doctors into the Defence Force itself were taking too long, considering there was a serious shortage for example at 1 and 2 Military Hospitals. Therefore many of the medical services were having to be outsourced.
There was a lack of technology in certain wards. When they had gone on a 2 Military Hospital tour, they had heard doctors and nurses saying that when they ran into trouble they had to take money from their own pockets because the procurement processes were taking too long and they were sitting with patients. So there was a problem in procurement, and if the DOD was considered as a special unit in government and had special role to play, then it had serious problems because it was not even giving special treatment to the soldiers and those who served the country. The medical stock itself had gone down from 50% to 45%, What was being done about those issues when they impacted on soldiers directly?
The Chairperson said that the issues to which Mr Esau had referred were in the Committee’s report, and once they adopted the report they could follow up on the issues.
The meeting was adjourned
- Department of Defence & Military Veterans Quarter 1 performance & skills audit outcomes; Defence procurement challenges & Surgeon General progress report am
- Department of Defence & Military Veterans Quarter 1 performance & skills audit outcomes; Defence procurement challenges & Surgeon General progress report pm