Armscor & Castle Control Board 2016/17 Annual Report

Meeting report

Armscor Annual Report Briefing

Mr Kevin Wakeford, Armscor CEO, informed the Committee that the Chairman of the Board advanced his apologies as he was not well enough to fly.

Mr Wakeford highlighted the performance of Armscor in the 2016/17 financial year where he touched on fiscal reductions of the defence community at large which affected Armscor. While there was reduction in transfer, there was no reduction in service level requirement from Armscor. Armscor dealt with the problem in two fundamental ways – (1) there was a cost reduction attempt, with a 5% reduction in the last financial year, and (2) increase income by increasing client base within the mandate of the legislation. Each business activity required approval by the Minister of Defence. The turnaround was initiated in order to develop efficiency within the organisation. While the trend was to cut manpower or human capital after a budget cut, Armscor had not adopted that approach. This was because Armscor was critical with regard to defence engineering and thus important to sustain such a position without losing the skill set provided by its employees. To this, Armscor can assist with different activities for state entities and other organisations for a fee.

Strategic turnaround included sustainability and commercialisation, organisational transformation and expansion of Armscor services. Of note, organisational transformation meant a new customer centric structure with a focus on centralised functions. This had additional units established, namely, supply chain management, business enablement unit and property leveraging and management. In terms of expansion of Armscor services, such services include engaging with local government and unlocking Africa’s defence potential in Nigeria, Ghana, Uganda and Zimbabwe. Armscor’s relevance to the Department of Defence included development of an alternative funding concept for the defence review, specific measures relating to Denel, substantial support to the development of the National Defence Industry Strategy and increased support and promotion of small players in the defence industry.

Mr Wakeford said Armscor had also provided services to African clients. He gave an example of Nigeria where the organisation assisted in the disposal of certain munitions and rockets donated by SA’s defence forces. To this, Nigeria required training, quality assurance as well as logistics – Armscor assisted in these areas for a fee.

Looking at performance functions, specifically acquisitions, there was 95% achievement of targets due to several reasons including advance payment on the Hoefyster programme, significant payments against the foreign component of the Ground Based Air Defence programme, shortened contracting process on the commercial and military off-the-shelf items, achieving on average 60 day turnaround, and Armscor providing experience to young engineers and scientists that was required by the Engineering Council of South Africa.

Different programmes pursued by Armscor included maritime systems which were the Hydrographic Survey Capability, Multi-Mission Patrol Capability and Midlife Upgrade of the SA Navy Frigates. Hydrographic Survey Capability related to acquisition of the Hydrographic Survey Vessel including two fully integrated inshore survey motor boats and one sea boat to replace the SAS Protea which was 40 years old. Under Multi-Mission Patrol Capability, the Off-Shore Patrol Vessels programme (OPVs) was cancelled. This was because Denel and a preferred bidder were supposed to reach an agreement, which they did not. Armscor sought legal opinion on the matter, to which indication was given that a change in circumstances, in terms of the law, and two major events (defence review on Dockyard and Denel and Operation Phakisa). Armscor gave Denel an extension of six months to meet two key conditions set for it, namely, proven partner capability and proven financial capability to meet the demands of the Dockayard costs. Should the conditions and timelines not be met, there was a risk mitigation plan in place.

Mr Wakeford outlined that with Airborne Systems, the New Generation Short Range Air-to-Air Missile programme dealt with the development of the A-Darter short range air-to-air missile system for the South African Air Force, co-funded by the Brazilian Air Force, was scheduled for completion by the fourth quarter of 2017. Armscor was sceptical if these timelines will be met because of challenges Denel was experiencing. The Landward Systems had New Generation Infantry Combat Vehicles scheduled for completion in March 2019 because of the challenges Denel was experiencing. The Ground Based Air Defence System was going well – the first phase was completed, the second phase was kick started and the third phase was expected to be completed by the end of 2018. Still on Landward Systems, the New Generation Tactical Communications Systems for the entire SA National Defence Force had the design test and evaluation scheduled for completion in July 2017 and this had happened.

In the area of research and development, Armscor covered electronic technology and aerospace, which included Aeronautics, Airborne, Electronic Warfare and Guided Weapons, Maritime Technology, Support Technology, Landwards Technology and Technology-Based Special programmes. The Technology-Based Special Programmes included Defence Engineering, a Science University programme, Defence Transformative Enterprise Development and Defence Black Industrialist Programme. Armscor went beyond bursary management and encouraged the taking up of Maths and Science at school level. He also highlighted the assistance given by Armscor to scholars leaving school systems to enter university systems, preparing for winter or summer school in the maths and science environment.

Test and Evaluation facilities included the Alkantpan Test range, which was an all purpose ballistic testing facility, and Gerotek which offered its services to the commercial sectors through advanced driver training, corporate events, restaurant and conference facilities. Alkantpan had a significant 14% increase on planned sales with foreign income generated at 64% to the total sales of R86,2 million and a two-year servicing contract with Singapore clients, scheduled to expire in March 2018. There was also operational and scientific research including Armour Development, Protechnik, Hazmat, Ergotech and Defence Decision Support Institute. The Armour Development focused on research work for amour protection systems and weight reduction on body amour combined with protection against light weapons. Hazmat had 91.1% of R14.6 million worth of sales derived from commercial business. To this, Hazmat exceeded its budget income by 12%. The Institute of Maritime Technology (IMT) was mandated to develop and maintain a sustainable capability for techno-military expertise to support naval decision making. The Institute also developed a new capability for its own noise analysis in the Submarine Own Noise Analysis and Management Support programme. There was also, under the IMT, the UltraSonic Broken Rail Detector system which automatically detected breaks in railway lines and reported them to an alarm terminal to prevent derailment of trains. A test evaluation with Indian Railways was underway. Further to this, there was significant collaboration between Armscor, the Council for Scientific and Industrial Research and Transnet.

Mr Wakeford gave a brief overview of Dockyard where he informed the Committee that the transfer of the Dockyard from Armscor to Denel was progressing and awaiting necessary approvals.

In terms of Black Economic Empowerment, Armscor achieved a level 4 BBBEE on the revised BBBEEE Codes of Good Practice. Armscor continued to drive transformation through an Employment Equity Plan with a focus area being women and physically-challenged individuals, more specifically black women and women with disabilities. There was a transformation target to increase black employees from 66% to 68%, however, it was exceeded with 77.32% achieved. There was skill development through international training programmes, adult education and training programmes, and the talent development programme. The talent development programme had 35 graduates appointed during the 2016/17 year. A total of 116 bursaries were awarded to undergraduates at various local universities in the year 2016/17. Finally, in the Dockyard project, there was SA Navy training, with 23 students enrolled at the training centre for P1 Mechanical Engineering and P2 Electrical Engineering.

With the Africa Aerospace and Defence (ADD) event, which took place between 14 and 18 September 2016, the theme was “Unlock Africa’s Defence and Aerospace Potential”. The exhibition hosted the first Africa Pavilion to showcase technology and products manufactured in Africa. He opined it was a well organised and well attended event.

Mr Wakeford also touched on Corporate Social Investment, with the Human Capital Development Programme assisting learners, specifically from previously disadvantaged communities, to improve their performance in the Science, Technology, Engineering and Mathematics (STEM) subjects. Examples of these programmes included Cell C Take a Girl Child to Work Campaign, University of Fort Hare, which had Saturday classes for 40 schools in the Alice and Bisho districts, Adelaide Tambo School with Special Needs, Curtis Knondo School of Specialisation and the SA National Defence Force (SANDF) Education Trust.

Armscor revenue increased by 5.5%, expenditure declined by 4.8%, investment revenue increased by 1.8% and there was a significant increase in the share of profits. In terms of the financial position, non-current assets declined due to higher depreciation charge and higher values of fixed properties. Further to this, current assets declined as the company had to utilise its own reserves to fund the shortfall in operational requirements emanating from the cut in the budget allocation. Total liabilities declined as deferred income was utilised as conditions were met. Overall, the group retained healthy liquidity and solvency position.

Mr Wakeford concluded by summarising the achievements and challenges faced by Armscor. Of note, the achievements were a second clean audit opinion from the Auditor-General of SA (AGSA), healthy financial liquidity and solvency maintained, focus on increasing black SME participation, delivery on core business, internal transformation and impact on communities. Challenges however, included the Dockyard capitalisation, which had slow progress and, funding challenges due to a reduction in transfer payments and shrinking reserves.

Discussion

Mr S Marais (DA) asked to what extent Armscor received information, and acted on the information, conveyed in the Budgetary Review and Recommendation Reports of Parliament. More specifically, he asked if Armscor received last year’s report and addressed issues raised in that report. The presentation today had some matters outstanding such as financial sustainability. He noted that Armscor informed the Committee it was maintaining solvency and liquidity given reduction in income and allocation from government – was there a programme in place to ensure Armscor did not shut down in the coming years? This was not a conventional problem and, as such, needed critical thinking. He also asked what the role of Armscor was in research and advising the Minister, the defence industry and Denel. Was there a platform to prove to the Minister that Cabinet needed to do something about Denel? Further to this, he noted the close relationship between Armscor and Denel, and the business obligation and loyalty surrounding it. He, however, questioned whether there were alternatives in the private sector in terms of the arms industry to replace Denel. If a state-owned enterprise cannot meet its obligations, it would be detrimental to wait until the last minute to act and find other alternatives. He noted the mention of aerospace and air defence and air patrol capability challenges and questioned why the report had not mentioned it – were these playing any role or were any recommendations made in this regard? SA depended on the ocean economy, transporting troops and equipment to peacekeeping missions – what were the efforts to recapitalise this? To what extent could the country’s own capital, including land and property, be sold to recapitalise defence? He was of the view that there was hope that the infantry vehicle programme would be on the horizon by now considering it was around for some time. He questioned whether the programme was in compliance with the requirements of the Defence Force and with obligations of land border security and peacekeeping missions.

Mr D Gumede (ANC) asked the CEO to clarify as to how many clean audits Armscor has had. He then requested clarity on whether or not Armscor was assisting Denel with its challenges. He also asked for a comment with regard to the issue of ICT raised by the AGSA.  

Mr S Esau (DA) asked of the status of credits of the 1999 MBDA. Where would the R135 million in credit be utilised? Was there any revised policy on the credits? He found the challenges Denel had to be worrying – was it possible for Armscor and Denel to become one entity? He opined that it could be a way forward in light of challenges. He further noted how financial constrains of Denel and delays affected Armscor. How was Armscor involved in the marketing for commercialisation within Africa? In this area there was huge growth and potential, with SA playing a key role in peace missions on the continent. To this, there was potential to exploit business, trade and investment into African countries. He asked if there was any consultation of that with the Department of Trade and Industry. He then asked for an update on asset sweating by Armscor. He opined there would be need for an urgent intervention in Denel if it did not meet its obligations. He also highlighted the Dockyard as a stream of revenue, and subsequently asked if there was a strategy drafted and whether this could also inform Denel on how to take it. A private company should be involved in Dockyard and there would be security issues that would have to be in place. He asked about the IP exploitation, with Armscor opening itself up to further commercialisation and joint ventures internationally – this would be a good way of developing the industry. He commended Armscor for its achievements but questioned if there any plan in place to address the six targets not achieved. Why was there a decrease in rental income? He also asked about the spending on local defence, referencing a comment that said there was not enough being spent – what would the way forward be? He then asked for clarity on what was meant by “other benefits of executive directors”.  Referring to the Annual Report he noted the issues raised with the agreement reached with Denel – was it possible to assure there would be no impact on revenue generated? In terms of UltraSonic technology, was there any interest of people buying the technology? He asked for income and profit being made by Gerotek. He noted the report raised certain challenges and asked for details on those challenges. What services did Protechnik deliver? He finally asked about how successful the Defence Decision Support Institute (DDSI) support for Military Veterans was, in light of concerns raised by the acting DG.  

Ms N Msini (ANC) asked about the security issues on Dockyard as well as commercialisation. She also asked if there were any measures in place to improve on targets that were not met.

Mr Wakeford noted there was a defence industry fund with the AMD – so far it was successful but there was no direct investment or involvement because it needs to be an independent entity. Resources were dedicated and the board was asked to allow Dr Khanyile to assist. There were advertisements calling interested parties and asset managers. He opined defence was an underfunded area with a ‘hands-off’ approach on investment. The defence sector held some of the best yields worldwide and, with the necessary financial support, it would assist to grow the sector. At the London DSI, there were a number of financiers including the UK Export Trade Finance Institution. To this, he informed the Committee there was communication between them and Armscor. He said the communicated that there is a facility for South Africa generally, of GBP 3.3 billion. The only requirement was that 20% of the value must be British. Thus, 80% can be South African or African at large. They have written to Armscor indicating they were willing to allocate R100 million as a start. The defence fund was going to assist in export trade finance. He also informed the Committee that Armscor was engaging the Department of Trade and Industry for assistance in the form of an export credit guarantee. The defence industry survived as a result of growing the export market to 70% of defence GDP although this was not necessarily good. A nation that relied on the defence sector and exported 70% of what it produced will at some point decline. He attributed that to poor local consumption, with the opinion that buyers internationally would start to question the quality of those products. If there was no spending on research and development, then products may become irrelevant, outdated and obsolete. Research was conducted as part of assistance to the industry and to meet part of the Armscor mandate. Armscor worked well with AMD in creating this fund, especially for SMEs and funding for the defence industry.

Mr Wakeford noted Armscor’s financial situation to be well managed. Armscor will reach a point where self-reliance would be considerable. It was not Armscor’s legislative mandate to go and seek income but it was necessary to do so. The alternative was to retrench staff. The organisation was working on income generation. The connection with the state security cluster was bearing fruit -Armscor assisted with projects, for example, with the Department of Cooperative Governance and Traditional Affairs and such assistance would be at a fee. The role of Armscor was to provide a service and these services were demand led. Armscor cannot force an opinion or influence anyone. He also highlighted the good relationship Armscor had with the Ministry of Defence, engaging at several levels with the Department of Defence.

Mr Wakeford addressed the Denel question by noting the challenge of capitalisation which Denel needed. Denel had little capital to sustain itself. The answer for Denel was not new business, but rather to consolidate, turnaround and remove duplications within its structures. Denel needed to manage its debt carefully, because currently the package was clumsy, costly and short term. The contracting methodology was also weak with no payment made when one was due. Denel needed a strong supply chain and to pay on time. In the past, National Treasury dealt with issues such as Denel’s challenges. This was done by Treasury issuing a guarantee and Denel would then go to the market and raise capital with a variety of credit notes from particular institutions. He opined that the problem was that Denel over borrowed. As such, there were no assets left to bond. It would be necessary for investment by the shareholder, the Department of Public Enterprises with the support of Treasury – state entities were not in a situation to do this. This was because Treasury extended R1.85 billion sovereign guarantee although he was not of the opinion that this would not help. Denel should not borrow more. In the event that there was some borrowing, it would place Denel in a terrible position. He opined that Denel should look to capital markets as this was where the state controlled and protected its sovereign capability. This financing would be interest free, with dividends paid only when the company can afford to pay. He would not comment on whether the state should do this – he was merely providing his opinion on what the way forward could be in dealing with Denel.

He did not think Denel should join Armscor - Armscor was an acquisition agency whose mandate was different from manufacturing. Denel should have the Minister of Defence as its main shareholder so that the Defence Force can have insight and visibility into its problems and, at the same time, take some control. The help Armscor gave to Denel was within the law and business practices. When Armscor placed an order, it gave an advance which was financially restricted. This was called a performance guarantee.  Armscor agreed to release some of the performance guarantees, converting them into corporate guarantees. It was in 2015 when Denel had space on its balance sheets. In 2016, Denel came to ask for help again however after insurance was taken out with Armscor as the beneficiary. Money was released to Denel however prudently. The Armscor board had said it can no longer help Denel. He also noted that Denel was a state actor and had Intellectual Property (IP) which was being monitored by Armscor. IP was a very valuable thing and worth billions of Rand. To this, he said industry did not own IP, it simply exploited it. Armscor had tried to help Denel but there was no sign of turnaround, improvement in delivery or project milestones. He noted the worry of the investments made in IP through Denel. If there was a business calamity within Denel, all investments, worth billions of Rand, could be lost. Armscor had disclosed its concerns. There could be great loss to the Department of Defence, armed forces and nation at large.

Mr Sipho Mkwananzi, Supply Chain Management and Acquisition, Armscor, said the Africa Track concept study was done and completed. The project was at the early stages of working out revised requirement capability. The project had to be revised because it was deferred for some time so there were changes in terms of the conditions and environment in which they were operating. As soon as the requirements were revised, it will be referred to Armscor to start the process of the feasibility study.

Mr Wakeford noted Armscor performed vetting for the state to settle security issues. Armscor was being approached by state actors to fast track the vetting process. Armscor did charge for the vetting. No one was going to operate on the Dockyard without being vetted. Preference was an indigenous player from local industry and there was capability within the local industry. He gave SA Shipyard in Durban as an example. There was always opportunity to raise a new model for the Dockyard. There was a mitigation plan in the event Denel did not deliver on Dockyard although Denel was the preference. Denel however did not yet have a partner who was willing to put up a financial guarantee and willing to show capability. Denel had to find a partner and sort out the financials.

Armscor had three clean audits and a number of unqualified audits. From a governance point of view, Armscor conducted its affairs hygienically and properly. Most objectives were not met related to ICT. Armscor had an old mainframe system which could not give management information at the punch of a button - Armscor was dealing with the problem. There were some changes but the Head of Corporate Support was hands on with the matter. He added that there was a budget module active at the moment.

Mr Wakeford said MBDA came to Armscor and suggested Armscor take the excessive missiles instead of the second generation missiles. MBDA also advised that instead of upgrading, repairing and servicing the old missiles, money will be used to put in new technology with local servicing capabilities. Armscor went to the navy and conveyed this suggestion, to which the navy did not have the extra R100 million. The new ones would have a test bench and training of local people to service those missiles. The R100 million difference would have solved the problem.

Mr Mkwanazi addressed the issue of the missile opportunities by noting there were quite a number of opportunities since 1999 for MBDA. Proposals were being put forward to MBDA although they never materialised. There was one that reasonably showed it would materialise – this was the one noted earlier by Mr Wakeford. With changed to the DIP Agreement, this was not a policy change but a change in the agreement itself between MBDA and Armscor. The agreement was extended to March 2019 with the aim that other possibilities will be looked at such as buying missiles from MBDA and transfer of technology. Mr Mkwanazi was of the view that there were further opportunities and the agreement should be amended to capture other possible ventures. There was a penalty but the policy was at that point that it would not be to the benefit of the state because the penalty was 1%. This explained the instance that Armscor received at least technology transfer out of the agreement.

Mr Wakeford then touched on IP commercialisation highlighting that the IP, directly controlled by the Department of Defence, required consent on every single bit of it. The consent process was a long and time-consuming one. The Intellectual Property Rights (IPR) Act of 2008 was a huge threat to defence IP because the Act said the beneficiary of technology will become the true owner of it. Armscor applied for exemption, but it was not granted by the Minister of Information and Technology. Armscor was working through the Department of Defence to amend the Defence Act and supersede the IPR Act. Technologies were exposed and it can be expunged overnight.

Mr Wakeford addressed asset sweating by highlighting there was a suggestion to utilise defence property that was underutilised and for it to be harnessed to assist the defence review as an alternative form of funding. The Department of Defence instituted its own investigation. There was no traction of movement on the matter. He also spoke about public works property used by the military for which public works was doing the asset sweating on its own - Armscor was ready to help if need be.

Ms Thuthukile Skweyiya, Deputy Chairperson of the Armscor Board, in closing noted that with military veterans, there were some projects running in Gauteng however, there will be more as SA was not just about Gauteng. She gave her assurance that in the not so distant future, Armscor would have done its best to cover the whole of SA. She also said ideas were welcome pertaining to military veterans.

Castle Control Board Briefing on the 2016/17 Annual Report and Audited Financial Statements

Mr Calvyn Gilfellan, CEO, Castle Control Board, extended thanks for those who were present at the 350 commemoration programme. He then moved on to speak to the highlights and challenges of the Castle Control Board by informing the Committee there was incorporation of the Castle Board’s mandate into the various programmes undertaken during 2016/17 on four strategic objectives, namely good corporate governance, development of the museum and imperative heritage components, developing and promoting the Castle as a heritage tourism destination and to ensure broad public accessibility. It was crucial to keep the standards of the Castle high to match those at international level.

Some of the highlights included the clean audit opinion from the AGSA, a successful 350 commemoration programme and an increase in publicity and savings on the maintained budget.

In terms of challenges, tourism revenue decreased and sat on R3.9 million as opposed to the target of R4.2 million. There were also challenges with security and South Africa National Defence Forces guard challenges.

By way of summary of performance, namely, administration and good corporate governance, preservation, interpretation and showcasing of the Castle history, maximising tourism potential and increasing public access and perception, all targets were achieved. Only one target went unmet – this was the maximising tourism potential. The revenue optimisation plan was activated – this would mean an increase of fees and extension of trading hours.

Mr Gilfellan brought it to the attention of the Committee that previous BRRR queries were being addressed.  An example was the One Castle, One Controlling Body issue matter - there was a management to management meeting with Iziko and that cooperation was much better. Another matter was with the SANDF guards - management met with the new Officer Command of the Army Support Base and a new plan was in place to deal with discipline.

Irregular expenditure was mainly due to the Board’s approval of the 350 commemoration allocation. The Board was working to eradicate this practice. The Committee also raised the matter of strategic risk plans – to this the Board had a risk register and action plan to deal with organisational risks. These risks were thoroughly dealt with at management, internal audit, audit and risk committee and Board level. The BRRR also spoke to performance bonuses - only new appointees would sign the performance agreement and be eligible for performance incentives. This changed in December 2016, when the Board abandoned the holiday bonus practice. After initial reluctance, majority of the staff were now moved to performance contracts. No performance bonuses were paid for the 2016/17 financial year.

Discussion

The Chairperson commended the Castle Control Board on its achievements.

Mr Esau highlighted that the Committee was aware of Treasury regulations with regard to surplus, and supported the idea that surplus must not be given back to Treasury but rather roll over from year to year. This was because the Castle Control Board depended on that money to sustain its activities. Surplus was important at this stage and was made further evident as it assisted in funding the 350 commemoration. The revenue optimisation plan would be critical to have especially because there was a chance that surplus may not always be there to cover the costs of the Castle. The Department of Defence would make some inputs as well and there were funds for maintenance.

He was concerned about whether or not revenue generating activities would be helpful. Was the conference centre state of the art? Projects on this facility were required by the Committee. He also asked about rentals on the restaurant and how much money can be made from the conference and restaurant. With the contract arrangement with the CEO, how many more years did the CEO have with the Board? The Member then questioned the autonomy of the Castle and if there were any shortcomings with the soldier guards. He addressed the issue of people settling around the Castle and opined that there was some other activity happening around the Castle for example selling of drugs – he suggested a cleanup in this regard. Was it possible to have perimeter fending around the Castle? How far would such fencing stretch?  People settling around the Castle were worrying and did not give a good picture to visitors as the Castle was a world class heritage site. These people bathed in broad daylight on the walls of the Castle. The SA Human Rights Commission said the people could not be put at the shelter if they did not want to – this meant the people were left to live on the street and do anything that amounted to public indecency, commit crime and break into cars. There would be a need to speak to the laws and address these issues. In first world countries it would not be tolerated and these people would have been taken to a facility. By-laws of the City of Cape Town would need to be looked into in terms of how such a challenge could be accommodated and addressed. To have people settling on a heritage site was not good. The Member then asked about the arrangement with the manager that owed R100 000. What would be sold in the gift shop and what potential turnover could it generate? With performance bonuses, the Committee was interested in ensuring all people were benefiting and not only a select few.  He asked for clarity and certainty of the performance rewards in terms of the provisional amount stated in the Annual Report and what was approved by the Board. Finally he asked about trips undertaken on behalf of the Castle.

Ms B Dambuza (ANC) asked how far the process of alignment of laws was and when it will be finalised. She also asked for a copy of the discipline plan for the soldiers.

Mr Gilfellan responded that the revenue strategy plan was a 110 page document with a detailed income stream plan. With renovations, some were rolled out – this was why the Castle Control Board was saying it was on phase two. There was a clear plan for revenue generating activities. With enterprise risk, all risk that undermined the ability of the Castle to execute its revenue optimisation plan may be mitigated. The focus was not only on business risk but all risk that may hinder the Castle’s execution of its mandate in a cost efficient way. The Board extended the contract of the CEO for another three years so it would end in 2019. The HR matter was settled - the Castle Board was not interested in the Minister intervening as there was enough leadership between the Castle and Iziko to deal with it. If it had not been dealt with, General Mbuli will insist on its execution. With regard to settlers around the Castle wall, the Board was working with the City of Cape Town to put a solution in place. Addressing of the challenge of the settlers was done and will continue to be done in a humane way. Perimeter fencing was an option. The fence however was controversial as part of the perimeter used to be sea. The Castle Board will deal with current land use as the City had given part of the land to the Castle therefore perimeter fencing was possible however with the humanity it deserved.

The gift shop would be moved to the front and will be stocked with diverse products which were branded and linked to the communities producing it. The idea was to give people opportunity to trade. With performance bonuses and holiday bonuses, these terms were used interchangeably. He clarified that in the past, people were given bonuses. However that stopped and everyone was migrated to the performance bonuses. With trips taken by the Castle Control Board, one was to Ghana and the other to France. With regard to legislative alignment, the drafting process sat with the Department of Defence - it would be essential to push the amendments especially with assistance of the Committee.

Lt Gen J Mbuli, Chief of Logistics and Chairperson of the Castle Control Board, gave a vote of thanks to the Committee. The Castle will look deeper into matters raised by Members and address them accordingly. He concluded by addressing the matter of discipline of soldier guards noting that he was scheduled to have a meeting with the newly appointed Commander in the Western Cape. He was waiting for the newly appointed commander to settle down before engaging on the status of the discipline of the guards. Lt. Gen. Mbuli could not speak directly to the soldiers as protocol required that he spoke to their Commander first. Proper soldering conduct in the Castle was expected especially given visitors to the Castle. Lt. Gen. Mbuli said he would resolve the matter of the SANDF members in the Castle.

The meeting was adjourned.