Defence Budget 2003/4: briefing

Meeting report

SECURITY AND CONSTITUTIONAL AFFAIRS SELECT COMMITTEE
4 June 2003
DEFENCE BUDGET 2003/4: BRIEFING

Chairperson: Mr K Mokoena (ANC)

Documents handed out :
Powerpoint presentation on Defence Budget

Members present: Ms Kondo ANC, Eastern Cape; Ms Lubidla ANC, Northern Cape; P. Matthee IFP, Kwa-Zulu/Natal; Prince Zulu ANC, Kwa-Zulu/Natal; Mr T. Ralane ANC, Free ; State; Ms J Kgoali ANC, Gauteng

Department of Defence delegation:
Mr J April Chief Director, Budget Management
Rear Adm Houter Chief Director, Strategy and Planning
A Visser Chief Director, Strategic Management
Brig Gen De Wit Director, Human Resources
Mr B Engelbrecht Director, Budgeting

MINUTES
A Powerpoint presentation "Department of Defence 2003/04 Budget Briefing" was made.

April: The President's State of the Nation speech followed by the Minister of Finance's budget set the business of the SANDF mandate. The budget is set as follows for the next three years, but the increases do not cover inflation:
2003/04: R20.050 billion
2004/05: R20.489 billion
2005/06: R22.532 billion

There are presently 74 599 members in the SANDF, using 1.6% of GDP. This will reduce to 69 967 members and 1.5% of GDP by 2005/2006. The purchase of the Strategic Defence Packages (SDP) distort expenditures, resulting in major increases between 2001 and 2006, including R9.694 billion on the SDP in 2006.

Engelbrecht: Although personnel numbers have decreased from 100 000 to 74 599, personnel expenditure has increased to R7.093 billion. Transfer payments, including the SDP payments to Armscor, are R9.075 billion in 2003/2004.

The following nine categories reveal:
Administration: R660 million budget and 12.8% growth, of which R1 million went to the Minister's office for communications.
Landward Defence: R3.188 billion budget and 4.4% decline.
Air Defence: R2.138 billion budget and 4.8% growth mainly in incentive schemes for air traffic controllers.
Maritime Defence: R1.051 billion and 7.5% growth, due to training and outfitting of new corvettes.
Military Health: R1.254 billion and 8.2% growth. Medical inflation stands at 23% because of imported medicines.
Defence Intelligence: R153 million and 7.4% growth, due to increased peacekeeping commitments.
Joint Support: R2.039 billion and 3.9% growth, of which R4.688 million was paid for establishment of the War College.
Command & Support: R722 million and 13.3% growth, due to peace support operations in Burundi, and support for the SA Police Services.
Special Defence Account: R8.844 billion and 13.3% growth for the SDP.

Excluding the SDP, the figure for personnel increase from 35% to 53.9% of the SANDF budget. The increases in personnel expenditures hurt the ability of the SANDF to meet operating requirements. The final cost of the SDP will depend on foreign exchange fluctuations

Some comparable percentages of GDP spent on Defence:
Angola 6.3%
Dem Rep of Congo 8.6%
Botswana 4.9%
Lesotho 3.0%
Mauritius 0.2%
Namibia 2.7%
Swaziland 0.0% defence force disbanded in 2001
South Africa 1.6%, but only 1.2% if the SDP is excluded.

Questions:
Matthee: Are you satisfied that the budget allocation enables you to fulfil your defence roles, including peacekeeping? Are the personnel numbers only permanent force, or do they also include citizen force and commandos? How many citizen force members can be called up at short notice? Would an active citizen force capability reduce expenditure?

Ralane: The budget appears to be well managed, but have you been able to align it with government policies? Have you spent qualitatively, and what impact has this had on personnel?

Prince Zulu: Integration took place in 1995/96. But where is the affirmative action in front of us today? What about firearm losses at Mtubatuba? What is Intelligence Services doing about the situation at 21 Battalion?

Replies:
De Witt: The Defence Review talked about a sufficiently large reserve and adequate permanent force. We envisage 75 000 full time personnel, both uniformed and civilian (now 18 000). Human resource 2010 aims for a balanced component between reserve and permanent force. The military skills development system began in January 2003 with 2300 people, and there will be a new intake in July. This will reduce the costs of personnel by about R1.2 billion.

Houter: In response to Mr Matthee on the adequacy of the budget: in 1996 the White Paper and Review established the policy. It was then R10 billion. Option One approved in the Defence Review. Given inflation and the consequences of foreign exchange fluctuations, the present requirement would be R27 billion. The Defence Review also intended to exclude operations, for instance continued support for SAPS, which means we are receiving even less. The Defence Review foresaw one battalion for peace support. We are now almost at three battalions, and this will increase to between four and six battalions. We require three to one rotations to deploy one battalion for peacekeeping. Cost of peacekeeping is extremely high. There is conversion training from war culture to peace culture, and then retraining of troops to become combat ready.

Border control was allocated in 1998, requiring R500 million to R1 billion. Since 1998 these functions have not been provided with additional funding. The maintenance of equipment has been cut back, and such reallocations are now taking their toll. We are resorting to cannibalisation for spares. Stocks are being reduced, and buildings are also in need of maintenance.

The reserves have not had an exercise since 1996. We recognise that there is no conceivable threat, and thus exercises have been scaled down, but the consequence is that skill levels are being lost.

From a strategic perspective, the SANDF is not receiving adequate funding, and has reached a critical level from which it cannot operate without massive new financial expenditures.

Visser: We are aligned with government priorities towards NEPAD and the African Union. The budget is insufficient, and the SANDF's strategic business plan shows that the SANDF cannot meet the risks for which it is supposed to be prepared. Uniting seven defence forces was a great success, but our people are ageing, and we haven't the resources to replace them.

Question:
Ms Kgoali: How do you budget for new equipment when you cannot afford to maintain existing equipment?

Houter: The Department does budget for maintenance but, because of budget constraints, has been forced to cut back. In addition, maintenance costs increase with ageing equipment.