Armscor Bill: deliberations

Meeting report

DEFENCE PORTFOLIO COMMITTEE
10 June 2003
ARMSCOR BILL: DELIBERATIONS

Chairperson: Ms T Modise (ANC)

Documents handed out:
Armaments Corporation of South Africa Limited Bill

SUMMARY
This Committee considered definitions in the Bill and sections relating to the continued existence of the corporation, its objectives and its functions. Questions were raised about Armscor's intentions, which

MINUTES
Definitions
These were accepted.

Continued existence of the Corporation
Mr D Dlali (ANC) said he was uncertain about Clause 2(3). Did this imply that Armscor would no longer be accountable to Parliament?

The Chair said that the Corporation would remain accountable to Parliament. The Committee would continue to receive annual reports and budgets.

Mr S Thomo, Armscor Chairman, said that in terms of the Public Finance Management Act (PFMA) Armscor would need the Minister's permission to take on new types of business.

Objectives of the Corporation:
Clause 1(a)
The Chair asked how defence acquisitions could be measured "effectively, efficiently and economically".

Mr T Radebe, Department of Defence, replied that these concepts were defined in the PFMA.

Mr Thomo said that Armscor's objective was to discharge its duties with maximum benefit in order to avoid wasting the State's money.

Mr G Oosthuizen said that these were nice, but loaded, words. What yardstick would be used, since Armscor was limited to Department of Defence requirements? Some sort of service level agreement was needed. He asked what sanction the Department had to enforce this.

Mr Thomo replied that there was already a service level agreement between the Department and Armscor. Section 5 referred to this.

Mr Oosthuizen asked if this agreement was the yardstick and was told that it was.

Clause 2(a)
It was proposed that the word 'recognised' be changed to 'accepted'.

Mr Thomo said that Armscor was endeavouring to supplement its income. The Corporation's capabilities were specific, and there was no intention of venturing into manufacturing. Nevertheless, Armscor did have test facilities and other expertise that were made available to industry for a fee.

The Chair noted that it had been argued for years in some quarters that, as a strategic State entity, Armscor should be properly resourced. However, if Armscor took on manufacturing it would be competing with Denel and AMD. She asked about opportunities for beneficiating military technology?

Mr Thomo replied that it was not intended for Armscor to manufacture anything. The Corporation would transfer technological expertise aimed at empowering the business environment.

Mr Oosthuizen said that, two years previously, a briefing by Denel had suggested that it had taken over all the profit-making aspects of Armscor's function and that Armscor's sole focus was procurement. Beneficiation of military technology would be in violation of this.

The Chair proposed that further consideration of Section 3(2) be deferred until Section 4 had been be completed.

Functions of the corporation
The Chair said that it was important to list and define what facilities Armscor incorporated. There was also the dilemma that what is strategic in peacetime may be vastly different during wartime.

Mr Oosthuizen asked if Armscor intended becoming a second Denel. His sense was that there might be some confusion regarding Armscor's purpose and future intentions.

Mr Thomo replied that Armscor had no intention of taking over the functions of Denel, AMC or any other arms manufacturer. The Corporation's primary purpose was acquisitions and a skills base had been developed that enabled Armscor to offer assistance to other role players in the industry. The Corporation had no intention of going into manufacturing or commercial activities unless asked to do so.

The Chair asked the Department and Armscor to reach consensus by the next meeting on the meaning of Clause 4(1)(c).

The meeting was adjourned.