The Secretary of Defence briefed the Committee on the 2016/17 Annual Performance Report of the Department of Defence and Military Veterans. He informed the Committee that the DOD had been unable adhere to the PFMA requirement to submit the Annual Report for 2016/17 to National Treasury and the Executive Authority within five months of the end of the financial year. That was due to the fact that the Auditor-General had not issued the General Defence Account Audit Report by that time.
65% of planned indicators were achieved while the Department had obtained a qualified audit opinion for 2016/17 financial year as against an unqualified audit outcome the previous financial year. The reasons advanced by the Attorney General included the fact that the Department had not disclosed all moveable tangible capital assets accurately to the Modified Cash Standard and that tangible capital assets stated at R57,6 billion were misstated by R1,3 billion. Furthermore, the Department had not disclosed capital work in progress for projects. Fruitless and wasteful expenditure was also cited to an amount of R303m. Irregular expenditure to the amount of R419 million was not disclosed in the disclosure note as required by the PFMA.
The target of 12 000 hours at sea in the Maritime Defence Programme was not achieved. The 8 131 hours actually spent at sea represented 67% of the target and was the result of the unavailability of vessels due to maintenance cycle delays and operational defects. Budgetary constraints prevented the opening of the two outstanding Defence Attaché Offices. Overall 65% of targets were achieved.
In respect of Maritime Security, the transfer of the Dockyard to the SA Navy as recommended by the Defence Review 2015 had commenced. During the 2017/18, the DOD would provide a comprehensive Departmental Cyber Warfare Strategy and Sensor Strategy to the Justice Crime Prevention and Security Cluster Ministers for approval.
The Department was facing challenges in the four major areas of operation: border safeguarding, peace keeping operation, maritime security and disaster management and police support. The Department was being asked to cut operations by R 3 billion in the coming financial year. The Annual Performance plan had been completed for 2018/19 but, after presentation, it had been sent back to the Department to slice it by R 3 billion. Looking at the four major areas of operation as mentioned, where would the Department effect that cut?
Members asked how the Department could allow such wastage of money without proper control and that an article in the media had alleged that R73 million had been spent on purchasing luxury cars. The Committee understood that at the end of the previous financial year, there had been money unspent and that amounted to wasteful and irregular expenditure. Other Members wanted to know how much money and how many hours were spent on chartered aircraft. One Member asked the Department what had really gone wrong in the financial year under review compared to the previous financial years? What had gone wrong and why had the Department regressed, according to the Department’s own analysis?
Members spoke about the exit mechanisms, alleging that R133m had been spent for people to exit the system and there was no clear indication as to how 16,000 people would exit the Department. Were those people going to be removed and how could the Force be rejuvenated when that happened? Members also asked about the average age of a soldier in the armed forces and the reserves as the contracts of many generals over the age of sixty had been extended.
The Chairperson indicated that there might be a need for a joint meeting with Treasury in terms of the realignment of legislation.
The Committee was to undertake a trip to the Democratic Republic of Congo from 25 to 29 March 2018. The trip would be a morale booster for South African troops stationed in that country.
The Chairperson welcomed everyone, noting that the Portfolio Committee meeting had been delayed by the events in Parliament over the past couple of weeks, but he was certain that they would meet all their targets. Mr S Marais (DA) interjected, stating that he was more concerned about the Defence Force that seemed not to have met its targets.
The Chairperson welcomed the delegation from the South African Defence Force as well as the Auditor General. The Secretary of Defence was asked to present without further ado.
Briefing by Department of Defence and Military Veterans
Dr Sam Gulube, Secretary for Defence presented the Department of Defence (DOD) Annual Report for 2016/17. He informed the Committee that the DOD had been unable adhere to the PFMA requirement to submit the Annual Report for 2016/17 to National Treasury and the Executive Authority within five months of the end of the financial year. That was due to the fact that the Auditor-General had not issued the General Defence Account Audit Report by that time. The delay had been communicated in writing to all parties concerned on 30 August 2017. DOD had been unable to table its Annual Report to Parliament timeously but had informed the National Assembly and the National Council of Provinces. The Auditor-General Report had finally been issued on 24 October 2017.
DOD had underspending of R 39.371million. Under expenditure of R 14.524 million in the Force Employment Programme was mainly within the Peace Support Operations environment due to operational requirements regarding aircraft chartering by the UN being less than what was anticipated. In the Maritime Defence Programme under expenditure of R 24.847 million was mainly as a result of austerity measures. However, underspending was necessary because some money had to be reserved to honour expenditure that would have to be paid for immediately after the end of the financial year.
DOD reported on 94 Performance Indicators in the Annual Report. A presentation of ten selected Performance Indicators showed a 100% achievement of five Indicators with minor shortfalls in three more. The target of 12 000 hours at sea in the Maritime Defence Programme was not achieved. The 8 131 hours actually spent at sea represented 67% of the target and was the result of the unavailability of vessels due to maintenance cycle delays and operational defects. Budgetary constraints prevented the opening of the two outstanding Defence Attaché Offices. Overall 65% of targets were achieved.
The Department had obtained a qualified audit opinion for 2016/17 financial year as against an unqualified audit outcome the previous financial year. The reasons advanced by the Attorney General ranged from the fact that the Department had not disclosed all moveable tangible capital assets accurately to the Modified Cash Standard. That tangible capital assets stated at R57,6 billion had been misstated by R1,3 billion. Furthermore, the Department had not disclosed capital work in progress for projects. Fruitless and wasteful expenditure was also cited to an amount of R303m. Further, Irregular expenditure to the amount of R419 million was not disclosed in the disclosure note as required by the PFMA.
DOD reported on various outcomes in respect of political cohesion in Southern Africa to ensure a peaceful, secure and stable Southern African region. DOD had provided forces in two General Military Assistance operations. Mission THEBE had ensured that soldiers from the Forces Armées de la République Démocratique du Congo (FARDC) had received individual and platoon weapon training by the SA Army tactical headquarters deployed at the Mura base. Team BULISA had provided assistance to the FARDC to ensure the publication and popularisation of their Military Strategy.
In respect of Maritime Security, the transfer of the Dockyard to the SA Navy as recommended by the Defence Review 2015 had commenced. The multi-lateral agreement between the DOD, Denel and ARMSCOR had been signed and Denel was awaiting National Treasury approval. Border Safeguarding saw the SANDF continue to register operational achievements, particularly in the area of stock theft, recovery of stolen vehicles, and prevention of cross-border crime. DOD would submit a Border Safeguarding Strategy to the Justice, Crime Prevention and Security Ministers for approval during 2017/18. During the 2017/18, the DOD would provide a comprehensive Departmental Cyber Warfare Strategy and Sensor Strategy to the Justice Crime Prevention and Security Cluster Ministers for approval.
Mr Marais agreed with the Auditor-General on the issue of special defence accounts. What had happened the previous year in the medium-term budget had to be remembered because R1 billion had been moved from that account. For what reason? How that affected the South African Defence capability to acquire assets and equipment was not yet known. There could have been other things moved as well and those who thought Defence was not essential were living in a fool's paradise. How could the Department allow such wastage of money without any control and without asking how it was utilised? The Department, if it wanted the Committee’s support, would have to decide whether it trusted the Portfolio Committee. As it stood, neither the Committee nor the Auditor General had that privilege, so the Committee supported the Auditor General’s findings.
The Committee had a problem with the special account as it was currently used to fund Human Resource expenses. Another issue was an article in the newspapers about R73 million that had been spent on luxury cars. The Committee understood that at the end of the previous financial year there had been money unspent. That amounted to wasteful and irregular expenditure. It showed that there were more problems relating to macro management in the Department, which meant there were even bigger problems.
Something that had not even been disclosed before were the flying hours and that over three hundred of those hours were on VIP aircraft because of the unavailability of Airforce aircraft. Knowing the state of aircraft at the Department’s disposal, how much money was spent on chartered aircraft? The Committee knew that the maintenance contract with ExecuJets had been cancelled and Members also knew the state of DENEL, so who was currently looking after the aircraft? Information reaching Committee Members was that those VIP aircraft had been grounded since August/September 2017 because there was no money available for maintenance. If that was the case, then Committee Members should assume that there were major problems. The concern was that although there was money provided for exit mechanisms, the Committee did not see how those mechanisms were put into a plan of action. It seemed as if there was no political will in government and in the Defence Force, and a lack of confidence by National Treasury that the Department was going to be able to meet up those challenges. That was why Treasury was reluctant to keep the Department’s budget at 1.5% of GDP.
Mr Marais declared that the Committee sympathised with the fact that the Department did not have enough money, but it needed to have a future planning scenario. The world would be totally different in 50 years and if South Africa did not even know what it was going to look like, how then could it embark on a six-year defence review? Was the country throwing good money into a bad cause and was that the best way to spend the country’s money? The Department could not hope to fix HR problem by getting more money from Treasury because that was not going happen. It was a big concern that the Department had received a qualified audit opinion. That had to be dealt with by the Department. The Secretary for Defence should report on most of the issues raised. He should indicate how he thought it could be done realistically. For instance, defence review implementation and the rebuilding of defence capability were major concerns to the Committee.
Ms B Dambuza (ANC) welcomed the report but asked if the Department could provide the Committee Members with a draft of the Defence Review so that Members could see what the DOD strategies were. The Committee did not know what challenges DOD had that had prevented them from finalising the first milestone. The Committee knew that a professional person had been appointed to deal with the matter. She partly agreed with the last speaker because an Act existed that spoke to the special accounts. That Act had to be looked at to see what issues it envisaged tackling. The audit system also needed to be addressed. There was also the issue of the political heads who should put things right, so the audit outcomes could be improved. The Committee also needed to undertake a study tour so as to learn about the practices in other countries and how Defence was audited in developed and developing countries. That was a strong recommendation that she was making to the Committee.
The transversal agreement between Treasury and DOD was another issue that demanded attention and where the Minister’s intervention was needed. The Finance and Defence Ministers needed to speak to one another on the issue and to the Committee. When considering that matter, Ministers should endeavour to come up with recommendations. The country’s soldiers could not be allowed to patrol on foot. It was a disgrace for South Africa. The Auditor General was unfair to the Department in terms of the guidelines developed for the public service. That was beyond the Department’s scope and powers. She stood to be corrected though.
Ms Dambuza asked how the Department had resolved the issue of Modified Cash Standards (MCS) while finalising engagements with the Auditor General. On the issue of immovable assets, the Committee wanted to know what the challenges had been, as the Department knew full well the auditing period. Providing incomplete information to the Auditor General could not be condoned and the Committee wanted to know what the Department’s plans were to prevent that from happening again. There was a contradiction regarding the underspending by R 37.3 million. The presentation circulated indicated that it was because of peace support operations and austerity measures that had been implemented, while the presenter had said that it was because some money had to be reserved to honour expenditure that had to be paid immediately after the end of the financial year. That information should be aligned to what was being presented.
Mr G Skosana (ANC) asked the Department what had really gone wrong in the financial year under review compared to the previous financial years? Previously the Department had received an unqualified audit opinion compared to the qualified audit for this year. There were citations from the Auditor General for fruitless and wasteful expenditure in the amount of R 303 million being incorrectly reported. There was also irregular expenditure to the tune of R 419 million not disclosed in the disclosure note as required by the PFMA. Why had that money not been disclosed? What had gone wrong and why had the Department regressed, according to the Department’s own analysis?
Mr S Esau (DA) reminded the Committee that it had a dashboard where all those matters were placed, and progress tracked, but that dashboard was heavy because the Department had failed to respond to pertinent issues and the issues were increasing without being removed. It did not create a good impression of the Department. There were, as they spoke, matters that dated thirty days and beyond that had not been dealt with. On the exit mechanisms, R133 million had been spent on preparing for people to exit the system. How was it done? There was, as yet, no clear indication as to how 16,000 people would exit the system or Department. Were they going to be removed and at the same the Force would be rejuvenated?
What was the average age of a soldier within the armed forces and the reserves? Progress could not be made without a political will to implement it. It had come to the attention of the Committee that even when people reached the age of sixty, they did not retire, and their contracts were extended. The Defence Force was a top-heavy organisation with too many Generals. The young people were not given an opportunity to grow within the Force and to become active dynamic active soldiers. Older soldiers could not go to war. Unless changes were enforced, South Africa would have an old force that could not respond to situations on the ground.
Looking at the performance indicators, Mr Esau noted that 94 indicators had been indicated but when he added them up, there were actually 95, and performance was at 65%. The reality was that 65 was less than two-thirds, which was not good. Last year it had been slightly more, but performance had regressed. Those things had to be monitored and those responsible for execution held accountable. Consequence management had to be followed. Of the cases that were reported, nobody had stolen money over R5 million: they had all stolen money under R5 million. There were 178 cases and prosecution had been really pathetic. How strong was the legal team within the Defence Forces? That capacity had also decreased. What about the issue of liabilities and contingencies of cases against the Department? The Committee was also not happy on the issue of the dockyard. One of the reasons for non-achievement of the sea hours was the maintenance of the actual vessels. When would the Durban dockyard open? The Defence Force had to remember that most of the piracy taking place around the country was in the Mozambican Channel.
There were a number of strategies and reports outstanding that had not been submitted to the Committee. What was the exact status? Could the Committee also be provided with all outstanding policies? What were the trends in corruption? What and how were people stealing? Even the procurement policy was not in place and that was supposed to be reviewed and amended. Procurement was an area where money was normally stolen, and officials were fingered in that area. Regarding the178 cases of theft of less than R5m, the Committee would like to have a comprehensive report on them because together they added up to a huge amount.
Mr Esau was adamant that the defence review was not taking place because one of the main issues that had to be tackled was a reduction in personnel. So far 57% had been spent on personnel and that was more than what was required. Money was taken from other departments and pushed into HR even at the expense of capability. Border safety was another problem. Fifteen units were to be reduced but the borders were porous, highways were being created to drive through borders unhindered, illegal foreign nationals were pouring into South Africa and were on the streets without papers. In reducing personnel, the problems would escalate. To reduce by fifteen units when right now when South Africa did not have enough personnel was going to create mayhem. It was a big concern hearing from the Department of a possible reduction of companies on the borders. The target for Defence attachés was set at 46, but only 44 had been achieved. Did South Africa really need those military attaches at all the embassies? If so, what value did they bring to the country? What expenditure went to fund those attaches? Money was going into DOD at the current austere time, but it was not accounted for and that should not be the case.
The Chairperson interjected stating that because of the insufficiency of time, all the remaining questions should be submitted to the Committee Secretary in writing so that they could be factored into the Budget Review and Recommendation Report (BRRR) as recommendations when that report was adopted. He said that, despite time constraints, there were matters that still needed to be addressed by the Secretary of Defence.
Dr Gulube, thanked the Committee and clarified that there was no intention or plans by the Department to reduce the number of companies deployed at the borders. What he was referring to, were the challenges the Department was facing in the four major areas of operation: border safeguarding, peace keeping operation, maritime security and disaster management and police support. The Department was being asked to cut operations by R 3 billion in the coming financial year. The Annual Performance plan had been done for 2018/19 and after presentation, it had been sent back to the Department to slice it by R 3 billion. Looking at the four major areas of operation as mentioned, where would the Department effect that cut? That was a big dilemma for the Department. There were previous quarterly reports that needed to be presented, and the Department needed guidance from the Chairperson as to when it would be suitable to present to the Committee. The Department could also be told to focus on strategy and plans in the Annual Performance Plan 2018/19 in respect of the Auditor General’s adverse findings if the Committee so deemed. As for the dashboard, the Department would write a report as a response, addressing all the issues raised.
Ms Dambuza was of the opinion that the Committee still needed to receive the Third Quarter report because most of the issues raised would be covered by that quarterly report.
The Chairperson indicated that there might be a need for a joint meeting with Treasury in terms of the realignment of legislation. The special Defence account was not only a South African phenomenon. Such accounts existed the world over. What the Committee could do was to undertake a study tour so as to understand the benchmark with other countries. Countries in Scandinavia such as Sweden and Denmark would be ideal places to go so as to understand how they approached the matter and the Committee could decide what was in South Africa’s best interest.
Members should be appraised that the Committee was supposed to go to Vietnam, but the National Assembly of Vietnam had asked for a postponement because of their national day celebration. A date would be chosen for March, but the Committee would have to reprioritise because of an outstanding trip to the Democratic Republic of Congo (DRC). The DRC trip would be from 25 to 29 March 2018. The trip would be a morale booster for South African troops stationed in that country.
Mr Marais was astonished that just three days before the flight to Vietnam, it was discovered that the trip fell on the Vietnamese New Year celebrations. The situation was untenable. The Department of International Relations and Cooperation (DIRCO) and the South African embassy in Vietnam should have known about it long before. The communications for the trip had started in November 2017. The Committee should know who was responsible for it because it was very unprofessional and a slap in the Committee’s face. Surely if South African embassy staff did not know the national days of the country they were serving in, then they should return home.
The Chairperson promised to raise the Committee’s displeasure with DIRCO.
Ms Dambuza asked what would become of the money. Would it be returned to Treasury? The Chairperson assured the Committee that the money would be rolled over for the next study tour in July.
The meeting was adjourned.
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