Armscor Bill: deliberations

NCOP Security and Justice

08 October 2003
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Meeting report

ARMSCOR BILL: DELIBERATIONS

SECURITY AND CONSTITUTIONAL AFFAIRS SELECT COMMITTEE
8 October 2003
ARMSCOR BILL: DELIBERATIONS

Chairperson: Mr K Mokoena

Relevant documents:
Armscor Bill (B18B-2003)
Armscor PowerPoint presentation on proposed Armscor Bill
Armscor proposed amendments

SUMMARY
The Department of Defence/Armscor delegation was comprised of Messrs Grundling (Chief Financial Officer), Sendall (Chief Director of Defence Policy), Ratebe (Director of Legal Support), Lobelo (Chief Director of Procurement), Doman (Black Economic Empowerment and Administration Manager) and Ms Ramphele (Senior Manager of Legal Services) - with apologies sent from Mr Masilela (Secretary of Defence). The Committee was also joined by Mr G Hoon, State law adviser, and Ms T Matshitenza, Adviser to the Minister of National Intelligence.

The Committee expressed disapproval that the public hearings input to the Portfolio Committee of Defence had not been made available. The Armscor team flew home to Pretoria for the evening before the next day's 10h00 Portfolio Committee meeting.

MINUTES
The Chairperson complained that delays from the Department of Defence had prevented their prior consideration of the Armscor Bill. Mr Sendall expressed the delegation's apologies for this, but explained they had been overseas when hearings were requested in August and September 2003.

Briefing by Mr Sendall
Mr Sendall talked to the hardcopy versions of a PowerPoint presentation as the required equipment was not working. He said the Bill was needed because of four developments:
Establishment of Denel in 1992 to undertake manufacturing previously conducted by Armscor.
Establishment of the National Conventional Arms Control Committee in 1995 to oversee exports.
Establishment of the Defence Secretariat in 1995, and
Publication of the White Paper on Defence-Related Industries.

As a result of these developments, Armscor had been downgraded from a Schedule 2, National Public Entity to a Schedule 3, Part B enterprise and could now fund itself outside the National Treasury. The Armscor Act of 1968 had previously given Armscor a very broad mandate to control every facet of the armaments industry and manufacturing.

The new Bill proposed the continued existence of Armscor. The State remained the sole shareholder and Armscor was accountable to the Minister of Defence. Its current objectives were to meet the material requirements of the Department as acquisition and technology agents. Its functions included management of the defence industrial participation programmes.

Discussion
Mr Ackermann (NNP): Were there any public participants at the Committee's public hearings, and did Armscor participate in the drafting of the Bill?

Mr Sendall: Public hearings were held on 15 April and there were submissions from Economists Allied for Arms Reduction, the Anti-War Coalition, General Nyanda, Aeronautical and Maritime Industries Association, and a black empowerment submission by Mr Khumalo. Armscor participated in drafting the Bill and supported it.

Mr Ackermann (NNP): What was the input at the public hearings? I get the impression we are being walked over.

Mr Lever (DA): I also request the public inputs. What about the share capital and loan authorities for Armscor? What about consultation with Denel?

Mr Grundling: Armscor's share capital is unchanged with this new Bill. The Public Finance Management Act and National Treasury regulations apply in its financial supervision.

Mr Sendall: Denel was included in almost all the meetings, except of the classification of Armscor as a schedule 3 organisation. Minutes of meetings were also provided to Denel.

Mr Mokoena (ANC): There is concern that Armscor is given a blank cheque to market its personnel and products. Are we sure that there are no illicit sources of funding?

Mr Moloyi (ANC): Section 4 "may" allow the Minister discretion. Shouldn't Section 18 (1)(d)) be tightened?

Mr Sendall: There is a perception that Armscor has a blank cheque for funding, and thus takes on non-authorised roles. This concern was raised in the public hearings. Section 4(2)(k) was reformulated to limit Armscor's marketing operations.

Mr Lobelo: There are three sources of funds: a) transfer payments, (b) interest on investments and (c) commercial business. The figures are audited, and there is no way to obtain illicit funding.

Mr Moloyi (ANC): Does Armscor have its own intelligence department?

Mr Radebe: The Defence Act provides that Armscor may conduct counter-intelligence services, and must conduct these in conjunction with the Department of Defence.

Mr Lobelo: We have a unit which gathers security clearance information about personnel.

Mr Ackermann (NNP): I get the impression we are not getting the full background regarding intelligence gathering within Armscor. This can be a delegated task, with the executive washing its hands if things go wrong.

Section 14 produced lengthy discussions as to what constituted a "family member", and the possibility of conflicts of interest. The State law adviser was tasked to produce a definition.

The meeting was adjourned after 2.5 hours and the Armscor delegation caught flights back to Pretoria. They would all fly back to Cape Town for the follow-up meeting at 10.00.

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