Appropriation Bill: Correctional Services & Department of Defence input

Standing Committee on Appropriations

25 May 2021
Chairperson: Mr S Buthelezi (ANC)
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Meeting Summary

Video: Standing Committee on Appropriations

The Standing Committee on Appropriations met to receive briefs from the Department of Correctional Services (DCS) and Department of Defence (DoD) on the 2021 Appropriations Bill.

The address by the Deputy Minister of Correctional Services focused on the budget cuts and the implications for DCS service delivery plus the four strategies to mitigate the budget cuts: self-sufficiency and sustainability, technology innovation, organisational development and design, and the social re-integration framework. DCS required both human and financial resources in the form of capital investment for agricultural and production workshops to generate savings for the state and generate revenue from the sale of products. However, lack of funding to implement these strategies would delay implementation and ensure DCS continually relied on government funding.

Highlights of the DCS presentation included strategies to mitigate the budget cuts and constraints, medium-term strategic priorities, budget cut amounts, key cost drivers, impact on compensation of employees (COE), service delivery programmes of Administration, Incarceration and Corrections, and Rehabilitation, impact on infrastructure delivery, tools of trade and conditions of service for correctional service officers.

The Committee reminded DCS that as much as it was trying to reprioritise its programmes, the Committee was concerned that its major challenges were poor financial management and irregular expenditure. Members asked questions on the rehabilitation, incarceration and corrections programmes, procurement challenges, historical poor financial management challenges, reprioritisation strategies, repeat offenders, COVID-19 preparedness, crime within correctional facilities, its roles in the Presidential employment programme, DCS self-sufficiency and sustainability initiatives, under expenditure, parolees and repeat offender cases.

DoD presented on the effect of the continual budget cuts; the cut to the Special Defence Account (SDA), compensation of employees, current state of DoD, its strategic environment and dilemma it faced due to the decline in Denel and local defence industries. It spoke to the Defence Review 2015 which was not able to be followed; decline in stock levels; the history of budget cuts and the implications for programmes such as defence intelligence, military health support and importantly, for Denel. It solicited the assistance of the Committee for reconsideration of defence budget cuts to ensure that the decline in defence capability is stopped.

The Committee expressed concern that Treasury had been cutting the DoD budget even before the pandemic. Members asked questions on the state of Denel, DoD skills and capabilities, decline in stock levels, military health support, National Treasury response to DoD appeals, the role of the South African Navy in dealing with illegal fishing and if DoD had engaged both Treasury and the President on its budget constraints. The Committee agreed that the intellectual property of defence rests within Denel and this cannot be allowed to collapse. The Committee resolved that it would engage with the Minister of Finance about the DoD budget.

Meeting report

Deputy Minister of Justice and Correctional Services opening remarks
Inkosi Phatekile Holomisa, tendered apologies from the Minister and himself as he would be leaving the meeting after his opening remarks to attend a funeral. The briefing would be led by Mr Arthur Fraser. He reminded the Committee of the mandate of the Department of Correctional Services (DCS) which contributed to the safety of the community. The proposed budget cuts to Compensation of Employees (COEs) amounting to R11 billion of the next three years negatively impact staff development and affects all DCS programmes. The proposed cuts will inevitably result in reduced human resource capacity. Budget cuts would also be imposed on DCS capital projects.

DCS management would brief the Committee on the service delivery implications of the budget cuts. The extent of the budget cuts is massive. It comes at a time when the executive has approved a self-sustainability strategy as a priority policy over the medium-term period. This policy priority is in support of Section 3(2)(b) of the Correctional Services Act which provides that the "Department must as far as practicable, be self-sufficient and operate according to business principles". The production of items internally through agricultural operations is currently undertaken. In 2019/20, savings through internal production was R94.3 million on products such as vegetables, fruits, red meat, milk, pork, chicken, and eggs. The implementation of the self-sufficiency programme in a phased approach would increase the volume of agricultural products thus generating more savings for the state.

The self-sustainability strategy approved by the Ministry is one of the four key strategies and solutions in response to the reduced appropriation. These initiatives aim at reducing duplication of efforts to increase efficient use of human resources and achieve optimal spending. These initiatives include technology innovation, organisational development and design as well as the implementation of the social re-integration framework aimed at building confidence in the system of community corrections. DCS requires human and financial resources in the form of capital investment for agricultural and production workshops. In the long-term, not only would the state generate savings but would be in the position to generate revenue from the sale of products. The lack of funding to implement these strategies would delay implementation leaving DCS to continually to rely on funding from the fiscus. Lastly, as a labour-intensive institution, DCS staff work under severe conditions at the correctional centres. These officers risk their lives each day to ensure that South Africans are safe and feel safe. He gave appreciation to them for their dedication and commitment to duty. He thanked the Committee for inviting DCS to share its challenges and strategies to move DCS forward. DCS looked forward to receiving advice, comments and questions that would assist DCS in moving forward.

Department of Correctional Services (DCS) briefing on Appropriation Bill impact
DCS National Commissioner, Mr Arthur Fraser, thanked the Committee and invited the DCS Chief Financial Officer to make the presentation.

Mr Nicodemus Ligege said the report would highlight the impact of budget cuts on DCS service delivery based on the five focus areas identified by the Committee. As mentioned by the Deputy Minister, the budget cuts are mainly on COE amounting to R11 billion over the Medium Term Expenditure Framework (MTEF) period.

Despite the budget cuts and their impact on service delivery, DCS has developed four strategies to respond to COVID-19 and the budget cuts as mentioned by the Deputy Minister. The first is the self-sustainability strategy. In its drive to increase self-sufficiency, this has led to the utilisation of 40 000 hectares of correctional centre farmland where vegetable, milk, red meat, chicken, and pigs are produced. The Department also has wood, steel, textile workshops, shoe factory and bakeries which operate as business units. This self-sustainability strategy would ensure increasing production by upgrading capacity at these sites to ensure that DCS is self-sustainable.

The organisational development and design strategy is development and approval of its Service Delivery Model (SDM) in June 2019. The SDM aims to improve business processes, encourage innovation and enable an effective and efficient system of correctional services. The development of a microstructure is underway which will enable efficiency and effectiveness. The Department developed and approved the Master Information Systems and Security Technology Plan (MISSTP) which is a systematic intervention to achieve organisational objectives using sustainable and appropriate technology to reduce the use of labour to achieve DCS objectives. The priorities on technology include network and communication infrastructure, offender sentence life cycle systems, physical security systems, and strategic reporting for operations management systems. The technologies that respond to COVID-19 include telemedicine for contactless diagnosis of inmates, e-learning for inmates, and electronic monitoring of parolees and probationers.

The Social Reintegration Framework repositions Community Corrections and focuses on social reintegration. The implementation of the approved Framework contributes to the promotion of corrections as a social responsibility and improvement of confidence in the system of community corrections. These four strategies DCS believes would address the challenge of budget constraints in the long run but these strategies also require funding.

MTEF strategic priorities
These align with the National Development Plan (NDP). Needs-based rehabilitation aims at influencing offenders to adopt positive norms and values, developing life skills as well as social and employment-related skills to equip them to live a productive and crime-free life. DCS has provided short and long-term skills programmes to rehabilitate offenders in preparation for successful reintegration and contribution to the economy of the country using specific success measures.

Budget cuts
Expected overall DCS expenditure would increase marginally from R25.2 billion in 2021/22 to R25.6 billion in 2023/24. An estimated 58.4% (R44.7 billion) of spending over the MTEF would be on the Incarceration programme and 67.4% (R51.5 billion) is earmarked for COE. Cabinet approved budget cuts to the DCS baseline is to R11 billion over the MTEF (R3.3 billion in 2021/22, R4.3 billion in 2022/23, and R3.4 billion in 2023/24). The biggest budget cuts affect the COE allocations.

Key cost drivers
The key cost drivers are the number of employees and the inmates and remand detainees. DCS is labour-intensive due to the nature of services it renders with 37 836 employees for 2021/22. The average number of inmates funded in 2021/22 is 169 681, of which 124 294 are sentenced while 45 387 are under Remand Detention. Total parolee and supervision cases are 62 055 and 13 109 respectively. Increase in the length of incarceration per offender as well as increase in the seriousness of the crime committed impact service delivery at the correctional centre level.

Impact on COE budget cuts
COE budget cuts would result in human resources capacity constraints, inability to absorb trained learners despite available vacancy slots, increased overtime, and inability to implement a Universal Shift System (USS). DCS is a labour-intensive 7-day establishment that operates on a 24-hour basis, with a total filled post establishment of 38 723 as of 31 March 2021 with 32 019 posts for correctional centre-based officials, while 6 704 are officials in categories of professional and support services. Of the 32 019 officials, 1 745 officials are responsible for social reintegration through Community Corrections. The remaining 30 274 are divided into two divisions A and B in equal numbers of 15 137 officials, each division offers custodial activities i.e. internal and external security to incarcerate a total of 140 907 inmates (when Division A is on duty Division B is off duty). This translates into a staffing ratio of 1 Official: 9 Inmates per division and shortage of staff may increase overtime and overworking of employees resulting in exhaustion. Also, the USS would not be implemented and this would lead to the introduction of a new shift pattern as an additional cost to the current budget. This would affect the delivery of the core function of the department, lead to non-compliance in the provisions of the structured day programme, non-compliance to section 8(5) of the Correctional Services Act on the thee-meal intervals, ineffective use of the available human resources, lack of work-life balance for Correctional Officials; compromise in the security of members, inmates and stakeholders, non-compliance to the White Paper of Corrections, Remand and Detention and other prescripts and mandates, expose DCS to grievances, arbitrations, and litigation, affect the implementation of the USS, and lead to low staff morale.

Impact on service delivery programmes
In Programme 1 (Administration), the COE budget decrease by R3.3 billion over the MTEF would constrain management and support functions, and result in abolishing recruitment in previously funded posts in the programme. The occupation category affected is management and general support personnel and would result in a 18.24% vacancy rate.

In Programme 2 (Incarceration and Corrections), the COE budget would decrease by R7.3 billion over the MTEF and would affect the these sub-programmes: personnel corrections, personnel development, personnel wellbeing, health care services, facilities management, and offender security. It includes sub-programmes such as offender rehabilitation, offender management, and remand detention. The rehabilitation of offenders has been negatively impacted by budget cuts. DCS implemented the strategic framework on self-sufficiency and sustainability from 1 April 2021 which needs a full complement of security officials. The custodian officials are expected to guard offenders for the duration of development programme, however, budget cuts have led to competing responsibilities as providing food, escorting inmates to courts and hospitals.

The desired outcome of self-sufficiency is to have more offenders gainfully occupied in working opportunities as well as increased production on farms and production workshops. However, reduced funds for security and the ever-dwindling number of artisans, would lead to serious challenges. The offender management sub-programme provides safe and secure conditions for effective administration and management of offenders. DCS would not be able to fully capacitate the two crucial structures for an effective rehabilitation path: Case Management Committees (CMCs) and Correctional Supervision Parole Boards (CSPBs). Ineffective CMCs will result in delays in generating timely and quality profile reports for consideration by CSPBs and result in delays in the placement of offenders on parole. The population of remand detainees has gradually increased 16.4% from 2017/18 with an average of 42 721 to 49 735 in 2020/21. The drivers of the remand detainees population are all beyond the control of DCS and include crime trends with courts opting for detention in serious crimes, failure of the few with an option of bail to pay the amount due to factors such as affordability and unemployment. The period spent in detention ranges from a day to more than 5 years.

In Programme 3 (Rehabilitation), the COE budget would decrease by R336.8 million over the MTEF and would affect services such as psycho-social, spiritual, correcting offending behaviour, and offender development and skilling which currently experiences a human resources shortage.

In Programme 4 (Care), the COE budget would decrease by R81.5 million over the MTEF . The budget cuts have not allowed DCS to employ contract nurses whose contract expired in 2020/21 and has resulted in a shortage of essential health care workers.

Program 5 (Social Reintegration) is a labour-intensive programme and core function of Community Corrections which has 2 105 funded posts. Of the funded posts, 219 posts are vacant and 1 886 are filled. There are 118 social workers responsible for Community Corrections and only one psychologist is based in Gauteng Region. The ratio of psychologists to offenders is 1: 33 and the ratio of social workers to offenders is 1: 521. At the end of March 2021, the caseload of community corrections was 61 425.

Impact on infrastructure delivery
Capital land and buildings projects not yet contracted were cut by R728.5 million. DCS is presently owing the Department of Public Works R664 million for accommodation charges for 2020/21.

Impact on tools of trade and condition of service for correctional service officers
DCS needs R100 million in 2021/22 to procure essential security equipment for correctional centre workers but only over R54 million has been allocated.

Ms M Dikgale (ANC) commended DCS for its rehabilitation programme as she had observed that parolees were been assisted. However, parolees become frustrated because their criminal record does not allow them to get jobs and they end up going back to a life of crime. She asked DCS how it ensures the funds used for rehabilitation lead to the successful integration of parolees into society and how DCS assists parolees to get jobs.

Mr X Qayiso (ANC) noted that the brief was detailed but included elements of concern. He reminded the DCS Commissioner that as much as DCS was trying to reprioritise its programmes, one its major challenges was poor financial management and irregular expenditure. Based on the briefing, the safety and security of DCS staff were not guaranteed because budget cuts resulted in reduced procurement of essential security equipment at the correctional centre. How would DCS ensure that its core mandates were not compromised if its historical poor financial management challenges persisted. He also asked DCS how it would enhance its reprioritisation strategies.

Ms N Hlonyana (EFF) welcomed the presentation. She noted the 1: 9 ratio of officials to inmates and asked if this was the standard globally. She asked DCS to explain the Universal Shift System (USS) and the unions not accepting this. In the incarceration and corrections programme she requested COVID-19 statistics for the number of inmates and number of officials infected. How will DCS mitigate the effect of the third wave of COVID-19, and how the budget cuts have affected COVID-19 matters. She asked how it planned to pay the debt owed to Public Works and if it had engaged them on this. How could DCS ensure that the tools of trade for its officials were not compromised?

Ms D Peters (ANC) asked how DCS managed COVID-19 incidents and if it still addressed HIV and tuberculosis despite the focus on COVID-19. She noted from the brief that some parolees were caught for the same offence after they were released such as gender-based violence (GBV). She asked DCS how it treats parole cases and to confirm if it could manage and deal properly with parolees. The ratio of social workers to inmates is 1: 521 which was not good enough as the Department of Social Development (DSD) had told this Committee that it had trained social workers who were still unemployed. Psychologists are also insufficient. She advised DCS to collaborate with DSD and the Department of Health (DoH) on the sharing of professionals. She asked if DCS takes inmates to private hospitals with warders accompanying them while the inmates in the cells do not have enough warders. She commended DCS for establishing agriculture, shoe, bakery, and furniture centres and its vegetable farm in Upington. The furniture products are of good quality and she wondered why DCS was not assisting the Departments of Basic and Higher Education with furniture. She asked DCS to clarify why its inmates were not involved in uniform and shoe-making for SAPS, Defence, and DCS officials. She asked if its farms produced only for DCS and suggested that the farms should be upgraded to provide vegetables for soup kitchens and Department of Health facilities and not only DCS facilities.

Mr Shaik Emam (NFP) said DCS had now realised that budget cuts were real and were impacting on its projects. Some of the challenges in correctional facilities that need attention are the criminal activities inmates conduct from there. Inmates have access to drugs and cell phones which is a result of collusion between prisoners and warders. This needs interventions as inmates are not supposed to contact the outside world for crime purposes. Gangs and sexual abuse are also common amongst inmates. DCS needs to address these as chaos exists at correctional services. He asked the number of private correctional facilities, how these operated and the price DCS paid for a loaf of bread. He suggested that DCS consider using offenders to create supply to ensure self-sufficiency in supplying bread at correctional facilities as this would ensure that released offenders would be empowered to become entrepreneurs.

Current statistics show that much crime is committed by repeat offenders because when on release there is no programme to reintegrate them back into society. These offenders go back to a society riddled with drug challenges and they go back to crime because they do not have jobs. He advised DCS to collaborate with the Department of Small Business Development to ensure that released offenders have the skills to ensure that they became self-sufficient entrepreneurs. He asked how DCS will address the threat of the COVID-19 third wave as overcrowding still existed in prisons. He asked how parole officers could be empowered.

The Chairperson asked DCS to state how it had rendered COVID-19 assistance by accessing the Presidential employment programme and how much DCS spent per prisoner per day. He asked how many awaiting prisoners could not afford bail. He requested a written report on strategies DCS would use to mitigate the effect of budget cuts because it is now a reality, how DCS trains its officers and the challenges about employing interns. He asked if DCS had under expenditure in the last financial year and in which programmes. He asked DCS to explain how it assists parolees who cannot get jobs because of their criminal record, confirm if the ratio of 1:9 was the same in medium and maximum security prisons, and the number of private prisons of DCS.

DCS response
DCS National Commissioner, Mr Arthur Fraser, invited his team to answer the questions.

Chief Deputy Commissioner (CDC): Incarceration and Corrections, Mr Samuel Makgothi Thobakgale, replied that DCS farms were used to assist government departments that collaborated with DCS. It has to invest more funds to escalate supply streams but DCS has put in place the strategic framework on self-sufficiency and sustainability to build more capacity. DCS has engaged with the Ministry of Finance through its Defence Minister to set up mechanisms to build more capacity. DCS manages COVID-19 cases by taking inmates to public hospitals. DCS only takes inmates to private hospitals when high-level permissions are granted. DCS has programmes to mitigate COVID-19. As of 24 May 2021 DCS has three new cases of COVID-19 who were DCS officials and no inmate had been infected. A detailed written report would be sent to the Committee on COVID-19 cases.

Tuberculosis and HIV cases are managed at the hospitals and pharmacies collaborating with DCS despite COVID-19. DCS ensures that COVID-19 protocols are observed, DCS pharmacists and doctors operate and attend to cases daily. It ensures that it fulfils its APP targets. Its COVID-19 recovery rate is 97% and the shift system ensures that DCS does not expose officials and professionals to COVID-19, tuberculosis and HIV.

The caseload for social workers is high. There are 588 social workers in the system, 61 posts are vacant, and DCS is in the process of filling these posts. In Gauteng, DCS has 29 psychologists with a caseload of 1: 30. It has 90 psychologists across the country. DCS works with DoH and DSD. The only limitation is the deployment of students for experiential learning as this is tied to the COE budget cut. The CFO mentioned the impact of budget cuts on COE and this has affected the deployment of student nurses. A written report would be provided to the Committee on the skills and rehabilitation programmes and the enrolment statistics at TVET colleges.

CDC: Community Corrections, Ms Anna Molepo, replied that DCS has an indicator for facilitating economic opportunities and employment for parolees. This ensures that parolees are trained on employable skills while they are within correctional centres. DCS also links these parolees with employers to increase the economic stimulus of the country and encourages parolees and probationers to form cooperatives to employ other parolees in their small businesses. Some parolees and offenders on probation are employed in the clothing, shoe, and taxi industries and DCS engages with the stakeholders and partners of DCS to create work opportunities for ex-offenders through projects. Parolees and ex-offenders who are successfully integrated into society become ambassadors who share the lessons learned with inmates on how they have navigated their challenges and succeeded.

DCS offers awareness programmes for procedures to apply to expunge criminal records. It collaborates with the Department of Justice and Constitutional Development by referring parolees and ex-offenders to apply to expunge criminal records. DCS has psychologists that render services to parolees and probationers within the correctional centres. It collaborates with DSD currently to ensure that the organisational structure of social auxiliary workers is realigned. Some social work interns have been absorbed and some interns are absorbed within community corrections.

DCS has submitted its requests to National Treasury on the Presidential employment programme to ensure social auxiliary workers are recruited. The caseload currently of 1 (official): 33 (probationers) and monitoring services are being implemented. DCS has been monitoring the impact of its correctional services on parolees for the past three years and a success rate of 99% has been achieved. DCS acknowledges the fact that 1% of its parolees become repeat offender. The framework for electronic monitoring systems for parolees would be completed before the end of 2021/22 to ensure that Community Corrections is efficient.

CDC: Remand Detention, Ms Cynthia Ramulifho, replied that DCS is a labour-intensive department with reduced capacity for security in custodian divisions A and B which had impacts on the various units. Due to the budget cuts, a realignment of shift structure was undertaken that allowed a staffing ratio of 1 official: 9 inmates per division, 1 official: 6 inmates per division, or 1 official: 3 inmates per division depending on the unit. Based on budget cuts DCS is working on a USS in collaboration with organised labour. The USS would implement an average of eight hours per day and this would assist DCS to reduce overtime expenditure. There are about 245 centres in the country but DCS would present a written response on the proposed USS. DCS is engaging with Treasury in realigning the organisational structure. DCS is looking at ways in which it would be assisted while working on other ways to address the budget cuts.

The CFO replied that DWS had two Public Private Partnership correctional centres: Mangaung and Kutama Sinthumule. The Mangaung contract would end in 2026 while that of Kutama Sinthumule would end in 2027. There are no plans to have more private prisons once the contract expires. DCS would be taking over the operations and run the facilities on behalf of the state. The cost of running both private facilities is R1.064 billion a year for 2021/22. The under-expenditure in the last financial year was due to the COVID-19 pandemic which restricted DCS activities. DCS had over expenditure on its COE by R137 million. On the goods and services, under expenditure occurred on travel and accommodation due to the lockdown. Another contributing factor to under expenditure was due to construction delays in building projects during lockdown levels 4 and 5. The average external cost in 2019/20 was R8.65 for a loaf of bread but prices range region to region. DCS embarked on a commodity analysis four years ago and it benchmarked the weighted average cost of purchasing a loaf of bread and DCS insisted that its regions procure within this reasonable range. This has led to reduced prices for a loaf of bread. Internally the average cost of producing a loaf of bread is R5.30. The self-sufficiency initiative would allow DCS to open up more bakeries internally. The price of internally produced bread allows DCS to produce more loaves. DCS would provide in writing recent statistics on the production of a loaf of bread.

CDC: Chief Operations, Mr Phiko Mbambo, replied that bed space capacity at Kutama Sinthumule is 3 024 while Mangaung can take 2 928. Problematic offenders are transferred to these private prisons as this ensures that gangster cliques are broken. DCS launched the gang combating strategy in March 2021 as it wants to have a proactive approach by working with the SAPS crime intelligence unit to ensure that gangsterism is dealt with and security enhanced.

Awaiting trial detainees fluctuate as they are not sentenced offenders as they go to and from court. As of 31 March 2021, the remand detainee population was 47 749. The daily headcount of those with bail is 4 545. Those detained on bail issues are about 3 383. Through the Justice Crime Prevention and Security (JCPS) cluster, DCS engages its partners not to send people who have committed minor crimes to DCS facilities to ensure that overcrowding is avoided. Those charged with minor offences receive community sentences within their environment. Bail protocols which allow for referrals to court and bail reviews are in place with limitation. Those charged with serious crimes are not sent back to court because they do not qualify for referrals.

The Minister would be launching the self-sufficiency and sustainability strategy in a phased approach that would not only allow workshops to be self-sufficient but DCS wants to move to the point of generating revenue. DCS plans to have trading entities where it would be able to undertake projects. DCS acknowledges that it can only succeed if it partners with other departments and processes are underway to sign a memorandum of understanding (MOU) with these departments. For instance, DCS is in the process of signing an MOU with the Department of Environment to provide timber that would be used to manufacture furniture by offenders. DCS has already done this at Saint Albans in Mpumalanga and Boksburg in Eastern Cape. DCS is already refurbishing desks but it would build new desks going forward if the Departments of Basic Education and Higher Education buy from DCS. It has assisted DoD. DCS bakes the best bread which competes with other loaves on the market. DCS has started at its Witbank factory workshop to manufacture shoes for DCS and would upgrade to sewing uniforms for SAPS and DoD. DCS agrees with the Committee on assist other departments but would need worskhop upgrades.

DCS is in the process of procurement of tools of trade in 2021/22 to ensure it has equipment such as pepper spray as DCS cannot compromise on security and safety. The parole review process has started as DCS has realised there are gaps within the parole system. The concerns raised by Ms Peters about parolees are being factored into the review of the parole system.

DCS National Commissioner, Mr Arthur Fraser, admitted that DCS had challenges with irregular expenditure and audits. DCS would submit a written report on this to the Committee. On gangs and crime committed in prisons, DCS is presently collaborating with SAPS, DSD and DoJ&CD to implement gang combating strategies. It would submit comprehensive responses to the efficiencies built into DCS systems. It is currently working on a microstructure for its business processes. As indicated by the CFO, DCS has finalised the service delivery model and a written response would be sent on the business process and delivery model.

The Chairperson thanked DCS. The Committee would await the written responses to questions.  He advised them to put mechanisms in place to mitigate the budget cuts as they were a reality.

Department of Defence (DoD) briefing on Appropriation Bill impact
DoD CFO, Mr Siphiwe Sokhela, tendered apologies on behalf of the Minister, Deputy Minister and Director-General. The budget cut for the MTEF is R15.4 billion with reductions of R4.5bn in 2021/22, R6.2bn in 2022/23 and 4.6bn in 2023/24. There was also an additional budget cut of R5 billion on the Special Defence Account (SDA) by Treasury in 2020/21. The budget cuts also affected the compensation on employees (COE) budget.

The DoD representative spoke to what the country requires DoD to do based on its mandates, the current state of DoD, and its strategic environment. He reported that DoD faced a strategic dilemma resulting from the state of decline in Denel and South Africa's defence related industry (SADRI) that are original equipment manufacturers for the South African National Defence Force (SANDF) prime mission equipment. DoD is unable to do a midlife upgrade on its defence force. SANDF system elements used to measure its combat readiness have been affected, and most of its critical skills and competencies have been lost.

Three defence policies were proposed for budget cuts: allocation reduction, independent expansion, or expanding partnership with other parties. The path of independent expansion was chosen by Cabinet to ensure sovereign independence and this selected Strategic Policy Option in the Defence Review 2015 was endorsed by Parliament, to incrementally improve and realign defence capabilities over 20 to 25 years.

Despite the approval of the Defence Review 2015, the DoD funding allocation has decreased significantly and there has been no direct intervention in the funding of declining defence capabilities. DoD has had a history of budget cuts that has serious implications on the execution of the DoD mandates. The downward adjustment of the budget for the Administration Program has implications on the implementation of the SA Defence Review 2015, COE budget, reserve force man-days, and Special Defence Account (SDA) funding. Treasury has not put in any interventions to address the decline in Work Packages 3 to 5.

DoD COE has been decreasing as only 64 567 positions have been funded when DoD has a complement of 73 153. COE is consuming more than 60% of the allocation due to budget cuts. The implications is that retention of scare skills and rejuvenation of the force is challenged. There is a risk of losing reserve force capacity with a further reduction of man-days.

The loss in SDA implies that there would be a loss of maintenance, renewal, and modernisation of defence capabilities and technologies. This loss of South African defence industries would lead to the country’s dependence on foreign procurement and expose its sovereignty. Projects under the strategic capital acquisition master plan have been abandoned due to the budget cuts that started in 2018/19. Modernisation could not take place at DoD because there was a shortage of R1.6 billion in capital allocations. As a result of the decline in DoD capital expenditure, some defence industries went into partnerships but Denel could not because it wanted to retain the country’s sovereignty. The reduced defence capital expenditure reduced research and development spending, reduced human resources, high technology experts exited and it had supply chain effects. The Defence Review 2015 individually classified the Denel divisions, for example, Denel Dynamics is classified as sovereign. Several strategic and sovereign capabilities have been established in various Denel divisions, therefore it remains the original equipment manufacturer (OEM). A symbiotic relationship exists between Denel and SANDF as Denel is the OEM for SANDF and therefore vital for the country. The demise of Denel would imply the demise of the SANDF. It takes years to rebuild a sovereign industry capability and the SANDF cannot afford to lose any of its capabilities as it hinges on Force Readiness and matters of national security. The Committee should also note that the loss of the SDA and Denel will be a strategic error for the future defence and protection of South Africa.

Program 2 Force Employment is responsible for safeguarding the border. The borders of the country would continue to remain porous with an increased out/inflow of illegal migrants, firearms, terror groups, and cross border crime due to budget cuts which affect Landward Border sub-units. Due to the decline of defence capabilities as a result of budget reductions, the country’s pledge to the Southern African Development Community (SADC) was revised downwards to reflect current resource level availability and might be reduced further due to more budget cuts.

Program 3 Landward Defence has been affected by shortfalls in the MTEF. The South African Army Force cannot carry out rejuvenation. Stock levels of ammunition, spares, uniform and general commodities are depleted, limited training opportunities exist for Landward Defence forces, and highly specialised Air Force capabilities have not been maintained.

Program 4 Air Defence has been affected by shortfalls in the MTEF and these shortfalls have implications. The Committee is advised to note that the budget cuts may force the Air Defence Program to close down many of its capabilities and this implies that the South African Air Force would become an Air Wing with few air assets being operable. Budget cuts have also affected the Maritime Defence programme and it has dire implications.

The Military Health Support programme funding is compounded by the current medical inflation of over 11% and foreign exchange fluctuations. Pharmaceutical and medical consumables are huge cost drivers and budget cuts are the reasons the newly qualified and specialist medical practitioners trained in the new state of the art equipment leave these medical institutions.

The Defence Intelligence programme provides Defence Intelligence and Counter-Intelligence support of internal and external operations. The budget cuts have limited the degree that the military responds to cyber-security. Budget cuts in the General Support programme have impacted the ability to maintain the deteriorated DoD facilities, maintenance of stock levels, industry supports, and effective functioning of the Defence Works Formation.

He concluded by soliciting the assistance of the Committee for reconsideration of defence budget cuts to ensure the decline in defence capabilities is stopped. Such interventions will ensure the country has a combat ready Defence Force and a vibrant industry support system.

Ms Peters acknowledged the apologies of the Minister and the Deputy Minister but indicated that the Minister or the Deputy Minister should be present during engagements with this Committee. She asked how DoD would deal with the demise of Denel. She observed that Denel should be an asset for income generation however the status of Denel is so critical that the management team cannot even ensure that salaries are paid. She expressed concern that staff had to gatecrash board meetings to ensure that staff grievances were heard. She advised DoD to engage with National Treasury to ensure that Denel does not collapse and lay off its employees. Looking at DoD skills and capabilities, she asked why it could not assist citizens in local areas when DoD was not commissioned for major deployments. She gave the example of the Eastern Cape where there are no bridges to cross rivers. She asked why DoD does not assist rural communities unless they were mandated to assist.

Ms Hlonyana noted the decline of stock levels of ammunition, uniforms and so on. She asked if DoD was ready to defend the country’s air, land and sea. She asked if it had an intelligence wing and if it had been affected by budget cuts. She asked DoD to state its defence plans since programmes such as research and development and search and rescue were under-funded. What mitigation plans would ensure that Denel and the Military Health becomes fully operational? She indicated that Treasury must make a plan to fund South African defence.

Ms Peters asked if there had been engagements between DoD, Treasury and the Presidency on the budget cuts and constraints.

The Chairperson commended the DoD for sharing its state of affairs. He expressed concern that historical budget cuts have been occurring at DoD even before the COVID-19 pandemic. He asked DoD to expound on the response of National Treasury when DoD shared the state of Defence due to budget cuts and clarify if this information had been shared with the Executive because a one-size-fits-all budget cut could not apply to all departments.

As budget cuts are a reality, he asked DoD to state the strategies that can be used to mitigate the budget constraints and clarify if the DoD had non-core assets that could be used to support the DoD core mandate. He asked if DoD had farmland as DCS has shared its proposed strategies that would assist in carrying out its core mandate. He agreed that the intellectual property of defence rests within Denel and that Denels’ defence industries have a huge potential in industrialisation efficiencies for military equipment. The importance of Denel cannot be overemphasised as one could not imagine the country having to rely on other counties for military equipment. He asked DoD to clarify the impact on the South African Navy in dealing with illegal fishing. The Committee would engage with the Minister of Finance on the DoD budget constraints.

DoD response
The DoD representative replied that Denel did not fall under DoD but is under the purview of the Department of Public Enterprises (DPE) but Denel works with Armscor. However, Denel under the purview of DPE had to come up with a different funding model. He replied that although DoD can carry out construction work, it is however limited by its budget. He reported that the response of National Treasury to the budget cuts was that DoD did not deserve higher budget appropriations as it was not in a warzone. Engagements on COE resulted in Treasury asking DoD to look for ways to lower its budgets instead of finding ways to rejuvenate the South African Defence Force. DoD is engaging on its properties that can be swapped with other departments and is engaging with the CFO to get a new funding model.

Lt Gen Mosiane assured Ms Hlonyana that the SANDF was combat-ready. DoD only alerted the Committee that the stock levels of ammunition are not well managed to ensure that the country did not get to the level where its defence would be threatened. DoD had expressed concern about its capacities in search and rescue but assured the Committee that DoD was able to respond to all national calls. Even though the briefing presents a bleak picture, the SANDF has been able to respond to national calls with its limited resources. Defence intelligence is also a source of concern as terrorism could occur when military intelligence is challenged. The South African Navy has a role to play in the maritime environment. There have been incidents of illegal fishing but they are dealt with using necessary reinforcements. What happens is that illegal fishermen flee when they have sight of the South African Navy. The Navy has always ensured that it honours its commitments on the sea as a few of such incidents have occurred. It is therefore necessary that it is able to respond when such incidents occur. DoD has categorised its core capabilities at Denel as to what is necessary and what is strategic. The Committee should be assured that DoD would ensure that its strategic capabilities in Denel are not lost.

The Chairperson thanked DoD for providing a window into its capabilities. He appreciated DoD for assuring the country that it was capable of defending the sovereignty of South Africa. Parliament did not want to lose Denel and the core structural capabilities of Defence. He assured DoD that the Committee would engage with both the Ministers of Defence and Finance.

Ms M Dikgale (ANC) noted she had an internet connection problem but her questions on Denel had been covered by other Members.

The Committee adopted the minutes of 18 and 19 May 2021.

The Chairperson announced that the Committee had two sessions on 27 May 2021 and he advised Members to reflect on the issues emanating from the briefs presented by DCS and DoD.

The meeting was adjourned.

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