National Defence Industry Council on boosting Defence Industry & Charter; Letter from President; with Minister


03 March 2022
Chairperson: Mr E Nchabeleng (ANC, Limpopo); Mr V Xaba (ANC)
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Meeting Summary


In a virtual meeting, the National Defence Industry Council (NDIC) spoke on the implementation of the Defence Sector Charter. The Defence Sector Charter Council was established. Membership from the relevant constituencies is complete. The Code calls for the establishment of the Enterprise and Supplier Development (ESD) Fund which will be utilised to fund Black-owned entities engage in activities that promote manufacturing in the South African Defence Industry (SADI), fund innovative Black-owned technology entities whose products can be utilised and develop intellectual property for SADI.

The Committee was informed that there had been challenges in South Africa’s trade relations with defence exports halted in the Middle East, in countries such as Saudi Arabia, United Arab Emirates, Turkey, and Oman. However, the matter has been resolved following the decision by the National Conventional Arms Control Committee (NCACC) to approve normal transactions with these countries. Over R5.5 billion in transactions have been immediately unlocked due to the NCACC decision to allow exports. R21 billion is still to be unlocked. Unfortunately, R2 billion in opportunities were lost due to the delays. The role of the National Conventional Arms Control Committee (NCACC) as an enabler of business for the Defence Industry is crucial in the approval and speedy processing of permits.

NDIC stated that market access needs a boost and the government needs to play an active role in marketing the local defence industry, as other major powers do when they engage their diplomatic counterparts. Special attention should be paid to countries in Africa, the Middle East and Asia.

NDIC noted that continued challenges at Denel have had a disastrous effect on the entire ecosystem, including, the total collapse of Defence Industry SMME companies. This has set back industry transformation and the skills drain continues unabated. The Open Secrets litigation was another challenge because if the case is lost by government, it will have a disastrous effect on the defence industry.

Committee members welcomed the Lekgotla for all defence industry stakeholders, government and the Defence parliamentary committees. Members were disappointed that the SAPS National Commissioner had not seen fit to work with NDIC on the small calibre ammunition designation programme. They asked about the impact of a government loss in the Open Secrets court case against South African arms exports to Saudi Arabia and UAE.

The President letter notifying the Committee about the 16 January to 15 April SANDF deployment for Operation Vikela was sent on 28 February 2022. The Committee discussed again the meaning of "promptly" in Section 201 of the Constitution for the deployment letters sent to the Committee by the President. The legal opinion on the interpretation of "promptly" would be sent to Committee members.

Meeting report

Chairperson Nchabeleng said he hoped that by the end of the meeting the Committee would have received answers on matters raised in the last meeting. These include NDIC policy options, Defence Sector Code, plans to boost the SA Defence Industry and the Denel task team.

Ambassador Sonto Kudjoe, Secretary for Defence, said the DOD presentation had three parts: Defence Sector Charter Council; defence industry performance; NDIC initiatives in support of defence industry s

NDIC presentation
Dr Moses Khanyile, NDIC Coordinator, said the presentation seeks to provide status feedback on the Defence Sector Charter Council, the defence industry performance, and the NDIC initiatives in support of the defence industry.

-The Defence Sector Charter Council (DSCC) established by Clause 19 of the Defence Sector Code is responsible for the overall implementation of the Code. The DSCC is functional and meets regularly to consider matters of Code. Membership of relevant constituencies is complete, and that includes DOD, Armscor, Aerospace, Maritime and Defence Industries Association (AMD), Military Veterans, Labour Unions, Defence Industry Fund, and the Department of Trade, Industry and Competition (DTIC). The Code calls for the establishment of the Enterprise and Supplier Development (ESD) Fund which will be utilised to fund Black owned entities to engage in activities that promote manufacturing in the SADI, fund innovative Black owned technology entities whose products can be utilised and develop intellectual property for SADI.

Key issues
- There has been a concern about South Africa’s trade relations with some countries in the Middle East, especially the Kingdom of Saudi Arabia and the United Arab Emirates. However, the matter has been resolved following the decision by the National Conventional Arms Control Committee (NCACC) to approve normal transactions with these countries.

- The government has given notable support to the industry through the regulatory framework. The role of the National Conventional Arms Control Committee (NCACC) as an enabler of business for the defence industry is crucial in the approval and speedy processing of permits.

- For market access, government needs to play an active role in marketing the local defence industry, as other major powers do when they engage their diplomatic counterparts. Special attention should be paid to countries in Africa, the Middle East, and Asia.

Notable Challenges
- Denel: As one of the main defence companies in the country, the continued challenges at Denel have had a disastrous effect on the entire ecosystem, including the total collapse of the SADI SMME companies. Industry transformation has been set back quite a bit. The skills drain continues unabated – this will have ramifications not only for the defence sector but for the country as a whole. The Aerospace and Defence sector is responsible for developing the critical skills that our economy needs to function. Sovereign integrity has already been compromised due to the shortage of equipment for the SANDF; the Denel situation has exacerbated this.
- Open Secrets Litigation: In June 2021 SADI learnt that two NGOs had approached the courts to review permits issued by NCACC to 37 companies doing business in Saudi Arabia and UAE. It is important that government efforts to oppose this continue to be supported and resources made available. The impact of this case, if lost, would have a disastrous effect on the Defence Industry. There must be a coordinated and unified approach to defend the case – industry believes that government must take the lead.

NDIC Strategic Interventions
- Aerospace and Defence Master Plan
- Designation of small-calibre weapons and ammunition
- Defence Industry Lekotla
- DOD IP Commercialisation.

Mr S Marais (DA) said he hoped that there will be regular interaction with the Defence Industry because it is not only important for SA job creation and growing the economy but is particularly important for SANDF and the state of security of the country. The lekgotla is a great idea to get everybody present so it can listen to the Defence Industry stakeholders. It is a great initiative. In the talk about the Defence Sector Charter it states that membership of relevant constituencies is complete (DOD, Armscor, AMD, Military Veterans, Labour Unions, Defence Industry Fund, DTIC) but there is no specific reference to Denel. Is Denel part of something else? It refers to Black owned entities, is this how it is understood in BBBEE format where it refers to a percentage of black shareholders or it is 100% black owned entities? Is it referring to SMEs, medium enterprises, or bigger enterprises?

He was happy that the NDIC has sorted out all the end-user certificate problems and issues with the UAE, Saudi Arabia, Turkey, and Oman. Of course, lots of business opportunities have been lost, but hopefully, the R5.5 billion will materialise going forward. What can the Defence parliamentary committees do to assist the industry, especially where you spoke about the need for the government to assist with Oman? How can we assist to open up that market and give them peace of mind so that they can trust SA, our industry, and stakeholders? What are you implying about the NCACC being progressive? Has there been a discussion on that?

On the Open Secrets court challenge, where the defence industry expects government to take the lead, what is the current situation? Is government taking the lead, especially with this litigation?

On Denel being a major problem, in last week's meeting the Secretary for Defence indicated that DOD together with ARMSCOR approached Defence Industry stakeholders on development work on missiles, equipment maintenance, and manufacturing of spares of certain infrastructural equipment. What is the progress on that? The four pillars of the Aerospace and Defence Master Plan sound fantastic, but why is the Minister of Public Enterprises involved in the executive oversight committee. What is the role of the Minister of Defence and DOD? Is it just to coordinate? It seems like DOD is outside of what is happening on this. At the end of the day, the industry plan relies heavily on what DOD and the JSCD do.

On the lack of response from the South African Police Service (SAPS), he found it unacceptable that the National Commissioner's office could not provide the data that NDIC required. Has this been communicated back to the security cluster ministers? They should be able to do something about that. He emphasised the importance of the lekgotla, and how it will give the Committee an opportunity to listen to industry stakeholders directly.

The Chairperson welcomed the Minister who had just joined the meeting.

Mr T Mafanya (EFF) asked about the internal audit and mismanagement. What is the status of the financial audit? He referred to SADI having to export 75% of its production because of the DOD budget decline. Looking at it from this perspective, if there are issues with audits where you have to apply for funding, it becomes a problem that it can be funded properly. That has affected the SADI exports that have been reduced from 100% to 75%. The other concern is the skills drain that continues unabated. For us to regain such skills in the industry becomes very difficult. What can be done to retain and regain the skills? This could be a challenge considering there has been a R90 million deficit in the payment of Denel staff. What is the impact of the R3 billion bailout for Denel in the current projection?

Mr D Ryder (Gauteng, DA) said the impact of selling some of Denel's divisions may impact the national security of the country, besides the job losses, and small calibre weapons and ammunition challenges for the SANDF. The entire defence industry in SA is closely linked to Denel. Certainly what Denel does tends to taint the reputation of the rest of the industry. Denel is spoken about as the elephant in the room, so it is important to know where we sit on this topic. Dr Khanyile has worked extensively on the impact of state capture and the Denel turnaround task team. Is this monster going to be salvageable? He agreed that a lekgotla is a great idea to get everyone on board. On Denel’s future, there was mention of splitting it up, what is the view on that? This arises from last week’s meeting as well. He requested the Defence Industry Master Plan to help the Committee with a better understanding of the plan.

Chairperson Xaba said the defence industry marketing strategy must be developed as a matter of urgency because it will assist the Committee to monitor compliance by the various agencies of government. The Committee will monitor its implementation and adherence by key government players, agencies or organs of the state. Without this, it will be difficult for him to respond if asked how South Africa is marketing products to other countries. When a business delegation in other countries is put together to accompany the President or senior government officials on a foreign mission, they will not leave out the defence industry especially where it is believed a market can be opened up for the country’s products.

Those countries that are potential markets are known. It is critical that political leaders, heads of institutions and committee chairpersons meet with foreign dignitaries. It should be known which countries are targeted. If there is an opportunity to meet with those countries, this item should be placed on the agenda. Everyone becomes an agent of the country’s defence industry. The strategy must target those institutions when they interact with key stakeholders from abroad. He is excited that a lekgotla is proposed to bring together the relevant key stakeholders. He is disappointed at the same time that the National Commissioner has not seen fit to work with NDIC on the small calibre ammunition designation programme and how to take this forward.

Chairperson Xaba said he is told that the police are buying this from abroad when it is produced locally. However, SAPS needs should be understood so production levels are scaled up to meet the demand, and that can be possible if its needs are communicated. It is disappointing that there has not been a breakthrough in talking with the Commissioner on that particular assignment. He was expected to coordinate the information from the side of the police to the municipal metro level.

He is excited that the NDIC is up and running. This will help government coordinate its approach to the industry. What is missing in the presentation is the industry's contribution to the economic development of our country, job creation, and beneficiation. This is so there is an appreciation of the extent to which the industry extracts our raw materials and converts them into a final product and sells it abroad. This is opposed to buying the final product at higher prices. That is what will happen if the country does not protect the industry. The presentation must focus on the economics.

Mr T Mmutle (ANC) sought clarity on transformation. The presentation spoke to the total collapse of the SADI SMME companies due to what has transpired at Denel. This has impacted negatively on the transformation agenda. ARMSCOR is responsible for procuring items as identified by DOD, from the serviceability of all tools, instruments, and machinery of the Defence Force. It is sitting with a transformation charter at its disposal even if Denel is not doing well it continues to procure directly from those companies within the industry. There is no excuse to suspend the transformation charter even if Denel is having challenges. Those that are still participating in ARMSCOR procurement should comply with the transformation charter.

On the litigation, he wanted to have an understanding of the impact of these cases on possible losses the industry is anticipating in case the judgment is not in its favour. The industry needs government to intervene and assist in this. Have they engaged with government? What is the status and the possible outcomes of those engagements? Is the role of the NCACC only to look at exports and not imports? This is because Mr Xaba said government entities do not procure from the industry and utilise the capabilities within the country but procure abroad. Is that regulated? If not, there should be engagement with the NCACC to expand its mandate to ensure there is regulation. It should be regulated that before importing, it should be determined that the local industry cannot meet the demand. These are the things that led to the demise of Denel.

Ms M Bartlett (ANC) asked for an explanation on the Master Plan because she felt the presenter moved too fast on that.

Mr K Motsamai (EFF) “spoke in vernacular.”

Chairperson Nchabeleng said many industries have succession plans. Scientists even if they are 80 years old are considered as they have the knowledge to give to young people working under them.

Mr M Shelembe (DA) said his problem is that the demise of Denel has resulted in the collapse of SADI. What will be the consequences if takes time to salvage Denel? It may take long to salvage Denel considering that the DOD budget has been cut, making it difficult for defence companies to survive. The relationship between DOD and the National Treasury does not look good in that if DOD approaches Treasury for assistance to ensure companies like Denel are salvaged, DOD fails to comply with the Treasury requirements. He is mentioning this because it needs to be established how best Denel can be salvaged. What will be the consequences if Denel is not salvaged? What will happen between DOD and National Treasury? These two departments should be working together to ensure that there is more money to deal with this. The issue is money and we can continue blaming Denel, but ensure that it is salvaged. If DOD continues not complying with Treasury requirements, Denel will not be resolved.

Chairperson Xaba said he knows someone who is involved in the Defence Industry and when he asked him about the Defence Investment Fund, he was negative because it has never helped him nor has it helped anyone he knows and it does not have money. When they go to the banks for funding, the banks are not interested in funding defence matters. This means that the possibility of emerging BBBEE people in this industry is zero because without capital injection you cannot take off. As much as it cannot give everyone money, at least explain where opportunities are in this sector. The worst thing is that some of these people are retired soldiers at the rank of colonel. How are we supporting emerging BBBEE companies or companies owned by previously disadvantaged people?

NDIC response
Ambassador Kudjoe, Secretary for Defence and NDIC Chairperson, said the reason DOD thought it will be prudent to have an industry lekgotla was because the fiscus is drying up. This has had an impact on government and Defence is no exception. The idea of the lekgotla is to have all the brains involved in the Defence Industry to gather and investigate the possibility of resolving these problems. There is the Department of Public Enterprises (DPE), DOD, Justice Crime Prevention and Security (JCPS) Cluster, and many other relevant entities. The National Defence Industry Council is made up of the defence industry itself and Denel is included – this answers the question asked about that. There are also Directors General sitting on the NDIC which is chaired by the Minister of Defence. The Minister delegated this responsibility to the Secretary for Defence and the NDIC sits quarterly to look and these matters precisely.

It may be prudent in future to do a presentation on the Aerospace and Defence Master Plan. This is thought to be the best Master Plan as it will bring impetus to changing the picture of the Defence Industry. Part of that will have to do with the Special Defence Account that the Committee knows does not have money. In the current year, it holds R1 billion and that is money that goes to multi-year projects that carry over from one year to the other. This money is carried over due to the time it takes to produce those capabilities. Some items have been affected by the unavailability of money. Initially Denel was what it was because of the acquisitions made by Defence through ARMSCOR. With the DOD budget cut the way it has been cut, this has had a cascading effect, and by extension, there will be problems with the capabilities, maintenance, and things like that. At first DOD dealt with the challenges of Denel until at a certain point it decided to call in the JCPS cluster to assist. Denel was invited to do a presentation to the JCPS cluster. It was realised that a lot of procurement in the security cluster was not buying our own. If the JCPS cluster can procure from Denel, it will make a significant change.

On the consequences of delay, the sooner Denel is dealt with, the better. Denel is a strategic asset that government has decided it needs to keep. The rationale is if we are a democracy that is worth its own salt we have to innovate, do R&D, and produce internally all the needs of our cluster, particularly Defence. From a security perspective everyone knows what will happen if there is external reliance for major capabilities. It has implications and so there is a need for a solution for Denel. One disadvantage is that Denel reports to DPE while its business is largely on the SANDF. It means there is a need to have this dynamic interaction between Denel, DPE, and DOD, and this is something that is being considered.

On the question of why do we need old people when skills are lost by Denel to other countries, she replied that even if those people are regained, how long do they still need to remain in the system? There is a need to look at recruitment and injecting young blood. We are talking about the intellectual property and that IP we have because of the R&D that was done. That is why today the Department IP is managed by ARMSCOR and utilised by Denel. The bigger South African Defence Industry is now asking how it can tap into the IP. The responsibility has been given to ARMSCOR to see if the IP can be monetised and how. There needs to be a proper model on how to deal with this. The transformation of the industry is to allow new entrants into the industry and the Black mentioned here will also cater for coloureds and Indians so that it can be reflective of the demographics of SA because right now it is largely white dominated. The possible impact of the industry losses has already been discussed. Denel has two layers of SMMEs that it procures from and if Denel was to go tomorrow, we would have lost 60 000 jobs just from those two layers of SMMEs. She could not only over-emphasise the urgency to deal with Denel, but also the importance of transforming the industry. Some of them are companies that are black women owned that have been marginalised in the past.

ARMSCOR does procure from previously disadvantaged groups. There can never be a point where it can be said that transformation in procurement is satisfied. They need to continue to allow new entrants to come in and that is why transformation is critical even in the Defence Industry. On the request to present the economic contribution of the industry, she said it is homework that they will need to deal with.

The Secretary for Defence said some years ago when she was ambassador, one of the marching orders was to go and promote the country's defence industry. Regardless of where one was posted to as an ambassador, you were expected to market Denel as a state owned entity, but also marketing the entire SA defence industry to ensure the money comes to SA rather than losing it to other countries. She agreed with the view expressed that there should be a marketing strategy and it must be aggressive. It must happen across the board in government so DTIC and other departments under the economic cluster that travel, should be able to market this. It is a responsibility that everyone has to take on – just as with Brand SA – to showcase what we are made of. The countries and clients that bought from Denel talk to the calibre of the company and some of the things it produced were among the best in the world. She could not agree more on the marketing strategy. She chairs the NDIC and it is looking at all the aspects in the Master Plan which is an open document that can be made available to the Committee.

Mr Ryder limited himself to Denel PMP because the position taken by DOD is that there are assets that can be classified as non-core. However, when you look at the business of DOD all those are there. If DOD procures about two thirds of its capability, what is it that is non-core? Even some of those that are considered not non-core, if looked at very closely, they feel like they are non-core. However, at the end of the day Denel cannot be left out because those issues are critical to it.

Mr Ryder noted the Secretary for Defence said about a week ago that DOD looks at its risk management strategy and determines areas where there are risks to be able to manage them and come up with mitigating measures. It would be an incomplete risk register and strategy if it does not talk about the non-availability of capabilities that SANDF needs to be able to respond to its constitutional mandate of protecting and defending.

Mr Ryder noted that, in response to the question on the NCACC being more progressive, the Secretary for Defence said the slide demonstrates between 2016 and 2020 the UAE spend on procuring military hardware. How much did Saudi Arabia spend on procuring the hardware? The National Conventional Arms Control Act is very specific that South Africa cannot sell weapons to countries if there is a violation of human rights involved. The Act also says the country must protect its national security and economic interests. All along when the NCACC did not approve the category A and category B which are thought to be the top of the range, it sold other categories that are not category A and B. Now the NCACC has decided to sell only certain ones.

Part of the reason why it sold is that when it did its assessment, it did a deep dive to see who these countries are and that is why they came with figures to indicate how much they spend on military hardware. As long as the NCACC did not put upfront the country’s economic interests as well, we were going to lose out because if we did not sell to those countries they would have bought from someone else. The countries that sit on the UN Security Council are also in the Defence Industry and are bound by the laws that bind SA's arms industry but they are selling.

If the Open Secrets case is lost, it will be a nail in the coffin for the defence industry, and the defence industry has an opportunity to contribute significantly to South Africa’s GDP. On the question of assistance, the Secretary for Defence said budget reduction makes DOD unable to acquire or finish the projects it has already taken up. If Denel goes down, 60 000 jobs are lost. The Master Plan is great, the only thing is that it has to be implemented and if you go deeper into it you will find that some of the things are impacted by budget. All the things that come from the Charter Code are implemented by DOD, the National Defence Industry Council is chaired by DOD as well.

The responsibility of the Charter Council is to ensure that transformation is achieved in the industry. Mainstream banks do not fund small companies that want to join the industry possibly due to a lack of understanding of what security is about. The Fund is already established and that fund will be sustained by the 1% contribution paid into it from the net income SADI is making annually. That is why it can prop up the new entrants. There is a second one where a bit of homework has gone into it called the Defence Industry Fund which supports small companies approached by foreign clients who want to procure from them. It is very important that all this is dealt with and the lekgotla will assist in dealing with several challenges as it is not one department or one company in the industry that will have all the answers. When there is a lively, vibrant, able, and well operating defence industry, it can only benefit everyone so it is important to meet and look at this.

The skills that have been lost should be looked at as a cup half full because they can now recruit new young people and inject them. They will learn from the older ones that have been there because at some stage they are going to retire and there needs to be young blood injected into the industry. If there is no innovation, research, and development, it becomes difficult to possess IP. Denel did very well and it has been shown in the past that if minds are put together, they should be able to deal with the Denel challenges.

Dr Moses Khanyile responded about transformation saying that ARMSCOR continues to procure for Defence and therefore it should be able to enforce transformation requirements. It is true that if a company is exclusively focused on exporting, meaning it does not rely on government contracts, that it does not have to comply with the this unless it has a progressive mind. The Code provides incentives in the form of points for companies that are dealing with the state. However, if the company is not dealing with the state, we have a problem with transformation. When it comes to Denel, it has a host of companies in the supply chain that support it. If it is not getting contracts it will not be able to procure from those companies which means they will also evaporate. If the SANDF is not placing contracts through ARMSCOR, ARMSCOR is not procuring from whomever, which means part of that the Code will not be effective.

The Defence Industry Fund has a particular focus, but also another very important aspect is that the Fund has to raise capital both locally and internationally. Capital once raised has certain conditions, which means it is not providing grants. There are still risks to be managed and these risks can only be managed if there is some kind of support from government. In other words, there is a lot that still needs to be done there. At some point, the Fund was trying to engage SOEs which have funds that could potentially be used to invest in the Fund, but there was no success. That means that if government does not demonstrate confidence in the Fund dedicated exclusively to Defence, why should others do so? The financial development institutions and commercial banks are specifically prohibited by their memorandum of incorporation to fund anything that has to do with defence. The Defence Industry Fund is the only mechanism meant to support existing enterprises and upcoming and emerging enterprises in the defence space. If it is not capitalised, then there is a challenge.

The Master Plan will be given to the Committee.

The idea of the intervention on weapons and ammunition in the security cluster is that once there is traction within the government space, then the designation could potentially be expanded to the broader security industry one way or the other. Besides that, it will enable SA to penetrate the African market. By way of illustration, if you look at what is happening in the global space, there is a conflict in Europe. Africa has a lot of military items from Russia and that side of that world, which are going to faced challenges going forward with maintenance and so on. If SA had a solid small calibre weapons manufacturing and maintenance capability, it would be able to fill the void. It would enable African countries to focus more south than east when it comes to procurement of small calibre weapons and ammunition knowing there is sufficient capacity to back it up, maintain and replace it.

Follow up questions
Mr Marais said the Secretary for Defence responded a bit on the Charter's reference to 'Black owned companies' and if it refers to BBBEE policy or means solely black. Perhaps NDIC will come back and state what it needs assistance with. Last week the ARMSCOR presentation that the Denel presentation to a large extent were pointing in opposite directions, so he was asking what the progress was. What the Secretary for Defence presented at that time was that they have approached Defence Industry stakeholders to do the missile developments and other programmes like maintenance. What is the progress that was made on this? Some Denel divisions need to be kept for the maintenance of the industry and for SANDF and the protection of SA and our integrity. Certain divisions might be closed down; some like R&D may need to be funded like the Council for Scientific and Industrial Research (CSIR) and there are some that can take on equity partners. However, if nothing is done, everything will be lost. There is a lot of frustration about how things are moving. He asked about that and he did not get a response that gives him a full understanding.

Mr Ryder said he was also not content with the response about Denel. What is of particular concern is that there is some expectation from other SA defence industry players that the IP of Denel gets shared with them. He was not sure if he understood correctly if that is what has been mooted. However, it will be unfair to SA taxpayers if its IP is transferred without some sort of payment. Please give clarity on this?

Secretary of Defence & NDIC response
Ambassador Kudjoe replied that what she was alluding to about the IP is that it is owned by DOD and is managed on behalf of DOD by ARMSCOR. All the IP that Denel produces is for DOD and ARMSCOR is managing it. Who are those that constitute the National Defence Industry Council? It is the defence industry itself and different departments including Treasury, Trade and Industry, DOD, DPE, and many others. In the last NDIC meeting in November 2021, the industry said it wants to benefit from the IP that DOD owns and is managed by ARMSCOR and have discussions about exploiting the IP. It is the commercialisation of the IP and how it is monetised to ensure that there is income obtained from it. To that extent, the Secretary for Defence requested the ARMSCOR CEO to investigate all the issues raised by the industry in the meeting and come back to DOD so that the matter could be discussed in the Department before reverting to NDIC. It needs to look at the pros and cons and the implications of charging for the IP. Microsoft is where it is because of monetising its IP. So this is a new issue that was raised in the last NDIC meeting and it will be sitting again on 16 March. The work that ARMSCOR is doing has not been finalised and also it is a serious matter so this will not be decided in one sitting. The matters governing IP are very complex and cannot be resolved in one sitting. The matter should be taken to the leadership of the Department to take a position on what needs to be done. What good is this IP if it is not going to help generate income in an environment that is fiscally constraint?

On the maintenance, it was agreed that the SA Air Force was going to review the user requirements to see budget availability. This matter is not just about the Air Force. It was also about the Gripen noted in last week's discussion; ARMSCOR is engaging with SAAB to look at this. SAAB is amenable to listen to what DOD has to say about the contract because what they were charging to service the aircraft was way too much. The SANDF only wanted to service those that were in use, not the entire fleet. The Falcon spares are already in place which is progress. However, they can find out from ARMSCOR if there is any further progress. When the presentation was made last week there was already ongoing interaction with those companies.

On protection of the industry, she replied it is important for everyone to have a viable SA Defence Industry, hence the reason for having the lekgotla. It will bring the brains of the industry, people who are involved in the Defence Industry, and that is why the parliamentary committees need to be part of so all stakeholders may be aware of what needs to be done.

Dr Khanyile explained that the Code makes use of the national legislation as to who is black and so on. It is not unique in any way from that point of view, but there is a distinction in what is a black owned entity or a black woman owned entity. It is all companies with a 51% and higher ownership that will be regarded as such. There is a sliding scale that determines the type of companies that are owned by black people. It also talks about companies that are international by nature, companies that are headquartered elsewhere in the world but have a local presence. Black owned companies are 51% plus and it has a scorecard that measures at least six elements on which companies are measured that start with ownership, management, control, skills development, and so forth. It is not unique from the other Codes, and the only additional element that differentiates the Defence Sector Code from others is that it also has a military veterans element to it.

Dr Khanyile explained that we can have IP but if it is not utilised it is useless, and in no time it becomes outdated. Each time one goes into a contract with other service providers, one is required to determine if there is any new IP development involved. Once that is confirmed, there is a proportion that is allocated such as 50/50, 60/40, 30/70 between government, DOD, and that company. Whatever gets generated will have to be managed on those splits. The share of government IP ownership does not limit ARMSCOR or government to exploit its share of IP in the market. As ARMSCOR is an acquisition entity, it is allowed to generate income which it can do by getting others to exploit that IP. He wanted to respond to the concern that is unfair to the taxpayer to exploit or commercialise the IP that government owns; rather it is extracting the value on behalf of the taxpayer. It is good for the country.

The Chairperson said the Committee is looking forward to the Master Plan and the Indaba. He released DOD and NDIC.

Operation Vikela: Letter From The President
The Chairperson asked Members if they have seen the letter from the President on Operation Vikela which was a burning point of discussion in last week’s meeting about the soldiers being deployed in Mozambique.

Mr Marais said he was glad that the letter was sent and that Chairperson Xaba had ensured that following last week’s discussion and request for it. He was concerned the letter is dated 28 February and Section 201(3) of the Constitution says “When the defence force is employed for any purpose mentioned in subsection (2), the President must inform Parliament, promptly and in appropriate detail." He does not know what happened and he does not want the Committee to conflict with the President. He suspects the delay was an administrative matter, but Members need to know if there are reasons why the President is not reasonable and prompt as prescribed in the Constitution. Was it an oversight by the President or by the staff?

Mr Ryder agreed saying the Minister and the Secretary for Defence owe the Committee an explanation why the letter came so late. The Committee can note the letter but it does not have answers on who has been deployed. There is a number – 1495 soldiers are being deployed but there are no specific units given and so forth. The letter is noted but it certainly gives rise to many questions considering the mandate of the Committee. It should be getting answers to those questions from the Minister, Secretary for Defence, and Chief of the South African National Defence Force.

The Chairperson said he was not expecting this to be a discussion on the letter. However, it is not a train smash and he suggested that a letter should be written to the Secretary for Defence.

Mr Marais said a letter can be written to Secretary for Defence and the Minister, but it is the responsibility of the President to write to Parliament. The Secretary for Defence can indicate the units that Mr Ryder spoke about but not about the letter itself.

Mr Shelembe said non-compliance is committed in several departments. Now if the President is not complying with relevant legislation; it is easier for the lower departments not to comply with legislation because compliance is not upheld by the head. He suggested that the letter should not be written to the Secretary for Defence, but to the President indicating that the Committee is concerned about non-compliance when it gets these letters. It is understandable that letters are sent to the Committee to be noted, but for the Committee to keep rubber-stamping it means letters are brought just for attention. The head of the country must not be seen as disrespecting the laws because he is the only person who can say do the right thing in South Africa.

Chairperson Xaba disagreed with the previous speakers saying they are misinterpreting the provisions of the Constitution on the matter. The Constitution is very clear, it says “the President must inform Parliament, promptly and in appropriate detail of—(a) the reasons for the employment of the defence force; (b) any place where the force is being employed; (c) the number of people involved; and (d) the period for which the force is expected to be employed. The President must inform Parliament of the expenditure incurred. The JSCD should not expect more than what is listed there. The President has informed the Committee as per the Constitution. The letter meets the requirements of the Constitution both in detail and in time because it does not specify the period within which the President must inform Parliament. It says 'promptly', which has been misinterpreted by many. A period of a month should not be considered as outside the term 'promptly'. The Committee does not need to get to the level of writing to the President because he has complied. If Members need more details on the matter, it can be transacted in a closed meeting because the people spoken about are deployed on a mission where they risk their lives.

Mr Marais said the matter cannot be left like that because there is a Committee resolution. This period is ending on 15 April and if Chairperson feels it is prompt to only notify the Committee before the end of the period that might be adequate for him, but not according to the definition. It is also clear in section 201(4) says “4) If Parliament does not sit during the first seven days after the defence force is employed as envisaged in subsection (2), the President must provide the information required in subsection (3) to the appropriate oversight committee." It gives seven days. Members must stick to the resolutions of the Committee and it must be put on the agenda. The Committee needs to support the soldiers and cannot do that without the information. He does not want to see the soldiers coming back in body bags.

The Chairperson said it is not wise to give details of such a mission in an open meeting. Some details must be excluded from the reports.

Mr Shelembe said Mr Xaba is being defensive on the matter. The Committee's role about deployment letters must be known. If the letter is brought to the Committee for mere noting, then it is understandable. However, the concern is the Committee agreeing on the meaning of “promptly.” If that word is not looked at, the deployment period could expire. If something is wrong, it must not be defended because the President is involved. How can we show our concern to the President that we are not happy that what he is doing is not in line with the Constitution?

Chairperson Nchabeleng said the Committee needs to get the legal opinion to resolve the terminology before writing to the President.

Chairperson Xaba indicated that there is already a legal opinion and committed to sharing the copy with Members. The legal opinion was clear and it defined and unpacked the term 'promptly'. It states "in our view by necessary implication, the provision requires submission of information promptly, that is without unreasonable delay. The question is was there unreasonable delay? There was no unreasonable delay." This is why he had suggested that the matter be left alone for now. He promised to share the legal opinion with the hope that it may resolve the interpretation.

Mr Marais said what is reasonable is for the Committee to get a resolution on its request to the Presidency. It is certainly not reasonable to let the Committee know a month and a half later.

Mr Mmutle said he is not disputing that the Committee must move on but the Constitution must be taken into consideration. It prescribes that the President must inform the Committee within a prescribed period. It is not for the Committee to change what it has been informed about; rather it is for the Committee to note the information. The time prescribed by the Constitution must be adhered to and should be communicated correctly.

A review of the Committee's Annual Performance Plan was done with no matters arising. All Members were happy with the Committee Plan. Minutes were also considered and adopted.

The meeting ended.

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