Exploring avenues for revenue generation by DOD, Status of Project Kobe Thala; Follow-up meeting on Reserves, Reserve Force Council and related matters; with Minister

Meeting report

Chairperson’s opening remarks
The Chairperson welcomed the Members of the Joint Standing Committee on Defence, the Minister of Defence, the Secretary of Defence, and representatives from the SA National Defence Force (SANDF). He said that the Department of Defence (DOD) revenue generation issue was on the Department’s Annual Performance Plan (APP) for 2019 and 2021. The need was for the Department to find other revenue generation activities to complement what the Department receives from the fiscus.

Minister’s opening remarks
Ms Thandi Modise, Minister of Defence, said that the Secretary of Defence would speak more on the revenue generation issue and that she was unsure how ready the Department is to engage on the issue because she is cautious about getting money to assist with state activities because it is fraught with temptations and pitfalls. She said that it is true that the Department wants to ensure that all aspects of Defence are in line and that they had a slow start in their roles and they have not really settled. This is why the Department would not be able to give the Committee a proper plan on how the generation of revenue will work.

Discussion on avenues for revenue generation by the DOD to assist with addressing the limited funding to the Department
Ms Gladys Kudjoe, Secretary of Defence, said that in 2017, she learnt that the Department had engaged the services of a consultant to assist them in finding other ways to generate revenue faced with the challenge of the consistently declining budget. She found that the main issue in the document was reimbursement from the United Nations (UN), but there were also challenges in the Department's agreements on what it was supposed to be doing to honour the agreement with the UN. The flow of that revenue was not consistent, but other items in the document were listed as ways to generate revenue. For example, the Department received about R500 million from the UN, but the Department spent more than that amount and could not even break even from that process. This showed that the project with the UN could not assist the Department in recovering its money and generating revenue to close the gap in the declining budget.

Some other things in the document included that when the Department transported its members with its busses, the members would pay a fee, but that amount would be too small. She said that there was nothing much that was done after the consultant's appointment to implement projects to help with the revenue generation because none of the projects would have assisted the Department.

The African Management Services Company (AMSCO) had also come before the Joint Standing Committee a few weeks ago to discuss what they were trying to do to help the Department generate revenue, but they had proposed sweating off all the assets with the hope of getting money. The Minister also said that the Department is unable to get the money it needs from Treasury and was unable to deliver on its 2015 Defence Review. Given that the Department was not able to deliver on its Defence Review, the Department decided that it needed to be led politically on its ambition. Once that has been finalised, the Department will then look at what it can do. The sweating off of assets was put on hold because the Department wanted to see the outcome of the political discussion.

Another issue that was discussed was the disposal of assets, as assets were only valuable for a certain period. One way of disposing of assets was through the auction process, but the process was not straightforward because the Department would have to apply to the National Conventional Arms Control Committee (NCACC) to dispose of the assets as they were military assets and could not just be given to anyone as there must be traceability. She said that it would be better if the Department were given the space to reflect and work on the issue and revert to the Committee when it was ready.

Discussion
The Chairperson asked if the Department will appoint a new auctioneer or if it is also putting that on hold until it dealt with all issues regarding disposal and sweating off of assets.

Ms Kudjoe said that the issue of the Auction Company was looked at as a transversal tender by National Treasury (NT), but the DOD could not dispose of military hardware with those auctioneers, as a completely different process has to be followed with military assets. Once National Treasury has finalised the process, the Department would participate because it would help it clean its asset register.

Dr Ziyaad Essop, Member of the Defence Force Service Commission, said that there were other avenues of revenue generation. There is an excellent baseline academic foundation within the Defence Force. The Defence Force can offer unique academic programmes on the South African Military Health Service (SAMHS) by forming the right partnerships. Certain capabilities within SAMHS can be marketed outside the country if they are further developed. The Defence force can also improve on its research capabilities. He said that these are specific health-related academic programmes that the Defence Force offers its members, but there is an opportunity to monetise some of them.  

Mr S Marais (DA) said that what Dr Essop mentioned had been part of the Committee’s discussions with the Department for a long time, but it is appreciated. He said that the auctioning of Defence Force assets is not new because it has always been a practice of the SANDF and the DoD. Certain defence industry companies specialise in buying military vehicles on auction and renovating and renewing them. Some of those vehicles are currently being utilised in Rwanda. He said that he did not understand the Secretary of Defence’s point on the auctions because it was as if she was saying it was impossible to sell military assets.

He asked the Minister if there was an asset register of all the movable assets, property, fixed assets and facilities because if the Department knows what it has and what it does not use, it will know what can be sweated off and what can be sold. He said that the Department still sits with assets from the old SANDF that it does not need so they need to be either sweated off or sold to private companies or individuals. He said that revenue generation had been a Ministerial priority since 2019, so it reflected the Minister's underperformance to delay it further. That could impact the Minister’s own Performance Agreements and ministerial priorities. He suggested that the Department partner up with the South African defence industry because they have the expertise and capabilities of renovating and fixing some assets and where and how to sell some of them.

Mr D Ryder (DA Gauteng) said that the Defence budget certainly needs a bit of assistance, especially on maintenance. If there are innovative ways to generate revenue, they must be used. The South African Police Services (SAPS) are looking for accommodation for 10 000 new recruits, and there are a lot of barracks that are empty and perhaps the SAPS could rent out those barracks from DoD, and some of them could be used as office space.

The SANDF did an excellent job when stationed in the Vaal doing the Sebokeng Wastewater Treatment Works with their engineers. This shows the capability that exists within the Defence Force and not only engineers but also engineers' health services. Some of these capabilities within the Defence Force have been untapped, so having some of the skilled workers become implementing agents for some of the projects put out for tender by other government departments could help generate some income for the DoD.

Mr T Mmutle (ANC) said that in his understanding, two types of assets require two different disposal processes. Disposal of assets must happen and cannot be avoided whether the processes are different. He said that not all the assets in the military base need to go through the process of the NCACC, as there are normal vehicles that need to be auctioned off through the Supply Chain Management (SCM) process.

The Chairperson said that on the Committee's oversight visit to 4 Vehicle Reserve Park in Tshwane, they were shown some obsolete vehicles. Some were said to have been delivered from some countries where the SANDF intervened in the past, such as Angola. They had not even been used once since 1994. Of late, there have been two incidents of the vehicle reserve parks catching fire and the vehicles were destroyed and whatever value was left in those vehicles was lost. If the Department had been quick to make a call on whether to dispose of them or retain them, perhaps not all would have been lost.

Response by Minister and Secretary of Defence

Ms Kudjoe said that there are two processes of disposal and one is for normal vehicles and the other is for military vehicles. The Department's logistics division contacted Treasury because Treasury was working on appointing an auctioneer for non-military assets that various departments would use and the DOD wanted to latch onto that process. The disposal of military hardware is an ongoing discussion between the Department and AMSCO.

She said that she welcomed Mr Ryder's suggestions and added that the Department has also been involved in building bridges, particularly in KZN and the Eastern Cape, through their specialised skills engineers. One of the things that the Department can accept is that it has not monetised its specialised skills and they want to look at ways in which it can do so.

She said that the SAPS did approach the Department about two weeks ago wanting to use the Department’s facilities and were willing to pay. The Department is still looking into that. The problem is that none of it has been consolidated into a full package that could present to the Committee. She said that she had spent half the day at the 2 Military Hospital. The hospital is very technologically advanced. She spoke to one of the Generals about the possibility of marketing the hospital as an alternative while they are still improving the state of 1 Military Hospital.

The Department does have an asset register that has a list of all the assets owned by the Department and part of the reasons the Department wants to dispose and sweat off some of the assets is to declutter the asset register. She said that they feel that some of the issues, including the disposal of assets, still need to be discussed at the Executive level because they do not want to dispose of assets they may need in the future.

Minister Modise said that the Department understands that when things are obsolete, they need to be disposed of and that every Department has a policy on the disposal of assets. She said that the Department is not refusing to dispose of the assets that they do not need, but they are looking at what they can do to ensure that their edge as the military in the region is not deflected by them wanting to be all over.

It is the Department's responsibility to ensure that there are enough funds. It is equally its responsibility to know that its focus is not to sell assets but to ensure that soldiers are looked after and do not lose their edge on their duty protecting the country. She said that if the slow process of disposing of military assets reflects badly on her as the Minister, then so it shall be, but she intends to ensure that the disposal of the assets is done properly with careful consideration of the assets that they need and those that they do not need.

She said that the Department told the Minister of Police that they would make space available for the police to use the facilities of the defence force, but it will expect a payment for the maintenance and upkeep for the duration of their stay in the facilities. She said that the Department would do what was right, but it would not cut corners just because it needed the money. The Department will ensure that all its reusable equipment is reused and all equipment that is not reusable is disposed of.

The Chairperson said that the Committee appreciates the Minister asking for more time and asked that the process does not take long as the issue of revenue generation in the Department has been discussed since 2019.

Briefing on the status of Project Koba-Tlala and the way forward for the SANDF to establish a Production Brigade
Brigadier General Gerhard Kamffer, Director: Koba-Tlala, presented the status of Project Koba-Tlala and the way forward for the SANDF to establish a Production Brigade. Project Koba-Tlala was approved in 2017 and instituted as a DOD project to support government's developmental agenda, particularly the National Development Plan (NDP) and Vision 2030. At the time, the Chief of the SANDF appointed the Chief of the Army to manage the project from within the SA Army as an SANDF project. Project KOBA-TLALA was approved in its current configuration for the short-term (FY22/23), whilst a plan is being drafted to transform it into a Production Brigade which will serve to support the sustainment of the SANDF in the outer years of the current MTEF from FY2024/2025.

Although Project KOBA-TLALA has made great progress with re-skilling reserves to provide them with portable skills for their own benefit and that of the communities, targets have not yet been fully achieved to empower regions and residents to function as part of the Production Brigade. Interventions in support of communities in distress (for example, water purification, water and sanitation, etcetera) need to continue. Essential services need to be provided to communities.

Project KOBA-TLALA is the only DOD vehicle available to stimulate rural economic initiatives and is a catalyst for development if it can be aligned with the AAMP. The focus remains on decentralised procurement to provide economic opportunities to SMMEs, and small-scale and emerging farmers close to military bases.

The project timeline and phases were established as follows:

-FY17/18: Phase 1: Formal initial phase and the establishment of the project
- FY18/19 to 20/21: Phase 2: Implementation and execution phase.
- FY21/22: Phase 3: Consolidation Phase. Further decision on the future of the 
         project. (Must be converted into a Production Brigade by FY24/25).

On the conversion of Koba-Tlala to a Production Brigade, he said that the guidelines received from the Integrated Project Team were to create self-sufficiency to provide certain common items through the establishment of the Production Brigade with the following streams:

-Agri-related initiatives where:
Defence Force land is utilised to provide food items consumed in military messes.
There are professional partnerships with other entities such as the Dept of Agriculture, provincial and local governments.
There is encouragement for local procurement.
Mutually profitable networks with local communities are created.
Residential and regional members who demonstrated interest are involved.
Develop a manufacturing capability for some general commodities utilised in the military like uniforms, boots, tracksuits.
Forge professional partnerships with entities such as the CSIR etc.

He also provided details on the Cattle Farming in the North West province pilot project and the Marievale Military Agri-Village pilot project and the way forward for the SANDF.

Discussion
The Chairperson said that the Committee's first interaction with the Koba-Tlala programme was in Cape Town. He walked away with the impression that the programme was meant to ensure food safety and security for the soldiers. He said that he never thought that the central message of the programme was to stimulate rural economies by ensuring that they procure goods locally.

Mr Marais said that his major concern was the budget that the Koba-Tlala Programme is working with because the programme wants to achieve a lot, especially moving towards the Production Brigade. He was concerned about how much their ideas will cost to implement because they have a small budget. He also wanted to know whether the programme would also include military veterans who do not reserve force members because many of them are currently very poor.

He said that the rural economy is not as big as the economy of the urban and metro areas and asked if the idea is to have the programme as only a rural programme. He said that they mentioned the involvement of the air force, the navy and the army, but their biggest masses are not in the rural areas. He wanted to know how they plan to integrate the programme into that. Lastly, he wanted to know if the programme is focused on Agri-processes products and if some bakeries will also be involved.

Mr I Mafanya (EFF) said that he was much more confused than before because the presentation was completely different from what was presented to the Committee in the past. His concern was that unemployment is at its highest in the country as about 10 million people are unemployed, let alone the reserve forces, of whom a large number are also not working. He said that it seems that the defence force is taking on the role of the Department of Agriculture and Land Affairs. He wanted to know who's land the Koba-Tlala Programme would operate on.

Considering what is happening in Ukraine currently, he said he expects that the country will run short of food, grain, oil, fertilisers, etcetera. That is where the Department needs to look at how it will augment the shortage within the next few months, where the whole country will be suffering.

Mr Mmutle wanted to know if the Koba-Tlala Programme or Production Brigade has considered that dieticians have a role in ensuring that the produce that soldiers will consume should be of a prescribed standard by the dieticians.

Mr M Shelembe (DA) said that he understood that the Koba-Tlala project was intended to take care of the soldiers and contribute to the country's economic growth and transfer skills to other producers. Several lands and farms were purchased by government for people, and some were producing a lot for their communities and exporting some products.

He wanted to know if information about the programme is shared with municipalities in a bid for collaboration, especially in the rural areas where land and farming are their source of income. This could also help the transference of skills to the locals while also helping the soldiers. He said that the Defence Force should consider using those lands purchased by the government and collaborate with communities. Lastly, he wanted to know the main objective behind changing the programme from Koba-Tlala into a Production Brigade.

Mr Ryder wanted to know from the Chairperson whether the presentation on Koba-Tlala fits the Joint Standing Committee on Defence's mandate.

Responses

Brigadier General Kamffer said that this is not a typical Military Brigade with a typical military structure. They will work in the rural areas and with the urban and semi-urban areas to see if they can make a difference. At this stage, the bakeries are not part of the Production Brigade, but they will consider adding them when they do a feasibility study.

He said that they are not trying to take over the work of the Department of Agriculture, which is why they do not want to deviate from the core business of the Defence Force. They are working in conjunction with the Department of Agriculture and the provincial departments of agriculture because they already have programmes in place for the small-scale and emerging farmers. He said they want to align themselves with the Department and support it. 

He said that they are building the capability to support the sustainment of the Defence Force and the feasibility studies will show them what will be possible and what will not. The Military Health unit will be involved in all the programmes. He said that they always involve the health officials to see whether the food is up to standard even if they are buying. The Military Veterans will also be involved as part of the Military Health services from small-scale farmers. He said that the programme is not only meant to take care of soldiers but also the developmental initiatives in the rural areas without deviating from its core business.

On the main objective of the Production Brigade, he said that the Chief of the Defence Force would like the Defence Force to become more self-sustainable in terms of the commodities that it buys, but it will retain certain elements of Koba-Tlala. The main idea is to see how the Defence Force can become more independent and self-sustainable regarding the various commodities that it buys.

Follow-up meeting on the Reserves, Reserve Force Council and related matters

Brigadier General Zoleka Niyabo-Mana, Acting Chief, SANDF Reserves, presented on the reserve force, the Reserve Force Council and related matters. On reserve force strength, the number of reserves declined from 20 128 in 2020 to 19 811 in 2021 and 19 623 as of 31 March 2022. She said that the number of reserves utilised in Operation Chariot in the recent KZN floods was 1 572. It is expected that reserves will participate in more natural disaster operations in the near future because of global warming.

On the Reserve Force Council, she said that the Minister is still deciding on its future and the Chief of Reserves has still not been appointed.

Discussion

Mr Mmutle wanted to know the challenges in appointing the Reserve Force Council.

Mr Ryder wanted to know if the reserve force was adequately equipped when deployed under Operation Chariot.

Mr Marais wanted to know the outcome of the deployed reserves in Umzimvubu and how the reduction of the mandates will affect the reserve force. Lastly, he wanted to know the progress in the appointment of the Chief of the Reserve Force.

Responses

Brigadier General Niyabo-Mana said that Operation Chariot is still ongoing and a report on how equipped the reserve force will come after the operation has been concluded. On the reduction of mandates, she said that what normally happens is that they overspend on the mandates. The Chief of Joint Operations had said that even though reserve force members constituted 40% of the people deployed in Operation Corona, there were still vacancies that he would have liked to fill in with reserves, but he did not have sufficient mandates. Reserves form part of all operations, resulting in the overspending of mandates, so the situation will be much worse now that the mandates have been reduced.

Ms Kudjoe said that the mandate of the Reserve Force Council lapsed at the end of November last year and the Council is only appointed by the Minister, but the mandate was not renewed. In the last Council on Defence, the Minister expressed that she wanted to meet and engage the Council members. She had an opportunity to look at the Constitution of the Reserve Force Council and there were some issues that she needed to talk to the Council about. The Minister also expressed that once she engaged with members of the former Council, she would determine the way forward and whether to appoint a new Council or to review some things in their Constitution.

On the Chief of Reserves appointment, she said that the process is that the Chief of the SANDF will look at the matter and discuss it with the Executive Authority, and then they would decide who to appoint in the position.

The Chairperson said that the position of Chief of Reserves has been vacant for too long and that the Reserve Force Council’s value to the process must be determined.    

Mr Mmutle asked for a timeframe for the decision on whether the Reserve Force Council will be appointed and the appointment of the Chief of Reserves.

The Chairperson said that the Department should report back to the Committee in the third quarter.

Ms Kudjoe agreed and said she would convey the message to the Minister.

The Chairperson allowed the Secretary of Defence and the members of the Defence Force to exit the meeting.

Committee minutes

The Committee considered and adopted the minutes of 12 May 2022 with no amendments.
 
The meeting was adjourned.