DOD funding for domestic defence R&D; Denel’s support SANDF, with Ministry & DPE Deputy Minister
16 March 2023
Chairperson: National Assembly (NA) – Mr V Xaba (ANC)
The Joint Standing Committee on Defence (the Committee) convened virtually for briefings by Denel on their ability to support the South African National Defence Force (SANDF) following the Medium-Term Budget Policy Statement (MTBPS) allocation and by the Department of Defence (DOD) on funding for domestic Defence Research and Development. The Minister of Defence and Military Veterans, her deputy as well as the Deputy Minister of Public Enterprises were in attendance.
The Denel executive team presented a Board approved turnaround strategy to stabilise, sustain and grow the entity. The Defence Ministry and Military Command Council were taken aback and expressed frustration about not being informed of the plans despite the failed attempts over the past two years to meet with Denel. The Committee urged Denel to engage the SANDF and Military Command structures and to resolve issues of concern regarding the ability of Denel to support the Defence Force. Denel apologised to the Ministry and the Command Council for the lack of communication and agreed to meet with the parties concerned. Reports of Steering Committee meetings in which the development of the turnaround strategy had been discussed with other stakeholders, including ARMSCOR and Labour, would be made available to the Ministry and Command Council.
The Directorate Technology Development depended on state funding to fulfil its mandate of directing and cultivating defence research and development (R&D) in pursuit of future technological needs of the SANDF. Consistent underfunding, due to fiscal constraints, had an impact on the level of R&D that the SANDF was able to conduct. The Department relies on inter-departmental agreements to augment state funding. To this end, an agreement had been secured with the Department of Science and Innovation to fund the acquisition of dual-view technologies to capacitate the SANDF.
The incomplete Hoefyster project was of great concern to both the Committee and the Ministry because it was supposed to have been completed in 2013. The project, pertaining to the supply of infantry combat vehicles (ICVs) as part of industrialisation, was meant to be the cutting-edge project of the army. R1.2 billion was paid in advance for phase one and R7.5 of the R7.8 billion allocated for phase two had been paid. But to date, not even phase one had been completed. The Department acknowledged that insufficient oversight by both Denel and ARMSCOR resulted in the failure of the project. The Committee resolved to follow up on the matter during the planned oversight visit to the Denel factory in Gauteng on 29 March 2023.
The Chairperson outlined the context to the two briefings. The DOD briefing would be dealing with the level of R&D funding to support the SANDF with cutting-edge technology and equipment to enhance the effectiveness of the Defence Force and to improve security. The support came under pressure due to fiscal constraints. This aspect should be the focus given the importance of enhancing the performance and effectiveness of the SANDF. The Committee appreciates the critical role of technology in the modern economy and particularly in the Defence Force. The focus on R&D technology is an outcome of R&D investment.
The presentation by Denel would focus on the number of contracts with the Department. The SA Army G5 and G6 Artillery project was due for completion in 2021 but has been delayed until 2023. The reason for the delay had not been communicated with the Committee. Amongst the other contracts is the Hoefyster project pertaining to the supply of infantry combat vehicles (ICVs) as part of industrialisation. The project has been delayed for ten years which meant that the allocated costs of R1.2 billion for phase one and R8.4 billion for phase two have since escalated. Between 2019 to 2022, Denel supplied a number of aircraft including the Oryx and Rooivalk to the Air Force. It is unclear what has happened since the contract expired. Discussions with ARMSCOR were ongoing to renew the C130 Hercules contract worth R350 million over three years. SA Navy projects pertaining to the three G12 cannons for patrol vessels and the Umkhonto Surface-to-Air Missile system for industrialisation had stalled. The Committee received information about serviceable and unserviceable aircraft and was therefore interested in the status of these projects.
The Chairperson was requested to prioritise the Denel presentation because it was of significant interest to the Defence Force. He apologised to the Minister and Deputy Minister of Defence for the change in the agenda. He called on the Deputy Minister of Public Enterprises, Obed Bapela, to introduce the Denel presentation.
Deputy Minister’s opening remarks
Deputy Minister of Public Enterprises, Bapela thanked the Committee for agreeing to place Denel as the first item on the agenda. He would make further comments when a response is required.
Ms Gloria Serobe, Board Chairperson, Denel, was grateful for the time afforded to Denel for the presentation.
Mr Michael Kgobe, Interim Group CEO, Denel, indicated that the presentation would provide an update on the status of the interim plan, the support role to the SANDF, and the risks facing the organisation. He noted the specific projects of particular interest that the Chairperson had highlighted and would provide further information at a later stage.
Mr Riaz Saloojee, Chief Restructuring Officer (CRO), Denel, said the Board approved the new turnaround plan and strategy. The turnaround plan was needed to revive lost revenue streams and to attract the lost human capital. To date, the turnaround plan is being funded by limited income from operations and releasing of non-core entities. The funding allocated in the MTBPS is required to complete the restructuring process, initiate CAPEX and maintenance programmes, and settle legacy debt. The funding has been ring-fenced for this purpose but is yet to be released. Denel is the Original Equipment Manufacturer (OEM), Design Authority and supplier of major prime mission equipment of the SANDF. The operational ability of the SANDF, to execute its national security mandate, would be adversely affected if Denel’s capabilities are eroded. It is critical that funding is released to properly execute the restructuring plan. The allocated funding will be used to stop the brain drain and the loss of core skills.
The Chairperson asked for an update on the status of the ARMSCOR/DOD contracts.
Mr Kgobe explained the statuses of the three contracts in support of the Air Force. The C130 contract was extended for three more years. The contract for the Oryx and Rooivalk helicopters was extended up to 31 March 2023 but extensive discussions with the Air Force and ARMSOR were ongoing for an extension up to 30 September 2023. The relevant funding had been secured for this purpose. The extension of the Badger ICVs contract is under discussion with ARMSCOR to find a way forward. Denel has been working with ARMSCOR to engage directly with suppliers. The Umkhonto Surface-to-Air Missile system had stalled.
The Chairperson gave notice of a visit to the Denel Aerospace factory in Gauteng on 29 March 2023 to tour the facilities and to view the aircraft. He invited the Defence Ministry to make further comments.
Deputy Minister Bapela asked that the Acting DG of the Department of Public Enterprises (DPE) be allowed to give feedback on the appropriated money that would soon be released to kick-start the new turnaround strategy.
Ms Jacky Molisane, Acting DG, DPE, said the Department was constantly engaging National Treasury about the funding to ensure the restructuring of Denel is realised. There is agreement with National Treasury that Denel met all the required conditions. It is expected that the allocated R3.4 billion committed by National Treasury would soon be made available. The Department would ensure that the money is used for the intended purpose. The projects would be monitored to hold Denel held accountable for progress.
Mr Kgobe said R5.2 billion is required to implement the turnaround plan. The R3.4 billion rehabilitation allocation had been secured with National Treasury. The balance would be raised through the sale of assets in the balance sheet worth R1.8 billion. To date, R1 billion was raised with the liquidation of the medical trust fund which enabled the entity to pay salaries and creditors. It is envisaged to raise the remaining R800 million through releasing non-core properties. Denel is engaging ARMSCOR on the impact of these non-core assets. Further detail would be made available to the Committee on the oversight visit.
Lt Gen Michael Ramantswana, Chief of Staff, SANDF, noted the presentation but still had a lot of concerns from a military point of view. He asked that the information also be made available to the Military Command Council for further deliberation. He suggested that the Committee might want feedback from the Military Command Council upon deliberation of this presentation. He deemed it critical to discuss the manner in which the presentation was delivered. He was of the opinion that certain aspects of the turnaround plan could be dealt with without delay. He undertook to scrutinise and deliberate on the presentation and provide feedback to the Committee thereafter.
The Chairperson agreed to have further engagement with the Military Command Council on the way forward.
Minister Thandi Modise said the presentation was impressive. But after two years in the Department, this was the first time that she came to know about all the possibilities, and that all the OEMs are still in the hands of Denel while the Department had been running around the world. The Department met numerous times with Airbus, trying to get the Hoefyster OEMs because of the inability to fix and upgrade the aircraft. She planned to listen to the input from Denel and engage afterwards. She had been fighting with ARMSCOR for failing to get the equipment which Denel seems to have had available. She was flabbergasted for running around the world, cap in hand to India, while Denel was holding on to the OEMs. She agreed with the Chief of Staff to investigate what went wrong because the alternative is to question the competency of the Chief of the SA Air Force. She wanted to know why the Department had been embarrassed for not having aircraft that is airborne while Denel has been available to service and extend contracts. The turnaround strategy appears to be a good story. But after six months of being appointed as Minister of Defence, she wanted to meet with Denel to establish what went wrong. Only to now be informed that Denel has all the required equipment available. She found the situation embarrassing and confusing.
The Chairperson said the Minister’s remarks foregrounded the Department’s presentation.
Mr S Marais (DA) noted that the words used by the Minister and the Chief of Staff reflected the Committee’s concerns. On paper, there seemed to be no problem which differed vastly from the reality. The Committee has been hearing consistently from the Air Force and ARMSCOR about the difficulty to keep the C130, Oryx and Rooivalk aircraft in the air due to challenges at Denel. Four of the eleven Rooivalk helicopters had been at Denel for four years. The C130 transport aircraft are serviceable but only one is available. The Air Force had to charter foreign aircraft to provide logistics to bases in the DRC and Cabo Delgado. The Committee is being informed that the turnaround strategy was dependent on funding. But in terms of the medium-term budget, there is no money available. Denel indicated that is capable of upgrading its capabilities. He asked if the upgrades were based on commitment, capabilities or funding. He sought clarity on the status of the Hoefyster project. He enquired about the relationship and shareholding with the three associate companies and if Barij Dynamics of the UAE had similar functions as Aero Dynamics. He asked how smart partnerships would work in practice. The strategic framework is underpinned by a number of approaches. He noted that no timelines were linked to any of the approaches and asked when it will be implemented. He enquired about the timelines for upgrading of the landward capabilities. There appears to be no funding generated from operational capabilities. He asked what else, other than the bail-out amount, was needed to make the turnaround strategy work. In the past, ARMSCOR had to cancel guarantees on certain project to raise funding in the capital market. He asked whether this was still an option. He noted a number of strategic positions had staff in acting positions. He enquired about the plans to fill these vacancies. He sought clarity on whether the Intellectual Properties (IPs) belonged to government, the DOD or Denel. In the past, the value of IPs were recorded in the balance sheet. He asked what the status of the Hoefyster project was beyond phase one.
Mr D Ryder (DA, Gauteng) said as a corporate banker for more than 20 years, he found that the Denel strategy was good. But the comments by the Minister and the Chief of Staff blew the presentation out of the water. Any turnaround strategy needs to take one’s leadership into account. It appeared that Denel was not on the same page as the Defence Department. There was an urgent need for deeper communication before Denel could be transferred back to the Department. Denel has broken the trust and has no other customers. He asked on what basis the cashflow projection was done to justify the amounts in the medium-term budget framework. Reliance could not be placed on a strategy that was done behind closed doors. He suggested that the strategy had been a desktop exercise. He asked what the total requirement was for recapitalisation projects. He was sceptical about the quantum and asked for assurance that no further funds would be needed in future. The Committee would have to pass the budget based on Denel’s calculations but Members were concerned about wasting valuable funds. Financial modelling was important to understand and to turn a good story into a true story. He had been optimistic about the presentation until he heard the comments from the Minister and the Chief of Staff. It appeared that the presentation was not based on realism but on a dream.
Mr Mmutle (ANC) asked if there was collaboration amongst Denel, ARMSCOR and the Department to address OEM issues. The intervention to localise manufacturing and disrupt cartels was putting the state under pressure under the pretence of OEMs. The turnaround strategy painted a promising picture but he was no longer impressed by the presentation. Denel must be able to indicate how best the entity would be able to support the SANDF. In the interim, he wanted to know how the strategy could be practically implemented to salvage existing capabilities. The strategy was not addressing the matter of attracting lost skills to ensure rebuilding of capabilities. R7 billion was made available for the Hoefyster project but Denel had nothing to show for the allocated money. Denel is the pride of the nation and the Defence Force. The DPE will soon cease to exist therefore the sooner Denel is relocated to the Department, the better. He suggested that the Department must be proactive and engage Denel to remove the communication gap between Denel, ARMSCOR and the DOD. The engagements must have the support of all stakeholders with the Department as the main driver. Continuing to treat Denel as an outsider might be missing the point.
Ms A Beukes (ANC) agreed that Denel must restore its position in the industry. Money had been allocated to Denel in 2019, 2020 and 2021. She wanted to know what percentage of the money was spent on the turnaround plan and if the plan had been outsourced. She sought clarity on the role of smart partnerships and what it would bring to the table.
Deputy Minister Bapela requested the Acting DG, DPE, to explain how the matter was handled. He understood the scepticism that the strategy would work, considering that it was not the first strategy. He noted the two comments about the communication gap and the army not having the required capabilities.
Ms Molisane was confident that the plan would be successfully implemented. A critical factor in the success of the plan is having the right people with skills and competencies in line with the milestones of the plan. In the past, no funding had been allocated to Denel which resulted in the erosion of staff morale and ultimately the loss of staff. Some hope was restored in the market and amongst staff who had left the company when the Minister of Finance announced the disbursement to Denel. The entity was always at risk of being liquidated in the absence of funding. The lack of funding was making it difficult for employees to commit. With the committed funding, the entity will be able to execute committed orders. Stakeholder engagements, including with ARMSCOR and Labour had been facilitated through a Steering Committee. The frequency of the meetings was one of the factors that the DPE believed, was making the plan feasible.
Mr W Bangana, Acting DDG, DPE, said the Department was confident that the plan would succeed because of the comprehensive interventions announced by the Minister of Finance. The relief included a capital injection and an amount to clear the debt. Weekly meetings with the DPE, ARMSCOR and National Treasury were taking place to review the turnaround plan. The parties are actively involved to ensure the turnaround is achieved and to help Denel succeed.
The Chairperson said there was no reason to celebrate the R3.4 billion injection because Denel was owing the DOD in excess of this amount. R1.2 billion was paid for phase one of Project Hoefyster and R7.5 of the R7.8 billion for phase was paid but to date, phase one had not been completed. He asked for a comment on the fact that the Department is a major creditor of Denel.
Mr W Bangana agreed that Project Hoefyster was the elephant in the room that must be resolved. He explained that mistakes were made in the management of the contract due to insufficient oversight by Denel and ARMSCOR. The advance payments and bank guarantees were putting Denel in a risky position. He acknowledged that Project Hoefyster was a critical factor in the success of Denel.
The Chairperson remarked that he was not rushing the discussion because the matter was at the centre of the country’s sovereignty.
Mr Kgobe took on board the comments of the Chief of Staff and the Minister. The oversight visit on 29 March 2023 would present an opportunity to respond in detail to the concerns raised and to give assurance about some of the challenges. He accepted the opportunity to engage the Military Command Council and the Minister of Defence. The key concerns around specific projects, support for aircraft and components of the contracting model would be dealt with on the oversight visit. In response to the question about Denel’s shareholding in associate companies, he noted the minority shareholding in the three companies as follows; 49% in Rheinmetall Denel Munitions, 49% in Barij Dynamics, and 30% in Hensoldt Optronics. The founding documents of the companies, containing the specifics, would be made available. A revised version of the presentation, including timelines and critical success factors, would be shared with the Committee on the oversight visit.
Mr Saloojee said the balance sheet of Denel was not in a strong enough position to access funding, hence the need to engage in smart partnerships to access new markets and new technologies. He reminded the Committee that Denel was starting from a very low base and with a new management team. The relationship with ARMSCOR is much stronger and engagements with the Defence Force were taking place at the highest level. He acknowledged that the loss of confidence in Denel and its capability to deliver on its mandate had taken a knock. Significant negotiations were ongoing to regain lost ground in terms of strategic independence, loss of capital, and lack of orders. He was relatively confident that with the support of key stakeholders, mechanisms would be put in place to ensure the successful execution of the strategy. He was cautiously optimistic and was playing open cards with the shortcomings of the entity. He undertook to provide better insights about the interventions on 29 March 2023.
Ms Serobe replied that she did not believe the strategy was a desktop exercise because it was done with proper engagement between the executives and with the support of the Board. The Board has to take ownership of the Hoefyster matter. She agreed drastic steps were necessary to address the communication gap with the Minister of Defence and the Chief of Staff. Their concerns would be prioritised to ensure that they are properly socialised. Part of the capitalisation conditions are the monthly meetings with National Treasury, ARMSCOR, DOD and Denel. Steering Committee meetings with stakeholders are taking place on a two-weekly basis. She apologised that the turnaround strategy had not been communicated effectively. In addition to normal capacity issues, the operational efficiency of Denel was under siege and required a particular approach to redress. The aim is to render Denel unworkable by recruiting Denel staff and acquiring Denel IPs. She apologised to the Minister of Defence and the Chief of Staff for the lack of interaction and undertook to prioritise correcting the situation.
Mr Thabang Makwetla, Deputy Minister of Defence, said the Department did not have line of sight of the areas of the turnaround strategy in terms of the factors that contributed to the near demise of Denel. By 2015, Denel was making a profit. Weaknesses in the business processes, internal controls, fiduciary duties of the Board, all led to the decline of the entity. These issues must form part of the turnaround strategy. Denel requires R5.2 billion to fund the turnaround strategy. National Treasury allocated R3.4 billion of which R3.2 billion is ring-fenced for legacy debt issues of Denel. A number of creditors have been threatening to liquidate Denel. The money being advanced by National Treasury has been important to protect Denel from being liquidated. But R1.8 billion was still needed which Denel was planning to raise internally through freeing some of its assets but that would take a long time to realise. A decision about what is possible in relation to raising this money must be made timeously. He understood that raising the money internally was dependent on releasing the non-core entities from the Denel stable. But the information shared with the Ministry, suggested that the criteria for this transaction does not sufficiently take the interest of the Department of Defence into account. Some of the proposals suggested that Denel might belief the assets are not core competencies that must be retained. But from the viewpoint of the users, these technology systems are regarded as core entities. He suggested a conflict of interest by the stakeholders who are driving the process. He appreciated the monthly engagements with the project team and requested that reports of those engagements be submitted expeditiously to the Ministry to ensure that everyone was informed about what has been done to arrest the situation at Denel.
The Chairperson called on the Deputy Minister of Public Enterprises to make his concluding remarks.
Deputy Minister Bapela welcomed the remarks and expressions of concern. Denel and the DPE would review the quantum of debt and the quantum to deal with the restructuring. The fund raising by Denel has been secured due to downsizing of the business. Denel need to respond to concerns about the Hoefyster project. He was hopeful that the first tranche of the funds from National Treasury would be made available by the time of the oversight visit. To revive the Defence Industry, Denel had been on roadshows to seven countries and generated R30 billion in sales with international partners. Denel has been engaging the Board as well as smaller companies and smart partners without the independence of the entity being compromised. Denel is a dependable service provider to the Defence on sea and on land. The executive has confidence that the strategy would succeed and would engage with stakeholders to remove any doubt. He apologised to the Minister of Defence and the Chief of Staff for not having provided the package to them beforehand and leaving the impression that Denel was no longer operational. He undertook to close the communication gap and ensure that the Minister and Chief of Staff is kept updated.
Minister Modise said the one factor that has always united the Defence Committees, is when the prime equipment is capable of defending the country because we do not have a country without it. She noticed that Deputy Minister Bapela and Deputy Minister Makwetla seemed to have more information than others. She drew attention to the time when there was a threat of selling off the 49% stake in Rheinmetall, she had to engage Minister Patel about not being informed of the pending sale. She reminded the Committee how Denel came into existence. When she became Minister, she fought with ARMSCOR for not doing their job in making sure to keep a tight rein on Denel. Denel’s responsibility in the past, was to disburse monies which had been allocated via the budgets of the Defence Department. Denel was supposed to be the SANDF re-equipper, upgrader and innovator. The state allocated money because most of the entities were owned privately. When the state allocate money to Denel, it is primarily to re-equip and upgrade the DOD. Her knowledge might be outdated but she never had an opportunity to get a briefing from Denel since her appointment two years ago, despite asking for a meeting to understand the relationship between Denel, the Military and ARMSCOR. She is glad that the money is being ring-fenced and hoped that the money is not transferred until she had a full understanding of the turnaround strategy. She wanted to understand in whose interest the strategy was and which companies fell under the Denel umbrella. She was hoping the company would start to generate income so that the DOD could have access to equipment that is unaffordable in the industry. She drew attention to a new venture that is being facilitated through ARMSCOR and that she was hesitant to present on a platter to Denel considering what she heard in this meeting. She remarked that Denel did not understand how toxic the relationship had become if the Department is not being considered as the primary client, and if Denel had observed that the DOD had been struggling to obtain aircraft, and if Denel does not understand the impact of not upgrading aircraft and keeping the pilots upgraded. The Department made enormous efforts to facilitate meetings with the family of Denel for the end of this year but she suggested the meeting should happen before the end of March 2023 not only because she was concerned but because of the role that Denel could play in the fiscus of this country. The Department was concerned about losing jobs and expertise. She had to reassure South Africans in the Emirates that they are still valued citizens of this country and they had not done any wrong. The Department had to contend with the error of the missing IP within the DOD. It did not help to be angry at people who were felt threatened at the time. In order to have a cordial relationship with Denel, she would always support the capabilities and need of the SANDF to be treated fairly by entities that are being funded by the state. For as long as Denel behaves like a private company, with no responsibility towards re-equipping and upgrading their main client, i.e. the SANDF, then the entity and the Department would be at loggerheads which would not end well. She promised to properly understand this relationship because it was about the survival of the SANDF and of South Africa, who are becoming a very diminished regional power which is not properly capacitated because of the failures of the past. She suggested that Denel would prefer to engage with ARMSCOR. She was still very angry about the R7 billion that was transferred to Denel when the entity was in trouble because that money might have been very helpful in trying to assist the DOD. Denel was planning upgrades while the DOD had been struggling. She argued that the discussion should be more complex and be focused on the original mandate. She suggested that the Department might continue talking directly to the holders of the OEMs and get the Ministers of those countries to help the DOD. She is foreseeing self-sabotage of the relationship between Denel and the DOD. She found it very difficult to witness the deterioration of the relationships in the Defence Force family. Even Members across party lines are sometimes at loggerheads. She attributed her less than friendly attitude in this meeting due to being concerned about the state of affairs. The meeting on 29 March 2023 should clarify the way forward and give an understanding of the finances because her main goal is to achieve capacitation. She described the visit at the IDEX defence exhibition in the UAE as difficult because companies preferred to sign up with ARMSCOR and not with Denel. The image of both ARMSCOR and Denel must be restored but Denel must consider the fact the DOD is their prime customer. Denel must first do what is right before the money from National Treasury would be made available. At some point, Denel existed simply to survive. The founding papers of both Denel and ARMSCOR must be reviewed and the properties in terms of those documents must be transferred back to the DOD. Denel must remember that when it is being taken to the cleaners, it is affecting the standing of the entire Department. She expressed being upset and would appreciate honesty from Denel. She brought it to the attention of Deputy Minister Bapela that the DOD had not been treated fairly nor had it been taken seriously. The Department is being judged on how well it can defend and protect the country irrespective of how much money is in the banks. She was angry and upset about the revelations of the OEMs because the Department would want to have the equipment in a functional condition. The meeting on 29 March 2023 would provide a platform to remedy the situation. The reason why the Chief of Staff wants the Command Council involved, is because all the Heads of Arms must understand the situation because some of them was under the impression that ARMSCOR was failing them. It would be important to have the meeting to bring everyone together and resolve all of the problems. Maybe it would create a better understanding of the turnaround strategy. She sympathised with Mr Saloojee and the Board but felt the problems must be fixed because the Department was dependent on Denel.
The Chairperson agreed that on matters of Defence, all parties in this Committee are united. The Committee is the mouthpiece of soldiers for the role they play as frontline defence of the country. It is unacceptable that only four of the eleven Rooivalk helicopters are serviceable, and only 17 of the 39 Oryx and only one of the six C130 aircraft are serviceable. The Hoefyster was meant to be a cutting-edge project of the Army and supposed to have been finalised in 2013. Now in 2023, the first phase of the project had still not been completed. The Committee will monitor the strategy and performance of Denel against the contracts, waiver of penalties and flow of funds with ARMSCOR. He urged Denel to meet with ARMSCOR and thrash out perennial issues that needed to be resolved. The Project Control Board (PCB) must express an opinion on what Denel was putting on the table. The plan is predicated on the Air Force putting in place contractual penalty waivers and conditions.
Mr Marais said Denel must note that the Committee, across party lines, shared the interest of the SANDF and how it must be equipped.
The Chairperson thanked the Deputy Minister of Public Enterprises, the Denel Board and executives for the interaction, which would continue on the oversight visit on 29 March 2023. He hoped that Denel would take into account the issues raised in the discussion when revising the strategic plan.
The Chairperson called on the Acting Secretary of Defence (SecDef) to lead the presentation on funding for domestic R&D in support of the Defence Force.
Dr Thobekile Gamede, Acting SecDef, DOD, said R&D funding is a requirement to ensure the use of modern technology in the Defence Force. Addressing the SANDF challenges had been frustrating because of insufficient funding. The SANDF cannot afford to be followers in the field of cutting-edge artillery. Researchers will leave the Defence Force if not given the opportunity to explore new technologies. The Department did not want the brain drain to continue.
Brig Gen Andre Barends, Director, Technology Development, SANDF, stated that since 2015, the average baseline allocation remained constant at the level of R544 770 661 which was consistently lower than the annual projected total requirement. For example, the projected requirements over the next three years are;
R791 388 000 – 2023/24
R755 759 000 – 2024/25
R790 937 000 – 2025/26.
He presented a summary of the MTEF allocation of R1 769 748 000 over the next three years, i.e. 2023/24, 2024/25 and 2025/26 in respect of the following programmes:
R238 704 000 – Landward Technology (14%)
R105 792 000 – Special Forces Operations Technology (6%)
R272 606 000 – Aerospace Technology (15%)
R233 467 000 – Maritime Technology (13%)
R155 424 000 – Support Operations and Technology (9%)
R466 028 000 – Electronics Technology (26%)
R297 727 000 – Test and Evaluation (17%)
No money had been allocated for the University Programme.
Underfunding over the years had an impact on the level of R&D that the SANDF was able to conduct. As a result, Denel experienced a loss of expertise, knowledge and skills and a collapse in research domains.
The Chairperson noted that the expenditure for every year since 2015 had been below the allocated amount. He sought an explanation for the unspent money.
Mr Marais said the Defence Force of any country should learn from the past and plan for the future. Adversaries are using the best fifth generation technology while the SANDF is still using analogue technology. He offered support for investment in technology as a force multiplier to improve the protection of our country. He asked to what extent the plan was providing for 24/7 visual observation capabilities of land and maritime areas. He wanted to know if the equipment could be used for rapid response or deployment of resources. He asked if the unfunded projects included frigate vessel upgrades. The Committee visited Silvermine Naval Base and found the communication capability and technology outdated. He asked to what extent R&D was assisting to re-establish Silvermine as the best communication technology facility.
Mr Ryder remarked that R&D is an expensive exercise. He asked how much overlap had been accounted for amongst the different entities.
Adm Anthony Morris, Chief Director Defence Materiel, SANDF, said underfunding was challenging in terms of planning for future technologies. Despite the underfunding, the SANDF is envisaging to launch rockets to put sensory equipment into orbit to provide the SANDF with sensory data recording tools or eyes. In the maritime space, sensors could direct effectors to specific environments. The Department is engaging the Department of Science and Innovation to secure an agreement to tap into their funding for the acquisition of dual-view technologies. Inter-departmental agreements were important to ensure that the SANDF is capacitated.
Brig Gen Andre Barends, Director, Technology Development, SANDF, explained that R&D consists of various levels. Normally the product is brought to a readiness level, only as a demonstration. The decision to develop a product with manufacturing capabilities rests upon service divisions. The Space Command satellite would provide the agility to move into areas where the SANDF do not have eyes. More detail will be made available on request. He confirmed that overlapping with ARMSCOR R&D had been noted. The Steering Committee could play a huge role in information sharing amongst all parties.
Minister’s closing remarks
Minister Modise remarked that it was good to discuss all matters of concern. She requested another opportunity to engage after scrutiny of reports. Technology around borders must be reviewed. The input was helping to pursue the important discussion on cyber security. The SANDF could have been more effective in going to Mozambique had the technology been available. The soldiers would have returned home by now.
The Chairperson said the SecDef summarised the problem succinctly when she said the SANDF was falling behind where we were once in the lead. He thanked everyone for persisting beyond the allocated time of the meeting.
The meeting was adjourned.
Xaba, Mr VC
Bapela, Mr KO
Bartlett, Ms M
Beukes, Ms AJ
Legwase, Ms TI
Mafanya, Mr WTI
Makwetla, Mr T
Marais, Mr S
Mmutle, Mr TN
Modise, Ms T
Mothapo, Ms MR
Motsamai, Mr K
Nchabeleng, Mr ME
Nkosi, Ms NE
Ryder, Mr D
Shelembe, Mr ML
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