DoD, DMV, Denel: hearing on AFS & SIU Investigations; with Ministry

Meeting report

The Chairperson welcomed the Minister, Deputy Minister, Committee Members, officials from the Department of Military Veterans, and officials from Denel to the meeting. The Chairperson also welcomed members from other committees who were attending.

The Chairperson indicated that this was the second part of the engagement that was had on 18 February, when the Committee had engaged with the Department of Defence. This meeting would deal with the Department of Military Veterans (DMV) and Denel.

The meetings would follow the same procedure as the previous one. Certain Members would lead the discussion. Time has been allocated and the entire interaction should be 20 minutes. He reminded members to be mindful of time.

Point of Order – raised by Mr G Skosana during prior meeting with Department of Defence

The Chairperson indicated that Mr G Skosana (ANC) had raised a point of order during the previous meeting with the Department of Defence and Military Veterans on 18 February.

Mr Skosana had raised a point of order regarding a statement made by Mr C Niehaus (EFF). Mr Niehaus was present at the meeting as part of the Portfolio Committee on Defence and Military Veterans. Mr Niehaus stated that he had asked questions in the House and received what he described as ‘extraordinary answers’ from the Minister of Defence, Ms A Motshekga. Mr Niehaus indicated that he had inquired about criminal investigations into one military hospital, to which the Minister responded that there were no investigations. Mr Niehaus referred to that answer as deliberately misleading, pointing out that the Committee had a report from the Special Investigating Unit (SIU), who were currently conducting investigations into the matter. Mr Niehaus also stated that the Joint Standing Committee on Defence received a letter on 24 December 2024 from President Ramaphosa on the deployment of soldiers. Mr Niehaus asserted, "If you want to cover up something, you can’t find a better day. If you want to not get a response, you can’t find a better day than Christmas Eve. President Ramaphosa obviously with the intention of the matter not to be dealt with properly, then sent the letter to the Committee on Christmas Eve.” According to Mr Niehaus, in terms of the law, the Committee had the right to respond to the letter, and the President had to expect a response. According to Mr Niehaus, the President did not comply with the law in informing Parliament of the deployment, the President prevented Parliament from executing its rightful duty and therefore Parliament allowed the President to “sneak” the deployment through in

The Democratic Republic of Congo (DRC) and the President had to be called to order.

Mr Skosana raised a point of order regarding Mr Niehaus’ statements. He referred to two issues: 1) The allegations that the Minister of Defence deliberately misled Parliament, which Mr Skosana argued was in contravention of National Assembly (NA) House Rule 85, he emphasised that to claim a Member had misled Parliament was unparliamentary and could be seen as casting aspersions on the integrity of the Minister, and 2) The assertion that President Ramaphosa ‘sneaked’ in a letter regarding the deployment on Christmas Eve, Mr Skosana argued that using “sneaked in” implied that the President had something to hide and therefore was casting aspersions on the integrity of the President.

The Chairperson indicated that he had consultations with the Secretariat in Parliament regarding the rules and the specific conversations that took place. Rule 85 spoke to reflections upon Members, the President, Ministers or Deputy Ministers who are not Members of the Assembly. The rule was specific in that a Member who wishes to bring any improper or unethical conduct on the part of another member to the House may do so only by way of a separate substantive motion comprising a clearly formulated and proper substantiated charge that in the opinion of the Speaker prima facie warrants consideration by the House. The correct procedure to bring any improper or unethical conduct of a fellow Member to the attention of the Assembly is by way of a substantive motion addressed to the Speaker. Such a matter is for the consideration of the House in line with the above rule.

The Chairperson said that Members’ attention was however drawn to National Assembly Rule 182. Rule 182 stated that members must at all times conduct themselves in a manner befitting the dignity and decorum of a forum of the Assembly. National Assembly Rule 69 provides that Members may not engage in grossly disorderly conduct in the House and its forums, including persisting in making serious allegations against a member without adequate substantiation or following the correct procedure. If a Member wishes to bring an allegation of unethical or improper conduct against another Member, they can only do so by way of a substantive motion which is addressed to the Speaker and will be considered by the House if the Speaker deems that there is sufficient prima facie evidence. This is a process for the consideration of the Speaker of the House and not to be brought to a Committee by the member making the allegation. NA Rule 69 deems it grossly disorderly conduct to in both the House and its forums to persist in making serious allegations against a Member without adequate substantiation following the correct procedure. NA Rule 85 deals more specifically with debates in the House, therefore the more appropriate Rule to be referenced by Mr Skosana is NA Rule 69(d) together with NA Rule 182. The complaint by Mr Skosana had been brought in terms of Rule 85.

The Chairperson indicated that in terms of Rule 85, Mr Niehaus had to bring a substantive motion in the House where the matter of the Minister answering questions arose and not in the Committee meeting if the Member is of the view that it is serious and warrants the attention of the House.

The Chairperson said that the guidance had been provided in terms of how the matter could be dealt with. The Committee had robust discussions. He asked the Members if there could be consideration for the rules themselves, but also being careful not to unnecessarily impugn one another’s reputation. There were instances where Mr T Kubheka (MK) framed his complaint in a way that was conforming with the Rules, as he had said that he ‘thinks’ the Committee was being misled. This was different than saying ‘deliberately misleading.’

The Chairperson said that as far as the Committee was concerned the matter was closed. Mr Skosana and Mr Niehaus were welcome to take the matter up in the provided manner. He indicated that he would provide the statement made to both members in writing so that they may consider their next steps.

Mr Niehaus thanked the Chairperson for the ruling. He indicated that would take it up and proceed in accordance with the guidance received.

Ms V Mente-Nkuna (EFF) thanked the Chairperson for the ruling and indicated that it would be dealt with at a later stage. She wanted to draw the Committee’s attention to the fact that forums of Parliament are dealing with all the matters of Parliament and so committees were an extension of Parliament. Therefore, as Members of the House, Members should be radically holding the Executive to account. She found it very weird that Members of the Committee were the ones that would now be defending the very same Executives from being held accountable. This was very wrong and was setting a bad precedent. The Chairperson’s ruling would provide further guidance, however Members should not do this. As Members of Parliament (MPs), Members should hold the Executive accountable. Members had no business defending the Executive.

The Chairperson said that the robustness was allowed however, there had to be regard for the rules of the House and its forums. Members should work their utmost to adhere to the rules. The rules of Parliament do not prevent robust discussion.

Mr C Dugmore (ANC) asked that the Chairperson allow Mr Skosana to speak. He said it was unfortunate that the Chairperson had made a ruling while it seemed that Ms Mente-Nkuna could not resist the temptation of taking the Committee back. The Rule referred to by the Chairperson raised by Mr Skosana was very clear – robust debate and accountability was one thing, but when someone impugned the integrity. Over the years, the EFF has learned by their conduct, which has not enjoyed the support of the public, that that kind of ill-informed and non-factual argument has resulted in the EFF losing political support.

Ms Mente-Nkuna raised a point of order.

Mr Dugmore stated that it was this kind of behaviour – disrupting a member who had been recognised to speak on the floor – that would continue to lower the EFF’s political support.

The Chairperson asked that members take the guidance provided. He invited Mr Skosana to speak on the ruling.

Ms Mente-Nkuna indicated that she had raised a point of order.

Mr Dugmore interrupted.

Ms Mente-Nkuna told Mr Dugmore to ‘shut up.’

The Chairperson told Ms Mente-Nkuna that such language should not be used.

Ms Mente-Nkuna told the Chairperson that Mr Dugmore had used the same language and it had been allowed. She said the Chairperson allowed Mr Dugmore to insult the EFF in the meeting. The explanation provided by Mr Dugmore was not an explanation, it was an insult. She would not allow members to insult the EFF. All Members knew the rules and the rules could not be used incorrectly to punish others. The Committee could not defend the Executives. She indicated that she did not care that Mr Dugmore was from the ANC.

The Chairperson asked Ms Mente-Nkuna to follow the advice and guidance provided if she felt Mr Dugmore had impugned the rules. Ms Mente-Nkuna could raise an objection in accordance with the guidance provided to Mr Skosana.

Mr Skosana (ANC) thanked the Chairperson for his guidance. He indicated that he was happy with the ruling, especially the point emphasised by the Chairperson that having robust engagement and holding the Executive accountable did not mean that members should disregard the rules. Members could hold the Executive accountable while respecting the NA Rules. He noted the Chairperson’s example of Mr Kubheka – he had been robust but he was within the rules. Whatever Members did or said should be within the rules of the NA. He reiterated his happiness with the ruling and thanked the Chairperson.

The Chairperson indicated that he had provided the guidance. The Committee could not debate this issue now.

Mr D Skosana (MK) said the Committee should not degenerate into political party issues. It was not correct for Mr Dugmore to speak about the decline of votes – this was uncalled for. If Mr Dugmore had made such comments about the MK, he would have felt similar. SCOPA should not be degenerated. Whether a party lost 20% or 100% of votes, it did not matter – the Committee was convened to address the issue of military veterans, not party politics.

The Chairperson noted this. He encouraged Members to mind what was said about each other. The Committee should focus on the issue at hand. He noted that the situation was uncomfortable but requested that the Committee move along with the meeting. He would share the written ruling with the Committee. Members should consider what happened in the previous meeting and in the current meeting and use the ruling and guidance provided in their own actions going forward.

The Chairperson thanked the Minister for her engagement thus far. He indicated that matters involving the Department of Defence had been dealt with. The issue of the Department of Military Veterans (DMV) would be dealt with in the meeting. The Department would be given an opportunity to make a few remarks, and thereafter a discussion would take place. The members had received and read the presentations, and thus it was not necessary to deliver the presentations again. Focus should be given to the questions and concerns raised by members.

Minister’s Remarks

Ms Angie Motshekga, Minister of Defence and Military Veterans, thanked the Committee for the opportunity to present and engage with the Committee. At the previous meeting, she indicated that it was not in dispute that the DMV was having a very serious problem. The Department had been operating as a very poorly structured and incapacitated Department for many years. The Department was faced with a situation where the entire senior management was absent and there was a great deal of staff not fit for purpose. Since taking over the Department, an attitude of addressing the challenges faced by the Department regardless of the historical context. Regarding the findings of the Auditor-General (AG), she stated that it was a mixed bag of results. While there continued to be many challenges, several interventions have started to yield positive outcomes.

The collapse of the management structure, specifically the internal audit function was one of the critical problems faced by the Department. The AG had mentioned this weakness and the material irregularities (MIs) of the Department and further recommended steps to be taken to address the issues. The Department received a qualified audit opinion due to challenges which include internal controls. Although the Department was faced with a number challenges, work has begun including the appointment of the Audit Committee and outsourcing the audit function to an audit firm. She confirmed that this has begun to yield positive results and has created some sense of stability.

It is true that the Department was engulfed with various challenges. The challenges are predicated on the basis of the instability at management level and internal audit. The challenges in terms of the internal audit function negatively affected the Department for 6 months until the audit committee was appointed in September 2023. The internal audit committee made recommendations based on a lack of internal audit. A number of mitigating factors had been put in place to begin to address the challenges experienced. Senior posts have been advertised – however the Department was not able to advertise all posts as the Department had to wait for the Department of Public Service and Administration (DPSA) to approve the final structure before the posts could be advertised.

The assistance of a very qualified audit firm was making a big impact.

The Chairperson invited the DMV to make any opening remarks or comments.

Ms Nontobeko Mafu, Acting Director-General (DG), DMV, indicated that at the previous meeting questions had been raised toward the Department, did the Committee expect answers to these questions.

The Chairperson indicated that the Department would have an opportunity to provide some key remarks regarding the presentation that had been sent to the Committee. Thereafter a discussion would take place. The Department could forgo this opportunity and go straight into questions.

Ms Mafu indicated that the Department would forfeit the opportunity to make remarks at this stage.

The Chairperson noted this. He indicated that Mr K Madlala (MK) and Mr Skosana (ANC) would lead the discussion.

Discussion

Mr Skosana (ANC) referred to the inadequately resourced and ineffective internal audit unit. In the presentation, it appeared that the Audit Committee had recommended outsourcing the internal audit unit until the organogram (structure) was reviewed. How long would it take to review the organogram to accommodate positions that would assist in strengthening the internal audit unit. The weaknesses of the internal audit unit contributed to uncorrected misstatements in annual financial statements which appeared as repeat findings from AGSA.

Regarding the Military Veterans Beneficiary Database, it was indicated that the Department had been using Microsoft Access system which was user controlled and which could not integrate with anything. Access benefits were therefore managed manually, through a paper-based system. It was indicated that the Department was of the view that it should have an Integrated Database Management System but were unable to do this because the State Information Technology Agency (SITA) had caused delays. The Department had not been able to find an alternative source because this also had to be approved by SITA, due to the SITA Act. The Department indicated that there would be a bilateral meeting between the accounting officers. When would this meeting take place? How could the Committee assist in this regard?

Mr Skosana referred to unidentifiable, moveable, tangible capital assets. The Department indicated that certain assets could not be located and that the interim organogram did not have some key positions including asset management and disposal unit. These positions would assist in ensuring that the management of assets was up to standard. These positions would assist in verifying, reconciling and the disposal of redundant and damaged assets timely. The short-term measure to correct the situation was to have a service provider appointed to this effect to cleanse the asset register.

Mr Skosana highlighted the issue of ongoing investigations regarding MTN and 7 000 tables (tablets). Apart from this investigation, were there any other investigations related to asset management considering that some assets could not be located.

Regarding performance indicators and targets, the presentation indicated that 10 out of 22 targets were met in 2023/24. This represented a 45% overall achievement. This was very concerning as the Department achieved less than 50% of the targets it set for itself. AGSA questioned the quality and reliability of performance indicators linked to the targets. Did the Department have a tracking tool in place to track and monitor indicators in line with targets? Did the Department have plans in place to address and improve this performance?

Mr Skosana referred to consequence management for irregular expenditure. AGSA highlighted cases of irregular expenditure that have not yet been investigated and cases were investigations were conducted but no further actions were taken. What steps has the Department taken to improve the investigation process and ensure effective consequence management, especially for those officials who contravened legislation resulting in irregular expenditure.

Response

Ms Mafu admitted upfront that the Department had a very incapacitated internal audit structure. This structure was led by a director, a deputy director: risk management, and a deputy director: internal audit. The Department agreed that more human capital had to be put into the internal audit structure. This would ensure that the work of the internal audit unit was effective and efficient so that when AGSA came to the Department, a lot of work had already been done, in terms of early-warning signs. The problem in the Department was compounded by the fact that in 2021/22 the director: internal audit was made to act as a Chief Financial Officer (CFO), while also doing the work of internal audit. This created issues as the person had been acting as both a referee and a player at the same time. This situation was allowed and resulted in a situation where there had been intervention from the former Minister to say that having acted as a CFO required a cool-off period so that someone else could do the internal audit work and subject the work done as CFO to internal audit. Currently, the Department has a service provider as recommended by the Audit Committee. The Deputy Director had resigned and there was now a vacancy in that position. The Audit Committee recommended that the Deputy Director: Internal Audit be redeployed on the basis of capacity and efforts. There were still negotiations underway in this regard and to determine whether the employee agreed with this move. A suggestion was made two weeks prior that the DG engage with him and she indicated that there was willingness on his part to move. The service provider had been appointed for six months, this period has ended but a decision was made to tender the position for 36 months so that the function could be outsourced while building internal capacity. It was critical that internal capacity be built.

Ms Mafu stated that the Department had a fully functional Audit Committee. The Department had considered different disciplines so that the Department could benefit from the Audit Committee. Included in the Audit Committee were two chartered accountants, an advocate, and a CFO with proper qualifications. Therefore, the support received from the Audit Committee was very good.

Ms Mafu said that the Department was lacking in terms of legal services. The Director: Legal Services and the Deputy Director had resigned and unfortunately this happened while DPSA had frozen posts. The Department had applied to DPSA to advertise these posts.

Ms Mafu responded to the question regarding the database. The database was a gateway to the Department for any members who were military veterans to access benefits. Veterans had to first register in the database. The system was not there – the Department had no systems. The Department had approached SITA to indicate that the Department wanted to get an external service provider to develop the systems needed, unfortunately SITA had rejected this. In the past, the Department had approached the DG responsible for SITA but no agreement was reached. The Department had engaged Parliament. The Committee of the 6^th Administration invited the Department and SITA to understand the problems, however, after this engagement, the CEO of SITA at the time resigned, taking the process back to square one. The Department received a letter from SITA that indicated that SITA would not be able to assist at the current point. The Department had hoped that before the end of the financial year, there would be a system in place – this did not seem likely for this financial year or the near future. The Department would welcome permission to deviate from the SITA Act and look for an external service provider to assist the Department in developing the systems and the move from paper-based to digital systems. The Department was working toward this but due to the SITA Act, the Department could not do it.

Ms Mafu asked if Parliament could assist in persuading SITA to allow the Department to outsource the development of the systems. SITA, itself, did not have the resources and outsourced to various service providers. It was her perspective that SITA contracted service providers whom they paid little to no money until the system was developed. The Department had not paid anything to SITA throughout this period. There was an agreement that the Department would only pay once the system was up and running.

Ms Mafu responded to the questions regarding performance indicators and targets. The Department’s targets were constraining the Department. For example, there was a target of providing public transport to military veterans. In South Africa, there was no integrated public transport network, so as much as this target was a benefit, it was difficult to implement because there was no integrated public transport system. The Department depended on other departments to facilitate the benefits. In the example of housing, housing was a benefit to veterans, yet the mandate of building houses was with the Department of Human Settlements. Therefore, when an application was made to the Department, the Department had to take it to the Department of Human Settlements which took the matter out of the Department’s control. Achieving the target was therefore the work of Human Settlements. If the Department of Human Settlements had a project in a particular province, they would advise the Department whether they could accommodate the application of the Department. The Department provided 50 square metres for military veterans, whereas other South Africans got 40 square metres. The Department paid R188 000 for the extra 10 square metres. The mandate did not reside with the DMV and there were serious dependencies on other departments. Unfortunately, if Human Settlements did not give the Department an opportunity or have a project running, the Department could not meet the target.

In terms of consequence management on irregular expenditure, Ms Mafu stated that in 2018, the Department deliberately formed an internal committee to deal with consequence management in terms of irregular expenditure. Unfortunately, there had been pushback from officials to the extent that it became difficult to implement consequence management. The Department had engaged the Department of Planning, Monitoring and Evaluation (DPME) to analyse the irregularities in the Department. There was information that stated the irregular expenditure of a certain amount and the Act that had been contravened, as well as the responsible manager. The challenge came in implementing actions against what had been discovered by DPME. Consequence management in the Department remained a problem. The presentation stated that there was a toxic culture within the Department and that there was serious pushback against any consequences that should be implemented. The Department, with the support of the Minister, was trying to ensure that consequence management was implemented.

Ms Mafu referred to the question regarding the investigation of MTN. In 2021/22 the Department procured 10 000 tablets from MTN. The records indicated that MTN had outsourced the provision of the tablets to another company (BAM Solutions). Ms Mafu referred to RT15 where the Department participated in procurement. In its nature, RT15 was meant to provide data and voice for officials of different government departments. Yet somehow, the Department had procured tablets to the value of R53 million. The tablets were not usable. The Department was negotiating with MTN to take the tablets back. The offerings of MTN within the contract, it did not indicate that BAM Solutions would provide the products. Unfortunately, the BAM Solutions tablets were provided to the Department, and not to any other departments. In 2023, the Department met with the CEO of MTN, MTN promised that it would do a forensic investigation and share the report with the Department. To her knowledge, MTN had done this but was now refusing to provide the report to the Department. The Department has since, in precaution, suspended two officials, of which one has been dismissed and one was undergoing investigation and the disciplinary process.

Approximately four investigations were happening in the Department. The Department had bought pothole machines to the value of about R27 million, without a plan or budget. As there was no plan connected to these machines, the machines were sitting in a warehouse and depreciating. This investigation was with the Hawks and she was hopeful that it would be concluded soon. There was also an investigation into ‘Dekondi Nani’ (sp) a service provider to which the Department provided a database for the training of military veterans. This was not based upon the requests of military veterans requesting training. The Department had connived with the service provide. This matter was under investigation by the Hawks.

Mr Ssibongiseni Ndlovu, CFO, DMV, responded to the question regarding moveable, tangible assets. He confirmed that there was a finding regarding this by AGSA. This was linked to the completeness of the assets register. The main challenge in this regard was around controls, accuracy, and completeness of the asset register. The asset register was currently spreadsheet-based. It was spreadsheet-based due to structure challenges. The Department was currently working with an interim structure which was created in 2010. This structure did not conform to the generic structure of government. The generic structure was a uniform structure that provided a minimum requirement for any government department to be able to function optimally. The Department was nowhere near this – this is what the Minister and the Department were trying to address in consultation with DPSA. To address the issue of completeness, the Department was allowed to appoint a system controller within the transversal systems which had the basic accounting system and the Logistical Information System (LOGIS). Since the formation of the Department, LOGIS had not been used. When an item was procured it was done via LOGIS, LOGIS also recorded and registered the asset – this enabled the tracking of assets. A service provider had been appointed to cleanse the asset register. Once this was done, all of the existing assets would be loaded in LOGIS. This would improve the asset register dramatically. The asset verification process was almost complete and would be followed by the reconciliation. This weakness did exist but was being addressed.

The Chairperson indicated that the engagement had gone over time, but he would allow Mr Skosana to ask any follow-up questions. He requested that the Department provide concise answers. The reason he had made the opportunity for a summary available to the Department, was to avoid long-winded responses. He stated that the Department’s responses had given him more questions, which could have been addressed upfront through an introductory summary.

Mr Skosana (ANC) thanked the Department of the situation with MTN, he noted that he had previously referred to ‘tables’ and that in fact the presentation referred to tablets.

Mr Skosana referred to the Deputy Director: Internal Audit, where it was indicated that the Deputy Director should be moved due to ethics issues. ‘Ethics’ meant that there were serious issues. Why were there negotiations to move an official where ethics issues had been raised? Issues of ethics were very serious, especially when dealing with internal audits.

Mr Skosana stated that he had a suggestion as it related to SITA and the database. He noted that this was a very old matter. Between 2017 and 2019, Mr Skosana had served in the Portfolio Committee of Defence and Military Veterans and was aware that the issue of the database was a historical issue. He proposed that the Committee engage with SITA regarding this particular issue.

The Chairperson noted this suggestion.

Ms Mafu indicated that the issue with the Deputy Director had been a labour relations issue. Workers were protected, and when they were to be moved there had to be negotiations.

The Chairperson asked if this meant that there was no ethical issue, but rather a labour relations matter.

Ms Mafu said that the issue was partly ethical.

The Chairperson said that this did not make sense. When there was an ethical issue, it fell within the Code of Conduct, which meant that the person could be suspended, pending disciplinary action. When an issue of ethics was raised and the Department stated that it wanted to move this official to a different position, the ethical issue did not die. The ethical concerns around that official remained, regardless of the position they served in. Either the Department had a case or did not have a case.

Ms Mafu stated that the official was a Deputy Director, not a Director. The official had ethical issues within the Department. For example, in 2019, the official developed a request for information and it was clear that the request was not in the interest of the Department. When engaged, he had withdrawn the request for information, as it had been needed elsewhere and he was the only person who could get the information. Others had used him to seek that information from the Department, through his position. There were many such incidents of unethical behaviour. The Department was currently looking to redeploy the official elsewhere so that the Department, if necessary, could deal with other issues of misconduct.

The Chairperson felt that the answer provided had not answered his question.

An official from the Audit Committee highlighted that the Audit Committee had recommended that the official be redeployed. The reason for this was that for the past two financial years (2022/23 and 2023/24) there had been no reports from internal audit. There has been no approved audit plan from internal audit. Since its inception, there had been no review from the Institute of Internal Auditors. The internal audit was not functioning. The Audit Committee felt that it could not have the official in internal audit who had not performed or provided any reports for three financial years.

The Chairperson was concerned about the way in which both the DG and the official had answered. It was indicated that since 2019 nothing had been provided – this was six years ago. He noted that ethical concerns had been raised, but there was no indication of any disciplinary inquiry and no actions in terms of the Code of Conduct. It was indicated that there had been a recommendation that the official be moved to a different position. This shows that there was a problem at the leadership level. The Department had told the Committee about a non-performance issue and the solution that the Department had was to move the official into a different position – to under-perform there. He indicated that this was the essence of the Department’s response. The Department provided detail on what the official had repeatedly not done, for years, and yet the solution was to move the official into a different position. There were ethical concerns for six years, without any consequence, and for three years, reports that were meant to be submitted were not. This pointed to a problem at the levels above this particular official.

The official from the Audit Committee felt that things had to be separated. Functionally, this person reported to the Audit Committee but administratively the person reported to the Accounting Officer. Matters of disciplinary actions had to be taken to the Accounting Officer. The Audit Committee had told the Accounting Officer, that functionally the Department could not have an internal auditor like that. Functionally, that decision was made by the Audit Committee. However, the Audit Committee could not deal with the administrative aspect – the Accounting Officer had to take control in this regard.

The Chairperson noted this. He indicated that this issue was not unique to the DMV. Other companies and state-owned entities (SOEs) had audit committees and executive functions. It was a symptom of dysfunction when the two were not able to act together, get things done and extract accountability. He was concerned by the instruction to separate things. The Chairperson indicated that he had previously served on an audit committee, as a non-executive director and understood that non-executives could not enact disciplinary procedures. Audit committees were part of the accountability structure and it was the function of the Accounting Officer to make certain that matters were dealt with expeditiously. What was seen in the Department’s answer was that this system was broken. He noted the need to separate the matter, but the answer was worrying, nonetheless.

Mr Madlala (MK) reminded members that the meeting was in the interest of the public. The meeting was dealing with dysfunctionality, and sugarcoating did not help. It was a benefit to the public to be taken through the dysfunctionality. He felt that some officials did not deserve their positions. When dealing with leadership and management issues, the Committee could not simply accept explanations provided. Regardless of how good an explanation was in terms of why there had been non-performance, it did not change the fact that there was non-performance.

Mr Madlala said that constant pushback against consequence management could not be accepted. This meant that there was high appetite for irregular behaviour and low appetite for consequence management. In the eight months of the new administration, the Minister and the Deputy Ministers should have developed an understanding around the issues and begun putting measures in place to address the issues.

Mr Madlala indicated that the Department had been underspending, and the expenditure did not match up to actual service delivery targets. What steps has the Department taken to ensure the expenditure aligned with service delivery and targets? This could be linked to system issues. Why was the budget being allocated to the Department if the Department did not have the necessary systems in place? The Department was at a formative age. If there was no indication of measures being put in place to address the issues in the Department, why was money being allocated? The targets needed to be met. It was pointless spending 69% of the budget if targets were not being met.

Mr Madlala referred to consequence management relating to material irregularities (MIs). He referred specifically to the allocation and payment of emergency housing to ineligible housing veterans. What measures has the Department put in place to ensure effective resolution of the MIs and to ensure that consequence management was enforced on identified officials.

In terms of the structure of the Department, Mr Madlala noted the position of the Director-General of the office of the DG. What was this position? Could the Department please clarify this? The Committee had been told that there was a process underway of filling the DG's post, but what was happening with the other positions. He noted that there was a DPSA process underway in this regard. To what extent could the Committee assist in terms of expediting the process with the DPSA. He was very concerned that another department could be preventing the Department from implementing important strategies. This was a very lax attitude and often went in circles with no results. What could the Committee do to assist with the vacancy challenges?

Mr Madlala expressed his worry regarding the pushback of officials against consequence management. He requested further elaboration on this issue. When there is a functional system of consequence management in place, officials should be served with a letter detailing the alleged misconduct. What was the response of officials in this case? Did officials attend hearings? How was the pushback occurring? Where was the issue? Labour laws allowed that hearings could proceed in absentia. He felt that this was a leadership issue that was limiting consequence management. If it was the case that there were other influences from outside of the Department, the Committee should be made aware of this. If the Department could not provide answers to the Committee, the issue was leadership, not officials, pushing back against consequence management.

Mr Madlala noted that the Department had attempted to get SITA involved in developing necessary systems. How could the Committee assist in expediting this process? This was a critical issue that needed to be addressed.

The Chairperson indicated that SITA would be called to the Committee to present on its own issues, as well as issue related to the Department.

Ms Mafu highlighted the issue of Rama City, where it was alleged in the MIs that the Department provided alternative accommodation to non-veterans. There was still a dispute on this issue. From the Department’s position, the military veterans that are housed in Rama City were in the database. The Department was disputing the materiality of the matter with the AG and AGSA has escalated the matter to SIU. The Department was awaiting an engagement to clarify the matter.

Ms Mafu said the ‘DG within the Office of the DG’ was a typing error. The position referred to a director in the office of the DG. She apologised for the error.

In terms of vacant funded positions, there were 39 such positions. Of the 39 positions, 17 have been highlighted as critical vacancies that the Department could not do without. At the moment, the Department had concurrency with the Minister and National Treasury that the positions were funded and were awaiting concurrency from DPSA. Unfortunately, without DPSA agreeing with the process, the Department could not fill the vacancies.

Ms Mafu responded to the question regarding the pushback from officials. In the DMV environment pushback manifests in many different ways. For example, the Department had terms of reference that were adopted that governed every sitting, including management meetings. In management meetings it was not unusual to get officials who were not members of the particular management structure sitting, engaging and deliberating. This was a form of pushback. There were instances where MPs visited officials within the Department, and officials who were members of political parties, who served in the structures of parties. The Department was trying to address this but there was serious pushback. The fact that within the Department there were military veterans, also complicated the process – in that instead of them servicing military veterans, they wanted to be serviced themselves. It was a mixed bag of results with military veterans also being employees.

The Chairperson said that the DG appeared to be telling the Committee that there were some senior staff members who had political protection due to belonging in political structures with MPs who have political influence. Therefore, the Department was constrained in taking action against them. He asked the DG to confirm whether this was what she was indicating.

Ms Mafu confirmed this.

The Chairperson noted this. He requested that Ms Mafu be straight with the Committee. He indicated that the meeting was being streamed and members of the public were watching, and the public had to understand the proceedings.

Mr Ndlovu responded to the questions regarding the misalignment between the performance and expenditure of the Department. He confirmed this observation. In 2023/24, there had been a delay in terms of gazetting the regulations, which then led to the baseline being increased with the new allocation for military veterans disbursement. However, the expenditure was not realised because the Department started rolling out the pension from 1 November 2023. This meant that the greater part of the expenditure (R159.1 million) was then not spent. The pension was a conditional grant to the Department, meaning that the Department could not spend this money elsewhere or re-allocate the money without approval from Treasury. Hence, the money then had to be paid back to Treasury. This accounted for much of the expenditure. However, it was correct that there appeared to be a misalignment. This was likely due to the benefits the Department dispersed. For example, the Department was meant to provide newly built houses to veterans, the Department would sit with the Department of Human Settlements and set targets at the beginning of the year. However, when it came to actual performance, the Department had no direct control over the amount of houses built for and delivered to military veterans. This then meant that the Department underperformed on housing and then the particular budget ends up not being spent. Contrary to this, the Department provided health care benefits to veterans who normally went to military veterans, but in most cases, military hospitals referred them elsewhere. This then increased the bills outside of the Department’s budget. The Department was reviewing the model of dispersing each benefit so that expenditure could be optimised and aligned with performance. With the assistance of the Ministry, he was sure that the Department could turn the corner and work toward better alignment.

Mr Ndlovu responded to the questions regarding consequence management. Over and above the pushback, the Department had sought interventions from DPME. That Committee consisted of National Treasury. There was a robust determination exercise as per irregular and fruitless and wasteful expenditure framework. All that was left for the Department to do was to conclude on these matters. However, those files have since been handed over to the Hawks. Along with the DG, the Department is securing an appointment with the Hawks so that the Department could get copies so that the internal processes could be concluded.

The Chairperson asked the CFO to clarify whether he had said files or funds.

Mr Ndlovu indicated that he had said files. For each matter, the Department created a file and allocated a file reference number. All of these files were then handed over to labour relations, but no work was performed. The Department was resuscitating the process to conclude on these historical issues. The current MIs were not only the Rama City issue, there were two other matters: the MTN tablets and the roller drum machines. Internally, the Department had a plan and would refer these matters most likely to the SIU as SIU was able to follow through the process until it was concluded. The Department needed to consult and get concurrence with the Ministry this week. The Department was hoping to conclude all matters of consequence management.

Mr Madlala thanked the Department for their response. He stated that the DG had one important statement that could result in progression – that the problem was that some of the dysfunctionalities in these departments were caused by politicians who then come back and sit in Parliament and blame the departments for issues, and if officials did not comply with these politicians they would bear the consequences, and if officials complied they were ineffective and incapacitated. This was the reality of South Africa. The battle of ensuring that there was competence, and ethical leadership would not be corrected by regulating. You could not regulate to restore moral conduct and moral ethical behaviour. No matter how many regulations were put in place, if there was no moral authority in leadership capacity of the country, the problems within departments could not be corrected. He commended the DG for this honest and truthful reflection. He noted that the Department found itself in a tight spot, did the Department take a decision to comply for the sake of sustaining their position and engage in unethical practices, or did the Department take a decision to run a clean administration and deal with the consequences that may follow. At the end of the day, there would be no protection that the Department could get from the Committee because it would go down to a vote of the political environment. In as much as officials may be victims after coming forward, there was little that could be done to protect them. The frankness and honesty were needed. This was not an easy battle. The country faced corruption in all departments and everything was collapsing because the culture of unethical and immoral behaviour that has led to such great deterioration, has been allowed. This culture was actually spitting on the graves of those who fought for the struggle in the country. Every day the leadership in this country existed as Black executives who confirmed that they could not run a country, which is what many had believed before democracy. He pledged his support to the Department if they stood firmly on the matter and indicated that this was the problem and did not try to be technical and sugarcoat issues. Officials should be frank and honest and say that they were unable to run the Department because of pressure from political parties, influence and other external factors, not because there were issues with putting systems and policies in place, but because pushbacks were supported by political parties. The same political parties who then sat in Parliament and tried to hold officials and the Department accountable. This issue had to be dealt with. Once this was resolved, a lot of other challenges would be resolved.

The Chairperson said that he liked to believe that the members of SCOPA, in particular, were determined to make sure that they did their best to offer any protection when necessary and needed to public servants. He understood Mr Madlala’s sentiments, but felt it was important that Parliament made its best endeavours to support public servants when they are correct and to hold them accountable when needed.

The Chairperson requested that the Minister and DG explain to the Committee and public what the difference was between the interim structure and the structure that should be in place. What was the gap that was resulting in these issues? There was discussion about the interim structure from 2010 which has not been updated. The Committee was unclear on what was in place and what should be in place. He did not want the Committee to speculate. He requested that Minister and DG provide this clarity.

The Chairperson noted that the Minister was a senior member of Cabinet. He had asked the DG a very direct question about political interference. He asked the Minister to deal with this issue. One of the strategic pillars outlined by the President in the State of the Nation Address (SONA) was an ethical, capable state. It appeared to him that people at the DMV were political deployees who should not be there. The Department would never be able to meet its mandate if this situation persists. He believed that the Minister had formal power in her position, but she also had seniority in Cabinet having served in Cabinet for a long time, to address this issue. He concurred with Mr Madlala. If this problem could not be solved, it made the President’s words empty. When engaging with the Department and Minister again on this matter, he would like for the Committee to hear specific steps that have been taken to address the issue.

Minister Motshekga responded that the Department’s plans and objectives had to match with the skills in the Department. Currently, there is a complete mismatch in terms of skills and job descriptions. This was why there was complete dysfunctionality. The purpose of the internal auditor, as an external entity, meant that they could not do any work outside of what they had been specifically tasked with. The main problem was within the Department itself, to be able to manage itself. The internal auditor and DG would be able to provide more insight into what posts were unaligned to the objectives of the Department. DPSA had to do a work study to determine whether the job description aligned with the skills employees had and what they were actually doing. When observing the structure of the Department, there were 193 posts, of which 163 are occupied. People are occupying roles to which they are not aligned. For example, in the internal audit function there may be a person who was not qualified to be there. This was a major problem. The Department was not allowed to advertise the posts until there was alignment.

Minister Motshekga said that the Chairperson and Committee had been right in terms of their concerns regarding political interference. The Minister indicated that she had images of MPs in the NA, who convened meetings at the DMV. MPs convened officials. There would be discussions at a strategic plan meeting with officials, and when coming to Parliament MPs raised questions about things that had been discussed internally in the Department. She could provide images of members holding meetings at DMV. The issue of political interference was not hearsay, it was a very real issue within the Department and evidence could be provided.

Minister Motshekga indicated that the Department had never had a Head of Department (HoD) for more than two years. There was complete instability. The longest time an HoD had been in office was 18 months. This conveyed the level of instability in the Department. The Department had no policies and systems. She could not deny the dysfunction. The Department had cases left, right and centre of millionaires who are military veterans that stayed in Steyn City that took the Department to court because of R20 000 school fees because their children did not go there. There was no means test. When she came to the Department the first question, she asked was how did the number of veterans get to 65 000. When the ANC came out of exile it had been indicated that there were approximately 20 000, MK came with 5000 – there was no reason why the number of veterans had increased so much. She was happy with the SITA proposal the Committee had made, because these issues would persist unless there were policies and systems in place. There were people who claimed to be military veterans that made their way onto the database. She indicated that the Department was working hard to save the sinking ship that was DMV. She expressed her gratefulness that the Committee was willing to assist. She described the Department as a wrecked ship in many aspects. The Department has had to bring on board many external entities to assist, included the external audit firm. The Department relied on SITA to assist with the database because running a paper-based database at this point was trouble.

In terms of MTN, the Minister indicated that she had spoken to the CEO of MTN who had said that the audit report had been provided to the Department. However, there appeared to be confusion about this in the Department.

Minister Motshekga said that the advertisement of a DG post had been approved. The system could not be changed without leadership. She has appealed to the Minister of DPSA to expedite the processes related to DMV as the Department could not recover or rebuild without the necessary officials. The system has rotted from the inside, and as a Minister there was not much that could be done from the outside, the DMV had to be tackled from within, beginning with proper leadership.

Ms Mafu said that when the Department was started there was a Ministerial task team which proposed the current structure that was in place. For example, in terms of education support there was a benefit but there were no ‘warm bodies’ or employees attached to the structure to implement education support. The current structure was made up of 169 workers, but of the 169 employees, 39 were vacancies. In addition to this there were 42 contract workers that have been there for a long period of time. A normal structure was when there had been a work study to say for example that within corporate services these were the specific resources needed. For example, in Human Resources (HR) there were approximately six elements within HR, within HR Administration (HRA) a specific number of employees were needed at different levels. The current structure was not responsive to the work that the Department should be doing. For example, internal audit having only three employees to facilitate internal audit functions within the Department that would be used by AGSA as a resource was a major issue.

The Chairperson thanked the Minister and DG for their responses. He indicated that the remaining Members of the Committee would be allowed to share their questions at this time.

Ms Mente-Nkuna indicated that she wanted to understand the Department’s way forward. It was her understanding that the Department did not exist and if it existed it existed for the benefit of a few. The Ministerial team referred to by the DG was not very experienced with what the ambitions were of the new South Africa. Military veterans were treated as the EFF of the time. There should not be the creation of various ‘crops’ of South Africans, some citizens could not be prioritised over others and should not adopt this view. The database could not be confirmed, however, surely at this point many veterans of the apartheid struggle were naturally no longer around. The number of veterans, however, keeps growing and does not make sense. The Department faces various demands from these people. Yet, if the Committee requested a breakdown of the organogram of employees and their ages vis-à-vis the qualifications and the utilisation of the system which had a memo that was designed to accommodate people who did not have an opportunity to get qualifications at the time, it would not match up. The Department had to provide a full breakdown of the structure, of those who were pushing back simply because they had the advantage of using memos created for a different environment and trying to utilise it in the current environment. The organogram needed to provide the ages and qualifications.

Ms Mente-Nkuna asked how far the Department was with the meetings with the Minister of DPSA. The DPSA Minister had to perform their function. There was a clear alignment. Everyone in the administration has seen that when there was a high demand of employees with certain qualifications – and the same should be true in the Department. If anyone was to be a Deputy Director and the person had a qualification required to occupy a particular space the ethical issues being faced should not be a problem. The ethical issues existed because the people in certain positions did not have the required qualifications. Was there an organogram that detailed the particular qualifications needed in each position? If this was not in place, what has been done to achieve this?

Ms Mente-Nkuna expressed her interest in the issue regarding MTN. There were people who have created a monopoly of certain things, and MTN was one such business who has taken over communications. MTN was very experienced with the systems in government and knew what was required. For MTN to have signed a contract of tablets that they knew would be rendered useless the moment they landed at the Department, was taking advantage. Knowing that the Department could not utilise the tablets, MTN signed a contract to take millions of South African money and gave the Department something they knew would never work. MTN had taken advantage of the Department. There should be a way for MTN to come to Parliament and account for this. MTN could not take advantage of South Africans, especially in the environment of the Department where MTN knew that there was lack of experience.

Ms Mente-Nkuna referred to the issue of the internal audit function. The service provider who was now providing internal audit functions had limited scope and therefore could not provide answers or work on issues that fell outside of the scope. She noted that an external audit firm had been in place for six months, and there was a tender for 36 months. This has not done much, in fact, in terms of audit, the Department deteriorated. Was someone designing a proper scope for the external audit firm to follow, or in three years would the external firm be brought in by SIU for the limited scope, high payment and poor results. Who was designing a proper scope for these people? The money allocated to the Department had to be audited and accounted for, failure to do so internally resulted in the audit being outsourced.

Mr Niehaus highlighted issues of incompetence and emphasised that there needed to be consequence management. He related these issues to the issue of the database. It was clear that the database was the gateway through which veterans had to go. If the veterans were legitimate, they had to be in the database and receive the various benefits awarded to them in the Military Veterans Act. There were serious problems with how the database was currently managed not just because of the SITA issues, but also because of internal management within the Department. He wanted to understand how the capturing of the database was done and by whom. Were there South African National Defence Force (SANDF) reservists among those involved in capturing? If there were, have they received a security clearance? There were whistleblowers within the Department and there were complaints that MPs received. It was important that members were able to ask questions on the basis of the information received. Did the database have members on it who had been snuck in by SANDF reservists. Were there examples where SANDF reservists have entered themselves onto the database.

Mr Niehaus said that the Portfolio Committee on Defence and Military Veterans had been told by the Department that in the third quarter there would be an overspending problem regarding the military veterans pension. Whoever received this pension had to be a legitimate veteran. It was vital that the database process needed to be handled properly and that where there were wrongful actions in terms of the management of the database, they should be exposed. Overall, the Department had to make a distinction between political meddling, which was very wrong, and allowing political meddling to protect anyone who was doing wrong, and on the other hand that where whistleblowers and concerns were being raised about how the process in the Department was unfolding that MPs had a right to garner that information because that empowered MPs to be able to deal with the critical issues and concerns. He indicated that he had received a message the previous evening from a veteran who lived in Paarl, who had raised a concern. The veteran indicated that they had been told that for the rest of the financial year, paying military veterans pensions out to further applicants and those who were to appear on the list would not be possible. The veteran indicated that he had heard that those who were approved would only get back payment for three months, even if they had been approved earlier. This information had been brought to him and he had to take it seriously. He emphasised that there had to be a distinction between an MP garnering information and asking questions on the basis of the information to get clarity in the service of the public. Members of the Portfolio Committee on Defence and Military Veterans received thousands of letters from military veterans, or those who claimed to be veterans, complaining. Part of the reason this happened was because the systems in the Department were dysfunctional. He had personally tried to phone the call centre and found himself on hold for hours – military veterans had the same experience and ended up raising their concerns to MPs out of frustration. MPs had a duty to make these concerns public within the Committee and the Committee on Defence and Military Veterans.

Mr Skosana (MK) said he had not been surprised by what he had in the meeting. He indicated that he was the founder of Rama City and it pained him to see the age of some so-called military veterans. Some of them were younger than his first-born. When he saw this, he had asked himself how this was possible.

Mr Skosana said the dysfunctionality of the Department was concerning. The Department was facing numerous issues including the several vacant positions including the DDG of corporate services, the DDG of social economic support, Chief Director of heritage, Director of Legal, and Director of HR. This was extremely concerning. He also indicated that the Department should be consistent when delivering presentations and use either Accounting Officer or DG as it created confusion when both were used.

Mr Skosana noted that staff suspension was common in the Department. The trend was continuing with seven officials currently suspended in top management. Unfortunately, the Department was once again operating under an acting DG. How many funded vacant posts existed within the Department. Why has the Department had employees on contract since 2024? How many officials were suspended currently, for how long and what were the charges against them. Was there any intention to appoint a permanent DG, if so, when? The previous Deputy Minister reported that the director was suspended due to maladministration and corruption. What was the current status of this and the outcome of the disciplinary cases? How did the Department hold management meetings with a skeleton staff?

Mr Skosana said that some of the houses of military veterans have no electricity.

Mr Skosana said that there was no skills development of members.

Mr Skosana indicated that some of the funeral claims of veterans were not approved or paid. This was a disgrace. People died for the freedom of the South African people. Some wanted to erect a tombstone but could not afford it. He highlighted an example of someone he knew who had been a General whose funeral claim had not been paid and whose family did not have money to bury him – he indicated that he had paid for the veteran’s funeral. And yet, top officials from the Department came to the funeral and sang struggle songs. What were the plans to address underspending as the DMV returned its budget funds annually? This had been confirmed by AGSA. The Department sent money back to Treasury, yet veterans were struggling.

Since the establishment of the Department, it was expected that there should be benefits implemented in accordance with the Military Veterans Act. However, 15 years later, the situation is dire and only a few benefits have been rolled out. Some veterans died because of terminal diseases, and mental illnesses. Honouring and memorialising fallen veterans, education training and skills development, employment placement facilitation, business opportunities, facilitation or advice, public transport subsidisation or provision, pension, healthcare access, housing, and burial support. The Department had a qualified audit opinion in the past two financial years. Would the Department turn things around with a skeleton staff?

Mr Skosana said that pension was a crucial benefit that could elevate the poor living standards and conditions of military veterans. A Presidential Task Team was established to oversee this process, instilling hope among veterans of a better life. Two years later, veterans were still awaiting relief, with applications either declined, not updated or pending due to unclear document requirements. In November 2023, only a few members reported to have received their pension. What were the plans for the rollout of the pension? How many veterans have received their pension to date and how many are outstanding?

Mr Skosana asked if any veterans or beneficiaries are currently employed within municipalities or government institutions. Could a list of institutions be provided that have employed veterans. How many job placements, excluding internships, were achieved in 2023? Were there any ongoing discussions with potential employees for 2024/25 regarding job placements for veterans? If so, could the Department provide details thereof. Did the Department coordinate training with an umbrella body? The relationship between the South African National Military Veterans Association and the DMV has been inconsistent, often depending on the acting DG for engagements, but lately surpassing the Association and engaging directly with members. Post-COVID, there were still discussions that the Department was not willing to help veterans.

Mr Skosana indicated that he had to leave early and had questions for Denel.

Mr Skosana (MK) said the situation with Denel was very painful. He said that this situation existed because of the late former Minister Pravin Gordhan, in terms of restructuring Denel. The Department of Public Enterprises (DPE) had issued several conditions. In terms of the disposal of non-assets, what was the condition or status currently? Was there any movement? He noted that Denel had rejected some of the conditions and the disposal of some assets. What were the conditions imposed on Denel as part of the restructuring process and which asset did Denel believe were critical to the future to sustain the company. Denel used to do very well. Perhaps with the DPE no longer in existence, things would improve. Unequivocally so, Pravin Gordhan was the reason SOEs were in these dire states. It was not about qualifications, it was about ethics. People were not ethical. SCOPA heard about a significant amount of missing money – the money was not missing, it was being looted.

Ms T Bila (ANC) raised the issue of financial statements. The financial statements remained uncorrected and this has led to the financial statements being unreliable and not credible for decision making. According to AGSA, they were constantly identifying misstatements in the financial statements. Was there any support that the internal audit unit provided in its oversight function? If yes, why do similar repeat findings continue to occur.

Ms Bila said she was disturbed by statements that said during the period of long-term precautionary suspensions, certain contracts and procurement were concluded without due processes being observed. Were the procurement processes also on a long-term precautionary suspension with the officials. According to her understanding those who were left in the office had to follow the procurement processes because they were there. She did not understand how the long-term precautionary suspensions resulted in procurement processes not being followed.

Minister Motshekga said that she fully agreed with the concerns of the Members. When she had first met with the Department she had been horrified. She had been in government for a long time and had never seen so much chaos, even in her time as a public servant. The first step to addressing the issues being experienced was to stabilise the Department. If the Department was not stabilised, all other efforts would be void. The Department had created a strategic plan to determine what had to be salvaged for the Department to continue to function. At the first strategic meeting, after work teams had been formed, officials were surprised to see certain officials work together. Slowly, progress was being made.

Minister Motshekga said that the Department could not go through this journey alone, which is why the Department had called on other sister departments to assist. There had even been fistfights within the Department, so it was necessary that other departments assist as much as possible for things to run smoothly. A report could be submitted on the stabilisation efforts.

Minister Motshekga agreed that the 39 posts could not be filled without a work study. The priority now was to fill the critical posts, specifically the eight HoD posts by the end of March. The posts have been advertised, and candidates had been shortlisted. The Department would the prioritise the next layer of vacancies. The Department was performing significantly lower than its expenditure. She noted and agreed with the advice provided by members.

Minister Motshekga responded to the questions regarding MTN. It would be unfair to the credibility of the company to say they refused to provide the audit. She had spoken to the CEO to ask for assistance in this regard. MTN had cooperated and had said that the report was provided. She would come back to the Committee to confirm whether or not the report was received.

The Chairperson asked if the Minister had the report.

The Minister indicated that she thought it had been shared with the Department two weeks prior. She said that she had been persistent in following up with MTN. Her office had told her that the report had arrived, but she had to confirm with the Department and MTN where the report was.

The Chairperson said that the Department should not rely on a private company’s investigation of itself. The government's job was to investigate everyone. The information received in the report was useful; however, the more credible report was one commissioned by the Minister, possibly through AGSA. If there was any lack of cooperation from MTN or any other party, the Minister should indicate this to the Committee, who could intervene. A report had to be done from within the public sector.

The Minister noted this. She had sought to correct the statement that MTN refused to provide the audit.

The Minister noted the concerns regarding the database. The database was paper-based, which meant that anybody could sneak on. She had met veterans who were 35 years old. There had been a lot of contamination with the membership and database. As people in the Department were aware that the system was contaminated, they highlighted the issue of clemency, but how could the Department forgive people when the Department did not know they were in the system wrongly. The cleansing of the database was very critical, more so than the roadshows of adding people. The database was opened three times. She did not know of a veteran for more than 30 years who has not been able to show up and be registered. In terms of the roadshows, the Minister said she had advised officials not to do roadshows due to the confusion over who was being recruited. At this point in time, who was still being registered. There was a clear way for veterans to register on the database and verifying whether the person was a veteran. If people did not pass the test to determine if they were veterans, they would not be included in the database. The database was very corrupted.

The Minister said there had been people who were trained as Defence Forces, who were not accepted, but had a force number and so were able to register as veterans. This was why there were 35-year-old ‘veterans’. As a result, the Department was unable to deal with the needs of legitimate veterans. She stated that verification was more important than registration. It was important to make the move toward Information and Communications Technology (ICTs) because with a paper-based system anyone could fudge the system.

The Minister said that the Department had underspent in some areas and overspent in others. The Department of Defence was on her neck every day to say that the DMV owed them more than R200 million and the Department could not afford to pay it. It had to be ensured that there could be no underspending in critical areas like health. In terms of education, there were ‘veterans’ with primary school age children. When asked to take DNA tests to prove that it was the veterans child they refused and it was taken as an insult.

The Minister confirmed that there were veterans employed elsewhere. She did not think that the Department traced this information. Many veterans came into posts through their own qualifications and work.

Ms Mente-Nkuna referred to the issue of MTN. She indicated that her issue was not regarding the report, but rather that MTN was the biggest communication company and had seized a weak moment in the Department, knowing that the systems were not good and functional. MTN had done a business transaction with people who they knew would not be able to utilise the tablets. MTN did it to sell the tablets.

Gen Bantu Holomisa, Deputy Minister of Defence and Military Veterans, said that the Department needed the Committee to strengthen the hand of the Department. This could be done through producing a resolution which was intended to fix the administration of the Department. The interventions being discussed would not be effective if the people who manned certain positions did not have the required skills. He was hopeful the Committee would make a resolution that there was a need for the Public Service Commission to conduct a skills audit and that report should be tabled to the Committee. That way there could be no accusations of manipulating the information.

Deputy Minister Holomisa said that he was unsure if the Council for Scientific and Industrial Research (CSIR) had the capacity to assist the Department, especially in terms of the IT systems. This was also a path that should be considered.

Ms Mafu sought to explain the numbers of the military veterans in the system. The number of veterans in the system included former statutory forces, members who had been in the South African Defence Force (SADF), there were members of Angolan origin, Namibian origin and Zimbabwean origin. These members had been brought back by SADF and had green cards. Also included in the number of veterans were former liberation struggle formations, former MK, former Azanian People’s Liberation Army (APLA). There was another component of those who had participated in the military skills development, these people applied and were trained but later were not absorbed into any structures who then joined the DMV. This was why there were so many young people within the DMV database. Training recruitment was of younger people to do military skills development and when they were not absorbed, they came to DMV. As these people had force numbers, they found themselves on the DMV database.

The Chairperson asked what was meant by ‘they found their way into the system’. He felt this meant that there was no active facilitation of the database. He understood that there was a generic term ‘military veterans’ which referred to those who served and retired or was discharged. He was concerned that people ‘found themselves’ in the database. He felt that someone had to facilitate this process.

Mr Niehaus said there were allegations that the statutory forces did not have a problem appearing on the database, it was those from the non-statutory forces. The basic situation of those statutory forces was rolled over from the old SADF into the database – they find themselves in the database. It was the battle of the non-statutory forces of the MK and APLA veterans that was the real problem. Could the DG please clarify this? Was it true that the statutory forces were just finding themselves in the database?

The Chairperson requested that the Department answer all questions and if the details were not available on-hand, it could be submitted in writing.

Ms Mafu withdrew the phrase “they find themselves.” She had meant that they applied to be included in the database. The application was made easier because they had force numbers.

Ms Mafu responded to the question regarding the process of capturing applications. It was correct that statutory force members came with their files, which made the process of capturing them easier. This was unlike the situation of former liberation struggle veterans, which needed to be verified. Former liberation army’s went through a verification process unlike statutory forces. She was not aware of reserve force members operating within the database. Officials deployed by the Department operated the database.

Ms Mafu responded to the question regarding how many people were suspended. There were only five people currently suspended in the Department. Amongst the five suspensions was a chief director, a director, and an assistant director (three senior managers).

Ms Mafu said that the number of military veterans currently accessing the pension benefit was 3659.

Ms Mafu indicated that there was pressure on the budget of the pension benefit, in that the demand was higher than what the budget could accommodate. The pension was disbursed for the first time in the last year. There were other applications that were not processed, but the pension had been paid every month. Once an application was accepted and payment began, payment would continue.

Ms Mafu alluded to the fact that vacancies there were 39 vacancies in the Department and that there were 42 contract workers and 169 funded positions.

Ms Mafu confirmed that there were problems within the call centre. The call centre was manned by three people, who serviced 85 000 military veterans. It was not surprising that at times calls went unattended to. There was only so much that the three employees could do.

Mr Ndlovu responded to the questions regarding the annual financial statements. As per the Public Finance Management Act (PFMA) the Department had to submit annual financial statements that were free of any form of misstatements. Government encouraged all departments to have clean audits. The real issue within the Department was capacity. For example, for the annual financial statements to be prepared and submitted on time to the audit committee and then to Treasury and AGSA, it had to undergo layers of quality reviews. Quality review had to happen on a monthly basis because each month-end closure had to be treated as the end of the year process so that when it came to the end of the financial year, what was in the system was free from material misstatements, misallocations, etc. The prioritisation of certain posts, particularly in the finance function, would assist this function in becoming properly resourced. In previous financial years, there had been no deputy director within financial accounting, and therefore the levels of quality reviews were very limited. The assistant director had been preparing the financial statements, which went directly to the CFO. In many instances it was the assistant director and the CFO preparing financial statements. The CFO and director should be reviewing the quality of the statements. Due to capacity this has not been happening. The financial statements were then submitted to the internal audit unit, which was a challenge due to a lack of capacity. AGSA was correct that there had been misstatements, which then challenged the quality of the financial statements. However, going forward, there was an interim plan to ensure an additional layer of providing capacity and conducting quality reviews.

On the issue of procurement, Mr Ndlovu said that what had happened was that there had been misinterpretation of processes as far as transversal processes were concerned. Treasury entered into transversal contracts. The conditions of utilising transversal contracts did not give a Department permission not to follow internal procurement processes and the prescribed processes as per Treasury regulations. He made an example using the MTN case. Ideally the end-user would develop the specification of the product, and then the procurement committees would become involved. This included the Bid Specification Committee (BSC), the BSC was the first layer in procurement and was where the terms of reference and specifications were quality reviewed. Procurement should have undergone a review by the BSC before the sourcing strategy was concluded. The Department had gone direct, rather than conducting the internal approval processes. The Department had accumulated over R100 million worth of irregular expenditure between the 2021/22 and 2022/23. As the numbers were reviewed, the Department was actually realising that more irregular expenditure was likely to be detected – this was why the Department was calling for a fully blown investigation so that all irregular expenditure was quantified and consequence management could be implemented.

An official from the Audit Committee responded to the questions regarding internal audit and the terms of reference. When the external audit firm came on board, halfway through the 2024 financial year, the firm came to the conclusion that the internal audit layer of assurance did not exist. The firm needed to move swiftly to have an internal audit, because they did not want to submit financials without that layer of assurance. However, due to time constraints, a decision was made to have a stop gap of six months while the 36-month appointment was being done. The financials referred to had been reviewed by the internal audit firm, but subsequent to this, there had been an audit plan that was approved by the Audit Committee, that was risk-based, and they had performed according to this plan. The Audit Committee had satisfied itself as to the terms of reference given to internal audit. The Audit Committee was happy with the terms of reference and the progress made. The terms of reference had been in place for the current financial year.

The capacity issue was a huge risk, that had been brought up with the Minister. The capacity issue was very complex in the sense that there was a concentration risk. There was institutional knowledge residing with two people. If anything happened to the two people or either of the two people, it would impact business continuity. This was why the Audit Committee insisted that DPSA be approached to have the critical positions filled.

At the time of coming on board, the Audit Committee picked up five matters that should have been reported as material irregularities. This was why it was requested that a proclamation be applied for to have the SIU look into these matters. Three of these matters were already with the Hawks; however, internally, it was decided that there had to be investigations into the five matters. The Department was awaiting a proclamation so that the investigation could continue.

The Chairperson indicated that a lot of questions had been asked and the Committee support staff had been taking note of the questions. There were some gaps in terms of the responses, however the time allocated for this item has been exceeded. The issues had been ventilated a lot. The Committee had recognised that this was a new Portfolio for the Minister and there were international complications that the Minister has had to deal with. There was a level of sympathy from the Committee toward the Minister.

The Chairperson provided the following time-frame as a guide to the Department. There would be a tabling of the national budget, thereafter there would be budget votes. The budget votes would set out the priorities across the state. This should give the Department sufficient time to be clear on what was funded and what could happen. Thereafter, the Committee would have to engage with the DMV, following the Department’s budget vote. The Committee’s expectation was that most, if not all of the issues canvassed in the meeting appear in the Department’s plans. This plan would be used to hold the Department accountable. One of the ways the Committee would be working was to have regular engagement with the government departments. The Committee provided oversight and was not targeting people. The Committee worked on the assumption that itself and departments were trying to achieve the same outcome. Issues had been raised across the DoD and DMV, in terms of leadership, governance, financial management, supply chain and the failure to meet targets. These five matters would be the subject of interaction between the Committee and the Department. The Committee would request regular reports in written submission so that the Committee could determine whether a hearing was necessary or not. The first engagement after the budget votes would be necessary. Ideally, by the time the Committee saw the next AGSA report, the Committee would have liked to work closely with the Department to achieve the improvement of outcomes across the Department. In future, it could not be the case that everyone in the meeting says that the Department was a disaster. The Committee and Department needed to work toward solutions. Following further consultation with the Committee, there may be further issues that need to be discussed. One of the issues would be how the Minister and Deputy Ministers worked together to ensure that the wanted outcomes were achieved. Fixing the Department was not about writing memos, it required tough intervention by the Department and the Committee.

Mr Skosana (MK) felt that most of his questions had not been answered but hoped that it would be provided after the break. In the early 1990s, there were the Self Defence Units (SDU) were they a part of the military veterans. There was a lot of speculation about the SDUs, some of them claimed to be from Angola, others from Russia and some were very young.

The Chairperson requested a yes or no response, indicating it was a simple question.

Ms Mafu said that it was actually a complex issue. Veterans were subject to verification and if they had been trained and met the criteria of military veterans they would be included.

The Chairperson indicated that the meeting would break. Following the break, the DMV item would be concluded and thereafter the meeting would proceed with Denel.

The Chairperson indicated that another committee would be meeting in the venue following the meeting and therefore it was important that the meeting did not run over time too much. He urged members and respondents to be concise in their responses. He stated that he had been made aware that there was a Budget Sub-Committee meeting, of which the Minister was a part of, and as such the Minister may have to step out – the Deputy Minister would remain.

Ms H Neale-May (ANC) said there should be support for military veterans employed in municipalities. This was one of the areas that had to be considered. There was a lot veterans could do in these areas in terms of coastal protection and infrastructure. It was not always easy for police and law enforcement officials to get to certain place, veterans could use their skills. This could potentially be funded by the Expanded Public Works Programme (EPWP) under the environmental heritage project.

Ms C Nontenja (UDM) said that the audit outcomes had regressed over the past two years. What were the reasons for this? Why did similar repeat findings continue to occur? Did the Department implement the recommendations of AGSA or not?

Ms Nontenja said there was a lack of proper record-keeping and monitoring controls. What measures has the Department implemented to improve record-keeping and monitoring controls, given that capital assets that were recorded in the 2023/24 year could not be located during asset verification processes, and irregular expenditure in relation to 2022/23 was not fully quantified and disclosed?

Ms Nontenja asked who set the targets for the Department that the acting DG said that the Department could not meet the targets as they were not under their control. Were they set externally or did the Department set unrealistic targets for themselves?

Ms Nontenja asked how it could be difficult to implement consequence management. The Department had highlighted pushbacks, a term which she had never heard before. What were the plans to counter this pushback because the Department was expected to implement consequence management?

Ms Nontenja referred to the military veterans database. What actions were being taken by the Department to address the limitations in the management of the military veterans beneficiary database, specifically the lack of audit trails for user access and change management controls to prevent instances of benefits being provided to unregistered individuals and the delays in processing applications.

Ms Nontenja asked what the Department was doing to address the call centre incapacitation.

Mr F Essack (DA) was concerned by the contravention of legislation, which seemed to be a continuous pattern. There had to be some concrete plan to address this issue. The fact that in 2023.24 AGSA had highlighted internal control deficiencies that were ongoing. There were serious issues in terms of capacitation. No audits had taken place in the DMV internally – this was a huge problem.

Mr Essack referred to individuals who were on suspension and still received full pay with cases that did not seem to have been finalised. This had a huge impact on cash flow and taxpayers had to bear the brunt.

Mr A Beesley (Action SA) said that the one thing AGSA kept highlighting was a lack of accountability in the system. This was an issue that Action SA had picked up as well. If there was no improvement in the situation in a year’s time, would the Minister and Deputy Minister’s resign. If not, why not. The situation of zero accountability could not continue, South Africans were suffering because of this.

Mr Dugmore said the issues raised painted a very despairing picture, but if the interventions and solutions could be followed through there was some hope. He had never seen a department in such a situation. There was reference in slide four to four senior managers who were placed on precautionary suspension for close to two years from the middle of 2021/22. What was the progress in this regard?

Mr Dugmore said that while the dysfunctionality continued, many people on the ground – military veterans – approached members. There was a non-statutory military veteran with a force number who passed away, in all his enquiries, no one was able to answer whether the wife of the deceased military veteran, who had been receiving a pension, was entitled to take over that pension or not. He has tried numerous times to get an answer, as the wide of the deceased veteran has not received any guidance on the matter.

Mr P Atkinson (DA) said that over the last seven months in SCOPA, right across government the Committee has observed a huge wastage of money, and money misappropriated and misspent. This was all paid for by the residents of South Africa with their hard-earned money. Government could not ask people to pay higher taxes when there were so many examples of money wastage, misappropriation and misspending. He highlighted the means testing of benefits payable by the Department. There was something strange about the Department paying for the school fees of a millionaire who lived in Steyn City. Why should such people be benefitting from something that was there for people who had fallen on hard times? When looking at reassessing the Department, a means testing of the benefits had to be conducted. That millionaire in Steyn City was being funded by the poor taxpayers of South Africa. This was very immoral. When proceeding, it was important to bear in mind where the money came from and that the most deserving should be receiving benefits. This may be one of the reasons the Department was finding it difficult to pay pensions, because some of the money was seriously misallocated. This along with the structure of the Department needed to be given serious attention. There were a number of senior employees who had not been at work for many months. There was a lot of wastage in the Department and this had to be resolved.

Mr Niehaus wanted to confirm that there were actually SANDF reservists involved in data-capturing. An official was suspended for doing this. He wanted to share this to bring the matter to the attention of the Department and Committee. He was not saying that the DG was lying but sought to bring the matter to attention.

The Chairperson referred to the Minister to respond to Mr Beesley’s question.

Minister Motshekga indicated that she was here as a Minister, deployed by the majority party. If she had difficulties, she would go to them not to the Committee or the public. If the people who deployed her were not happy, they would address it with her. She could not commit to Mr Beesley’s question as it was a matter between herself and those who had deployed her.

The Chairperson indicated that the response was no.

Deputy Minister Holomisa said that the Department was dealing with a legacy problem. People should judge the leadership on the current financial year 2025/26 – this was the stage where the leadership’s performance should be evaluated from. The Committee should be thankful that systems have been put in place to solve some of the problems. The mere fact that the Department always honoured invitations from Parliament was an indication that the Department meant business.

Mr Richard Hlophe, Deputy Minister of Defence and Military Veterans, noted the Committee’s sympathies with the leadership of the Department, for inheriting a number of complex issues. He was hopeful that in the near future, the light at the end of the tunnel would be seen. The leadership was committed to making the situation better.

Ms Mafu responded to the question regarding the four suspended senior managers. The process that was followed was that the suspension was lifted on 8 March 2023, and the chairpersons and initiators of the disciplinary hearings were then convened. A process of withdrawing the charges was then done. The charges were withdrawn and the suspension was lifted.

Ms Mafu said that when a military veteran passed away, the spouse was entitled to half of the amount that the veteran was receiving. The spouse had to apply through DMV, and thereafter it would be processed.

Mr Dugmore noted this. His frustration was that getting this answer was something that the widow had struggled to do. He would follow up and see that she was assisted. It has been two years since the veterans' death.

The Chairperson noted this. He encouraged members to raise other such issues, as if the call centre took as long as it did, many veterans or families were not being assisted.

Ms Mafu responded to the question regarding the call centre capacitation. The capacitation would be dealt with as the Department worked through the structure, otherwise it was difficult to address the issue. There needed to be capacity building, but it was important to have the posts that were approved and funded.

Ms Mafu responded to the question on the delays in the application of the processing for inclusion in the database. The delays were mainly from the side of non-statutory forces as there had to be a verification process. There had been a stoppage in that committee, but the Department was in the process of reinitiating so that those verification processes could actually be done. When recommended, people would be processed and included in the database.

In terms of the lack of audit trails, Ms Mafu said there were processes in the Department that dealt with audit trails. For example, if, for instance, a procurement has happened irrespective of the amount, there would be an end-user who initiates, and there would be a process that was followed, and then ultimately it should then be possible to get the submitted memo requesting the service to be procured and the process that occurred. There would be audit trails, but because the Department did not have systems and was paper based, when records were sought, they were sometimes misplaced or were no longer available. A paper trail of the processes could be observed when reviewing the current year.

Mr Essack said that he had highlighted very clearly that in the latest financial year 2023/24, AGSA had been explicit in indicating that there had been internal control deficiencies. This was quite recent. How was it possible that the AGSA could highlight that there had been a total failure to identify issues and that there were internal control deficiencies.

Ms Mafu indicated that this had not been a response to Mr Essack’s questions, she was dealing with Ms Nontenja’s questions.

Mr Essack apologised.

Ms Mafu indicated that the Department would follow-up on the suggestion made regarding having military veterans working in municipalities and in infrastructure protection.

Mr Ndlovu referred to the presentation that had been submitted and indicated that the time-lines had been included for the audit outcomes of the Department. Focusing on 2022/23 and 2023/24 where there had been a regression, it was important to understand the position of the Department and what led to it. In 2021/22 there were suspensions in the Department, and since then the Department has highlighted that there was the usage of transversal contracts to procure certain services including MTN and the roller drum machines. This lapse in internal controls has caused a spillover into the period where there were regressions in the audit outcomes of the Department. In 2022/23, because there was no proper handover when the officials returned from suspension, there had been a deliberate act of not handing over documents, including procurement documents. It was then very difficult to prepare the annual financial statements in a credible manner, mostly around the issue of irregular expenditure. In 2022/23, the area of qualification was purely completeness on irregular expenditure because there were a lot more other transactions that could have taken place, which management could not easily detect due to legacy suspension issues. This had a spillover into 2023/24, however the areas of qualification increased to include assets. Hence, management had taken a decision to clear these matters. Regarding irregular expenditure, the Department was working with AGSA to ensure that what was detected as uncorrected mistakes to the value of R6.5 million, was being addressed. On the issue of asset management, the Department was working with the assistance of a service provider to verify all assets and reconcile the asset register so that the asset register clearly indicated what was missing, what was currently verifiable and the condition of the assets. This project was progressing well. The Department was targeting this annual financial statements so that when the disclosure was made on assets it was complete. Anything identified as missing would be disclosed. He was positive that the Department would turn the corner on these two qualification areas.

Mr Ndlovu referred to the question on the designing of the scope for internal audit. The Department was looking for short-term solutions while addressing the long-term issue of capacity. The terms of reference with the assistance of the Audit Committee and the procurement committees, have designed the terms of reference for the internal audit. The terms of reference were in circulation for a three-year period and were undergoing adjudication before an advertisement was made.

Mr Ndlovu said that there were three MIs in the Department. The first was the issue of providing emergency accommodation. The second was the procurement with MTN. The third was the procurement of the roller drum machines. Ninety roller drum machines were procured to the amount of R27 million, but there was no plan to utilise the machines. Management had deliberated on the issue and had discussed various options including the disposal process which would include selling the machines back to the service provider or transferring the machines to the Department of Public Works and Infrastructure (DPWI). The Department would provide the Committee with details on the final outcome. The description of the MIs was ‘non usage’ which management had a different opinion on. Before something was procured, there had to be a plan for usage. If something was done without a plan, the issue was not usage, it was rather the procurement of items without a plan. This was being cleared up with AGSA.

Regarding how management held meetings with a skeleton staff, Mr Ndlovu indicated that there were management structures in the Department. Amongst the management structures, was the management committee meetings. These had terms of reference, which included who should attend, quorum, etc. Management meetings were held with proper adherence to the set terms of reference.

Mr Ndlovu was unclear if there was further information regarding the non-payment of funerals. The Department was not aware of the issue, as all applications for funerals were transferred. In some instances, telegraphic transfers were made to ensure next-day payments. Funeral claims were generally processed on time; if there were exceptions, the Department would look into it and provide feedback.

Regarding the Department not being able to pay the pension for the remainder of the year, Mr Ndlovu said that this was not the position of the Department. The Department was working on interventions with the assistance of Treasury. Section 43 of the PFMA stated that virement should not exceed 8%. If 8% was exceeded the virement became irregular. There was a situation where there had been the depletion of the budget and the amount that a virement could be done was nowhere near what was required. The Department was working with Treasury to resolve this issue.

Mr Ndlovu said that to date, cumulatively 3659 people received pensions. There had been no job placements delivered by the Department. The Department was working toward achieving something by the end of the year. Ensuring that there was capacity in this space was critical, so that moving forward the facilitation of employment was done properly. 

Mr Ndlovu confirmed that the Department had an audit action plan based on the 2022/23 financial year. Progress was made in addressing critical audit issues.

Regarding performance, Mr Ndlovu stated that there were no quality reviews in the past. Information was received as is and was captured without accuracy verification. The current internal auditors did quality reviews of performance information.

Mr Ndlovu referred to the current database system. The real issue was that there was database utilising Microsoft Access, which did not have full audit trail, however there was access control. Some audit trails could be pulled from the system that was currently being used, but it was not good enough. The system had to be fully automated and integrate with all the benefits in the Department.

Mr Ndlovu confirmed there were no internal audit reports for 2022/23 and partly 2023/24. Currently, the Department had six internal audit reports which AGSA has indicated that they would consider when doing the regulatory audit.

Mr Ndlovu noted the comments regarding suspensions with full pay and that this may lead to wastage. However, the systems of government did allow delays in some instances before a disciplinary matter could be concluded.

The Chairperson thanked the Department for the responses provided. He indicated that the time for this item had exceeded. He encouraged members to submit any further questions in writing and indicated that he would submit his own question in writing. The answers provided would be used as part of the Committee’s oversight work going forward. In terms of the DoD, there was an Acting Secretary of Defence and an Acting DG – this was a priority. If there was no HoD, everything else stood still. He reiterated that the Committee and Department would need to have another interaction, however some things had to be done before then. Part of this interaction would be understanding the action plan.

The Chairperson thanked the Minister, Deputy Ministers and other officials from the Department for their engagement throughout the meeting.

Going forward, Ms Mente-Nkuna and Ms Neale-May would lead the discussion in terms of Denel. However, he asked that the Chairperson of Denel make opening remarks. Denel had submitted a presentation to the Committee and this should be taken as read. He urged the Chairperson of Denel to focus on the audit issues raised and the discussion with the SIU. Thereafter Ms Mente-Nkuna and Ms Neale-May would engage with Denel and asked them to be concise in their questions. If it were necessary to schedule another engagement with Denel, this would be done.

Denel Briefing to the Committee

Ms Gloria Serobe, Chairperson of the Denel Board, noted that Denel had been expected by the Committee on the 18, but had only received an invitation on the 19 for the 25. Denel had not received an invitation for the 18. She wanted to assure the Committee that Denel only received an invitation for the 25.

Ms Serobe indicated that Denel was moving to the Department of Defence, which was convenient as Denel’s largest client was the Armaments Corporation of South Africa (Armscor). Denel and Armscor would be sharing a stakeholder, which would be good for coordination between the two entities.

In the case of Denel, the malfeasance and corruption, like any other entity, had many issues. The more severe issue at Denel was the theft of intellectual property and intellectual capital which was linked to some of the audit issues. Once intellectual capital was gone, Denel had issues around the payment of salaries. This coupled with a brain drain made it difficult to get the capacity back. She was pleased that Denel had managed to secure the top Chartered Accountant (CA) in the country as its Group CFO. Denel also had a permanent CEO. All of the layers of management were being dealt with. Denel had an executive for internal audit, which was one of the issues highlighted by AGSA. Denel’s internal controls were being dealt with.

The nature of the weakening of Denel was deeper than the headlines. For example, there were over 300 Denel employees in the United Arab Emirates (UAE), to the extent that some board meetings were done in Afrikaans. This was how severe the exodus from Denel was. This added to Denel's collapse. Denel was much wiser now, in terms of dealing with this issue. She was sure that the Committee would receive complaints by some defence companies, Denel would not deal with. Denel had sovereign capability things to deal with and had to ensure that the army was capable and had equipment, to the extent that Denel was being attacked by the Middle East through some South African companies. She was not at liberty to disclose the companies, but it has been shared with the Minister.

Denel had been recapitalised. In the case of Denel, the late Minister Gordhan had been extremely supportive and had assisted in Denel getting to where they were. In terms of the severity of the liquidity crisis, he cash crunched and not being able to pay salaries, Minister Gordhan had ‘held Denel’s hand’ to Parliament and ensured that Denel received support. Denel received the recapitalisation funds, with many strong conditions. Denel had committed to these conditions. The conditions included reviewing the non-core assets to be sold. However, when Denel looked at the non-core assets the army was the owner of some of these assets and so the approvals had to come from them. Some of the assets such as property make have looked idle but internally there had been a national key point for missiles. This meant that these assets could not be let go of. She did not sense any frustration from the DoD on this, when engaging with the DoD there was agreement that assets could not be sold for various reasons.

On the issue of the audit, there had been delays due to HR challenges and COVID-19 had depleted Denel’s human capital. Denel also did not have money to pay employees, and thus many employees left. Denel did not have a good audit report, but progress had been made through the appointment of the Group CEO and internal audit function to deal with all of the issues.

The process of finalising the 2023/24 Annual Report was impacted by the professional issues Denel was experiencing. This had been dealt with and had been submitted to AGSA.

Discussion

Ms Mente-Nkuna asked how long the Board and Senior Executives had been in place.

Ms Serobe said that the CEO and CFO had been in place for just over one year. She had been in position for over two years, and the Board had been longer than that.

Ms Mente-Nkuna said that Denel had missed three years of submitting financials, and even when they had eventually been submitted, they were all disclaimed. After the financials were disclaimed, Denel failed to submit financials again and were late. Denel attributed this to staff and experience that left. Why was this not taken care of? For Denel to have money to hire people, Denel should have to account for what has been given. How did Denel expect Parliament to give the entity money, and yet they did not account for it for three years? The space was such that there were no systems in place.

Ms Mente-Nkuna said she did not understand why Minister Gordhan had to hold Denel’s hand for Denel to ask for money. Money that Minister Gordhan knew would not be accounted for. This raised a lot of questions in terms of how this was allowed. Both the Board and the former Minister had allowed a situation where Parliament kept appropriating and giving money, but money was not being accounted for. And after being accounted for, it was all disclaimed meaning that no one could pinpoint where the money went to and how it had been spent. In some instances, there was not even reference to value for money.

The CFO of Denel referred to the financials for the three years. The organisation found itself in a situation where for three years no financials had been prepared, and the finance department, in the main, had people in acting positions. It was his assessment that some of those people were acting above their own skills. This was what led to the financials being disclaimed, because evidence could not be provided for the various elements of the financials. To prepare those financials, the consultants had to be hired to be able to prepare financials. After AGSA had issued the disclaimer, management and the Board agreed to pause and take two months to bring everything in order before preparing the next set of financials. This was why there had been a delay in the submission of the financials.

Ms Serobe responded to the question in terms of why Minister Gordhan had to ‘hold Denel’s hand’ to ask for money that was not accounted for. The money had been accounted for. At the time of the recapitalisation many people were coming after Denel for prepayments that had been taken where delivery did not happen. Denel spent a lot of time travelling to these places to pay, apologise, and address the reputational issues. The money was accounted for. The issue was that Denel had no money and had to request recapitalisation. Once a Board took over, it had no excuse of saying that it had not been in place when the matters occurred – it was the Board’s problem. The corrections that were occurring were recognising that the Board had to address the historical issues and move forward. One of the many reasons Denel needed help, was that Denel was being arrested for non-payment of many legacy debts. Denel therefore had to ask for help – there was no other option other than requesting financial support.

Ms Mente-Nkuna disagreed with this. The AGSA could not say that Denel was disclaimed and that there was no evidence of how money was being spent and yet Denel was saying that the money was accounted for. It may be Ms Serobe’s understanding that the money was accounted for through the legacy debt, but AGSA stated that it had not found evidence of what the money was spent for. Even after being disclaimed for money being spent on legacy debt which there was no evidence of – what did Denel do after this.

The CFO referred to the AGSA’s disclaimer. AG stated “I do not express an opinion on the financial statements of the entity, because the significance of the matters described in the basis for disclaimer of opinion section of this Auditor’s report. I was unable to obtain sufficient appropriate evidence to provide a basis for an audit opinion on the financials.” The financials were prepared in terms of the International Financial Reporting Standards (IFRS). This was what the AG was looking at in totality – to determine whether the financials were prepared in accordance with IFRS. Based on the fact that in some areas there were other factors that had to be complied with and things that Denel had not done, this was why Denel received a disclaimer.

Ms Mente-Nkuna said she did not know what document of the AG the CFO was reading from. The briefing of the AG given to the Committee, on page 37, 2.3.2. Overall Audit Outcomes, stated ‘the audit outcomes show that Denel was still suffering from the effects of historical irregularities, governance weaknesses, annual financial statements, compliance with laws and legislation, audit of predetermined objectives’. Everything was stated in the briefing document.

The Chairperson said that the Committee and public needed to understand what in Denel’s opinion led to the conclusion by the AG. The Committee needed to be taken through what this meant and needed details on the audit outcome. Did it relate to issues of managing the asset registers, was it poor systems – what was the issue leading to the AG’s conclusion.

Ms Mente-Nkuna referred to the AG’s briefing document, “The entity’s overall audit outcomes for the 2020/21, 2021/22 and 2022/23 financial years are disclaimed with findings. It is the same as the previous audit outcomes of 2019/20. Overall, the audit outcomes of the entity have remained stagnant with no notable improvement in outcomes in the past six financial years.”

The CFO indicated that he had referred to the Integrated Report of Denel and largely the information was the same. The documents were simply worded differently. The issues with the preparation of financials and the financial management of Denel centred around three things: people – a lack of skills and understanding of accounting principles, processes – people not understanding the processes that had to be conducted in terms of reconciliations and variance analysis at month end, and systems – Denel had roughly three Enterprise Resource Planning (ERP) systems that did not speak to each other. A situation like this made it difficult to have standard processes or approaches when doing financial management. The AG raised the issue of going concern – was Denel a going concern, meaning that it could operate in the next 12 months with no issues. AG said that given the information AGSA had, Denel was not a going concern, however management did not agree with this conclusion and had provided reasons to AG. In terms of the management of property, plant, and equipment, there had been issues with skills and knowledge in terms of complying with IFRS. People were not doing what they were supposed to do. For instance, when managing the finances of an organisation, depreciation should be calculated on a monthly basis. To do the financials of 2023/24, he has had to get external assistance to help in one of the units where the monthly depreciation calculations were not done for 12 months. This was due to people in acting positions, acting above what they were capable of. In terms of accounting for inventory, the same issue existed – stock was not being counted on a regular basis. On trade and other receivables, there were some adjustments. It had been quite difficult, as Denel was completing financials for three years within six months. Management had made some adjustments that were not appropriate and had to be reversed. In terms of provisions, IFRS required that organisations do provisions on an annual basis – this had not been done. Due to the industry, Denel received a lot of deposits and advanced payments from clients. There had to be a system to record these payments and link them to various contracts – this had also been an issue, however Denel was addressing it to ensure that advanced payments were used for what they were meant to be used for and were accounted for appropriately. There were also issues in terms of accounting for revenue. All of these issues pointed toward people not having the necessary skills and not following the proper processes. The systems of Denel were not up to modern standards.

Ms Mente-Nkuna said that it was clear that, that which was supposed to be done was not being done for the three years. At what point did the Board arrive at a conclusion that even if there were not people to account for money, to ask for money? How did the Board reach this decision?

Ms Serobe was unclear on the question. Was Ms Mente-Nkuna asking why Denel had asked for money?

Ms Mente-Nkuna confirmed this. There had been no accountability in the 2020/21, 2021/22 and 2023/24. How did the Board then decide to ask for money? How could the Board ask for money when there had been no accountability? Money had not been accounted for two years and nothing had been done to acquire the necessary human capital, and yet money was requested. Where did the money go?

Ms Serobe said that Denel had not paid people’s salaries for two years. According to Ms Mente-Nkuna’s question, Denel should have been building capability during this period without resources. For more than two years, Denel had been unable to pay pensions, medical aid, salaries, etc – staff were losing their houses and cars. Denel had to go to the shareholder to indicate that this path was not sustainable. Denel had not been in the position to fill any of the critical vacancies. Denel had requested financial support for visible things, and in the meantime, everyone was taking Denel to court, including unions. What was the expectation of the Committee in terms of Denel getting out of that situation? The Board could not excuse itself by saying that they had not created the problem, the Board had to solve it. Solving the problem without resources was not practical. To bring in people to do what was needed in the midst of a crisis was not easy. Denel had requested a recapitalisation to solve visible issues, regardless of what the AGSA report said, there was no money that was not accounted for. If Denel had not requested money, the issues would not be solved. Denel had many creditors – why could Denel not come to Parliament to get the entity out of these issues. The question asked when approaching Parliament for money was what Denel would do with the money. Denel responded to this question. The last recap Denel received was sitting in an escrow account to ensure that it was used for the correct purpose. Asking for more money was the only way to address the issues. In the midst of all of this, the Board had considered what could be done internally and had as a result gotten into the medical aid surplus. The Board had not sat back waiting to be helped, the Board did its best but there was no way that the Board could have achieved much without going to the shareholder for support. Denel was not planning on any further requests for money.

The Chairperson noted the time and indicated that a second session would be necessary.

The Chairperson asked if the funds allocated by Parliament were conditional. Had specific conditions been placed on the money.

Ms Serobe confirmed that the money had been allocated for specific things. Denel had to list all people where prepaid payments were taken without delivery. Denel had indicated all of the legacy debt. There had also been a line item for the payment of salaries. There were issues regarding Section 189 that had to be done due to excess capacity. The money had been allocated according to line items and had conditions attached to it. Some of which, such as the sale of non-core assets, could not be met. There were strong and tough conditions.

Ms Mente-Nkuna agreed that there had to be a second sessions.

Ms Mente-Nkuna asked where the executives were that received the money. Denel received R3.4 bailout, R2.4 was spent. Some of which went to things that were not allocated for. Denel was unable to access approximately R900 million of this because the agreed conditions were not met. Where are the people who managed this money. Most of the money that went out of Denel, in collapsing Denel, was to service providers and for services that were largely not rendered. Where did the money go to? The salary bill of Denel was always budgeted for, yet the money was taken elsewhere – this is why Denel was disclaimed. Evidence of many of these transactions could not be found.

Ms Mente-Nkuna said that SIU referred two workers to Denel (Riyaaz S and Fikile M). There was no feedback on what actions had been taken. Fikile had been referred in May 2023 and there was no feedback in terms of consequences. In 2023 SIU had advised that Riyaaz should not be hired at Denel as they were under investigation, Denel had proceeded to hire the individual and had extended his contract. What progress had been made in dealing with this issue.

Ms Neale-May said that Denel had once been the goose that laid the golden egg. She thanked the Board and Minister for taking the Committee into confidence regarding the challenges the Board had. Was the Board capacitated to its full extent? There was still some outstanding business that needed to be done regarding the corporate plan, the Annual Performance Report, and the Shareholder compact – this has not been done for three consecutive years. This made it impossible for the Committee to assess performance against key objectives. Did the Board have the capacity to address these areas? The Board had oversight over the three subsidiary companies. Denel had shareholding under 50%. Were there any dividends that came to the Board?

In many instances, individuals in investigations were found to have left the company, approximately 300 living in the UAE, avoiding disciplinary action. Were any of the IPs with Denel, and how many had been lost to other companies that former employees had moved to?

Ms Neale-May asked how much money was held in foreign bank accounts belonging to Denel. The audit outcomes stated, ‘weak revenue management and failure to collect outstanding funds.’ In 2021, R3.3 billion worth of military hardware was exported. In 2022, 245 million weapons were sold to Angola, France, the Philippines, Thailand and the UAE. Has Denel managed to collect all of these funds or were they in a foreign bank account? Has Denel managed to trace some of these funds? How was the Board going to ensure that the measures being taken currently address these delays in bringing everything (audit reports, corporate plans, Annual Performance Report)?

Ms Serobe responded to the concern regarding Board capacity. Denel had a very strong board – possibly the strongest in the country. In terms of skill, the Board was equipped with very senior CAs, lawyers, and an ex-military official. The Board was well capacitated. The weakest link was on the management aspect. Money was needed to answer the issue of capacity in terms of management. Once the money was received, work in this regard was started. Most officials were now permanent.

In terms of dividends from the subsidiaries, there was not much by way of dividends from subsidiaries. This was why the Board’s solution to the liquidity issue was to sell shareholding and get some cash to fulfil its functions. This did not happen as the assets were critical. Denel had 49% of Rheinmetall Denel Munition (RDM), but Denel was not receiving dividends. Part of the angst from DoD was that the RDM shareholding should not have been sold. RDM should have remained a Denel asset. There were discussions of potentially buying back the 51% from Rheinemetall. The Board had placed members on the boards of the subsidiaries to keep an eye on what was happening. This was also an attempt to drive dividend policy.

The CFO highlighted the issue of the foreign bank accounts. Denel did not have a policy to say that funds could be kept outside of South Africa. Where Denel did foreign projects, the funds were immediately repatriated. There were two branch offices, where some money was retained to pay salaries. When he had reviewed the debtors book it was indicated that there were no foreign debtors outstanding. The majority of the long outstanding debt was in South Africa.

Mr Tsepo Monaheng, Group CEO, Denel, said that the work of Denel was good for SANDF and the country. The work being done currently was to ensure that Denel was working for the country. Denel had a shareholder compact. The corporate plan for the year would be submitted the coming Wednesday. Everything has been normalised for Denel to operate like a normal business. Denel was busy with the audit for 2023/24.

Ms Serobe responded to the question regarding SIU. In terms of the two officials highlighted by Ms Mente-Nkuna, the matter had been dealt with by the Board. The Board had indicated to SIU that there was no indication that there could be fall guys. Denel had stated to SIU that if anything conflicted with the SIU’s investigation of Riyaaz, Denel would ensure that there was no conflict. There were other investigations that the SIU was busy with which may or may not implicate the specified individuals. The SIU was present and could comment further.

The Chairperson confirmed that a second session would be necessary with Denel. The Minister was excused from that particular meeting. The Committee needed to meet with the Board and the Denel Executive team. More issues may be included in the Committee’s invitation. There were issues where Denel had to clarify the appropriations made and what the funds were used in terms of the conditional cash injections into Denel, the Committee needed to see that the money was used for the intended purpose and what the reasons were for those that were outstanding. Secondly, the Committee had to be sure that there was visibility in terms of the financial management and accounting issues. He understood the challenge of completing multiple audits at the same time. Were the people acting above their skill level still in the system, or did they face consequences? The third theme that had to be dealt with was matters relating to the performance issues of Denel, including procurement orders from the DoD which Denel was unable to meet. This had to be dealt with. In terms of intellectual property and intellectual capital of Denel – this had to be addressed. There also had to be discussion of the matters under investigation by the SIU. Further, there had to be engagement regarding the general financial health of Denel vis-à-vis the plans going forward in terms of accessing the needed capital and addressing governance issues. The Committee also needed to hear specific plans of what Denel would be doing to address these issues. The Committee needed this information so that it could hold Denel accountable to its plans.

The Chairperson said that by the next engagement with the Minister, Denel would have been under her Department. The Minister needed to be able to engage on Denel’s matters.

The Chairperson indicated that he would be available ahead of appearances before the Committee to clarify what the Committee needed to ensure that the Committee got what was needed.

The Chairperson indicated that members should inform the Secretary of any issues they would like to include in these engagements.

Closing Remarks

The Chairperson thanked the Minister and Deputy Ministers for their engagement, as well as the various officials from Denel and DMV. He thanked the members for their attendance and engagement.

The meeting was adjourned.