Medium Term Budget Policy Statement

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Defence and Military Veterans

05 November 2004
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Meeting Summary

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Meeting report

5 November 2004

Professor K Asmal (ANC)

Documents handed out:

Medium Term Budget Policy Statement

Actual spending was reportedly low on certain items. The Committee was confused about the process of transferring money from one defence component to another. There were question marks over the destination of revenues from the sale of old equipment. A discrepancy existed between an amount in the Department Budget and the Budget Policy Statement because of salaries issued to the Secret Service, which were undisclosed in the Budget. The Department cited weak administration, and inadequate funds to purchase modern information systems, as reasons for its qualified report from the Auditor-General. The Department was invited to attend a Committee trip to the Denel power plant at Swartklip, which is posing serious health risks to surrounding human settlements.

The Chairperson outlined the course of a proposed Budget through the endorsement of Parliament. It first came to the Portfolio Committee, which passed it on to Parliament. It then went to SCOPA, and then the National Assembly Finance Committee.

Department briefing
The Department delegation consisted of Mr J Grundling (Chief Financial Officer); Mr J Masilela (Secretary); Mr B Engelbrecht (Director: Budgeting); Mr J Rautenbach (Director: Budget Control), Brigadier General de Wit (Human Resource Planning); Mr de Villiers; and Rear-Admiral Verster.

Mr Engelbrecht and Mr Rautenbach presented the Department's Medium Term Budget Policy Statement. They reported that actual spending was low on certain items. The Department cited weak administration, and inadequate funds to purchase modern information systems, as reasons for its qualified report from the Auditor-General.

The Chairperson advised the Department to change certain parts of the Report. Clusters could not change strategies laid down by the Department, only the priorities within those strategies; so part one and part two of the presentation needed to be integrated. The efficiency of Department administration had to be improved. Finally he suggested the establishment of a Defence Open Day, to initiate public interest and confidence in the Defence Force.

Mr Grundling explained that R2 billion had been allocated to salaries for the South African Secret Service and this was not locatable on the Defence Budget, but in in the Budget Policy Statement. This was in accordance with international standards of reporting.

The Chairperson asked how Batho Pele could be implemented from a financial perspective. This was a very important programme that should be a top priority for the Department. What were the Department's feelings about the relative indifference shown by the National Treasury and MinComBud (Ministerial Committee on Budgets) to the Defence Budget over the years?

Mr Grundling replied that Batho Pele pervaded the Defence Programme. There was no specific amount allocated to it. Mr Masilela thought that reductions in the Defence Budget related to a shift in the broader political and social responsibilities of government. Human security issues took precedence over the military's concerns. Government faced various challenges of social-economic backlogs that were more exigent than Defence needs. Mr Grundling added that these trends were no different to that of most countries. What could be changed, however, were the attitudes of financial authorities to the Defence Budget. They seemed to overvalue it.

The Chairperson advised the Department to narrow its focus for additional Budget allocations, into two or three defined priorities, such as combat readiness of peacekeeping troops, or the need for an alternative ammunition depot to Swartklip.

The Chairperson asked why adjusted appropriations in the 2004 budget were R23 million for administrative functions.

Mr Rautenbach explained that R11 million had been redirected from Foreign Affairs to supplement administrative departments for payments to military attaches. The Chairperson proposed that the Department control these expenditures, rather than Foreign Affairs, because virements should be necessary only for substantial activities of the Department.

The Chairperson expressed the concern of the Committee with the impact of virements on small communities. When spending and investitures were suddenly re-allocated, it hit the disaffected area hard. The Department was entitled to make virements that were less than 8% of the appropriated Budget: He recommended that this ceiling be lowered to 5%, and that the Defence Council approve the virements after having studied their social impacts.

Dr G Koornhof (ANC) was uncomfortable about the increased allocation in the budget to personnel. This was contrary to the ongoing reductions in personnel. How was the self-financing component of the budget functioning?

Mr de Wit answered that conditions of services had been upgraded since 1995, while the South African National Defence Force (SANDF) had been downsized. Salaries had been expanded and various programmes and incentives had been introduced to retain skills in the SANDF. Self-financing was operated through a special defence account that contained revenues from the sales of obsolete equipment. However, the Public Finances Management Act required Government that held monies for a National Revenue Fund. The National Treasury had agreed to grant the Department a dispensation to reclaim from the Fund, and to keep possession of revenues for financing domestic interdepartmental services.

Dr Koornhof asked if the Department would report to Parliament on its expenditure of self-financing revenues. Last year this Committee had witnessed terrible conditions at combat training centres. Many of these were in need of financial assistance. Lastly, why had the Department received a qualified report from the Auditor-General?

Mr Rautenbach said the National Treasury strictly monitored the movement of self-financing revenues. Money from the sale of obsolete equipment belonged specifically to the programme from which the equipment originated.

Mr Grundling responded that there had been five qualifications from the Auditor-General. 80% of these stemmed from inadequate information systems in the Department. The other 20% came down to weak administration. The new accruals accounting standard had waylaid the Department, which had captured hundreds of millions of asset items manually in its books. The reporting of purchase payables, assets, personnel leave liabilities and incomes from the sales of redundant equipment, had each received qualified opinions from the Auditor-General, who felt the Department needed to invest massively in information systems.

Mr S Ntuli (ANC) asked if the 23 000 tonnes of ammunition earmarked for disposal was currently located all over the country. Mr Masilela responded that the bulk was isolated in a few locations, and the small remainder was scattered about the country.

Dr Koornhof invited the Department to visit Swartklip with the Committee. Mr Masilela assured the Committee that a delegation from the Department would visit Swartklip.

The meeting was adjourned.


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