Defence budget process: briefing

Defence

19 October 1999
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Meeting report

DEFENCE JOINT STANDING COMMITTEE

DEFENCE JOINT STANDING COMMITTEE
20 October 1999
DEFENCE BUDGET PROCESS: DEFENCE ESTIMATE OF EXPENDITURE

Document:
Financial Management Cycle of the State (Key Finance Reports: Estimate of Expenditure 00/01 - 02/03; Vote/Programme 99/00; Expenditure Survey; Projected Expenditure 99/00; Appropriation Statement 98/99) - the relevant information is contained in the minutes.

SUMMARY
In addition to reiterating the earlier principle of informing the Committee of the financial management cycle of the Department as a background to the Committee's involvement in the defence budget process, the session explored the objectives of the Defence programmes; Defence estimate of expenditure; outputs and main cost drivers; consequences of a reduction in the allocation; risks/implications of the allocation; and additional requirements. The session was drawn to an early close due to a special memorial service on Parliament grounds attended by the President.

MINUTES
The Chair, Mr. J Mashimbye (ANC), opened with the statement that the Committee's decisions will determine whether or not the Defence Budget will be approved or not. He encouraged members to give careful consideration to the proposals explored in the meeting. The chair further explained that the meeting would be handled in two phases: The first phase provided a background of the budget process, previously provided on 22 September 1999. The second phase addressed the Department of Defence proposed 2000-2003 budget. The Department of Defence (DOD) Finance delegation responsible for the briefing comprised of Mr. J. Grundling (Chief of Finance), Mr. Antonie Visser (Director of Budgeting), David Fourie (Budgeting Office), Lt. Col. Dorette de Jager (Human Resources), Admiral (Defence Acquisition) and Mr. Abrahams (Budget Office).

Introduction to the Financial Management Cycle of the State:
Mr. J. Grundling, Chief of Finance, DOD began with a brief review of the financial management cycle of the Department to familiarise the Committee members with the budget process as outlined in the meeting of 22/09/99. Mr. Grundling emphasised that the Committee would be focusing on the budget for defence for the next two years and is willing to provide the Committee with any documentation it required. Mr. Grundling further reviewed the process of compilation of the programme budget, explaining how the budget was drafted at the Defence Department, was sent to the Inter-departmental level, passed through the executive and now is being addressed at the parliamentary level.

Introduction of Main Defence Programmes and Activities for Expenditure:
Mr. Antonie Visser, Director of Budgeting: DOD, explained that the proposed policy is based on the RSA Constitution, the White Paper on Defence, the Defence Review, the Financial Management Act and the Public Service Act. The following broad categories make up Defence expenditure and estimated expenditure:

Administration
To conduct the overall management of the Department by formulating policy, providing strategic direction and organising the department in terms of its force design and structure. 1999/2000 - 356,184, 000 2000/01 - 294,399,000 2001/02 - 318,121,000 2002/03 - 326,337,000

Landward Defence
To provide prepared and supported landward defence capabilities for the defence and protection of the RSA by providing strategic direction for landward defence and establishing, training and maintaining prepared combat and auxiliary services and facilities. 1999/2000 - 3,340,713,000 2000/01 - 3,071,946,000 2001/02 - 3,087,405,000 2002/03 - 3,005,054,000

3. Air Defence
To provide prepared and supported air defence capabilities for the defence and protection of the RSA by providing strategic direction for air defence and establishing, training and maintaining prepared combat and auxiliary services and facilities. 1999/2000 - 1,866,171,000 2000/01 - 1,801,394,000 2001/02 - 1,855,145,000 2002/03 - 1,813,226,000

4. Maritime Defence
To provide prepared and supported maritime defence capabilities for the defence and protection of the RSA by providing strategic direction for maritime defence and establishing, training and maintaining prepared combat and auxiliary services and facilities. 1999/2000 - 757,217,000 2000/01 - 831,017,000 2001/02 - 866,863,000 2002/03 - 937,941,000

5. Military Health Support
To provide prepared and supported medical combat elements and services by providing strategic direction for military health support, establishing, training, providing and maintaining operationally essential medical services to members of the SANDF and their dependants as well as establishing and maintaining auxiliary services and facilities. 1999/2000 - 877,377,000 2000/01 - 908,992,000 2001/02 - 984,842,000 2002/03 - 999,913,000

6. Defence Intelligence
To provide a defence intelligence and counter-intelligence capability establishing, training and maintaining prepared military intelligence services, auxiliary services and facilities. 1999/2000 - 170,658,000 2000/01 - 142,420,000 2001/02 - 151,679,000 2002/03 - 152,349,000

7. Joint Support
To provide and maintain a centralised infrastructure for the provision of common supplies and services as well as providing a channel for grants-in-aid to specified organisations. 1999/2000 - 1,406,891,000 2000/01 - 1,903,533,000 2001/02 - 2,254,726,000 2002/03 - 2,447,404,000

8. Command and Control

To provide and maintain an operational command and control capability for the operational employment of combat forces. 1999/2000 - 23,717,000 2000/01 - 33,539,000 2001/02 - 45,305,000 2002/03 - 47,096,000

9. Special Defence Account
To augment the Special Defence Account for financing special defence activities and purchases. 1999/2000 - 1,829,257,000 2000/01 - 1,911,911,000 2001/02 -1,764,987,000 2002/03 - 2,052,916,000

Personnel Expenditure According to Main Programmes and Activities
David Fourie, Budgeting Office, DOD, provided a history of Defence expenditure and reviewed the personnel costs in the DOD proposal per main programme:

Administration: 1999/2000 - 249,224,000 2000/01 - 201,220,000 2001/02 - 206,997,000 2002/03 - 211,137,000
Landward Defence: 1999/2000 - 2,538,491,000 2000/01 - 2,401,625,000 2001/02 - 2,195,643,000 2002/03 - 2,001,947,000
Air Defence: 1999/2000
- 849,720,000 2000/01 - 748,430,000 2001/02 - 732,213,000 2002/03 - 697,234,000
Maritime Defence: 1999/2000
- 570,703, 000 2000/01 - 598,270,000 2001/02 - 538,389,000 2002/03 - 583,389,000
Military Health Support: 1999/2000
- 604,600,000 2000/01 - 611,781,000 2001/02 - 617,932,000 2002/03 - 611,638,000
Defence Intelligence: 1999/2000
- 104,869,000 2000/01 - 94,167,000 2001/02 - 94,454,000 2002/03 - 94,391,000
Joint Support: 1999/2000
- 600,089,000 2000/01 - 980,441,000 2001/02 - 1,256,926,000 2002/03 - 1,469,587,000
Command and Control: 1999/2000
- 23,717,000 2000/01 - 16,377,000 2001/02 - 22,851,000 2002/03 - 25,125,000

Mr Fourie further provided the Committee with estimates of expenditure per programme for comparative purposes between 1998/1999 and 1999/2000. In summation, all of the programmes saw an increase, particularly Administration, which witnessed a 47% increase, with the exception of Landward Defence, which experienced a decrease of 8.32%. The total expenditure amount in rands for 1998/1999 was 9,721,173,000 while the current 1999/2000 is stated at 10,404,819,000. This is an increase of 683,646,000 which represents a seven per cent increase in total.


Rationalisation:
Lt. Col. Dorette de Jager, Human Resources DOD, presented a brief review of the rationalisation phase (personnel downsizing) and the Department's efforts to establish efficiency of the two current severance programmes: the Voluntary Severance Package, and the Employers Severance Package. Work in this field is still in the initial phase.

The rationalisation phase is necessary to downsize the bloated personnel numbers and reduce spending. While 1993/1994 saw only 31.5 % of expenditure on personnel, the 2000/01 year will see 51 % of expenditure allocated to personnel costs. The DOD have set a target of 70,000 troops by 2002, a reduction of 23,000 personnel. However, it is likely that rationalisation will set a lower reduction target of 65,000.

Arms Acquisitions:
An SANDF Admiral spoke on new arms acquisitions. The Admiral spoke on the various categories defined as the (a) non-strategic defence package (NSDP), (b) strategic defence package (SDP) and (c) technology.

On the allocation of funds, NSDP is distributed between the various services. The estimated allocation is 49.12 % to the South African Air Force; 32.7 % to the Army; and 18.12 % to the Navy

Armament Phase funding in the new budget will see 16% to development, 8% to SDP, 5% to NSDP and 70% to production. Production includes projects such as a joint Israel missile programme and a C-130 production venture overseas, projects that are nearing the completing phase.

Concerning the controversial SDP acquisition while 4% of the DOD budget will be allocated to the purchase, 96% is still to come from the State. The signing of contracts will begin in the near future.

The impact on GDP is seen as 1.8%. Without the Strategic Defence packages the impact of the defence budget would be 1.4% to 1.5%.

DOD Additional Requirements:
Mr. Abrahams, Budget Office DOD, spoke briefly to the Committee on the additional requirements placed on the SANDF in its secondary roles such as patrolling the Mozambique border and participation in peacekeeping operations. Mr. Abrahams appealed to the Committee to consider allocating increased funding to the DOD for these additional activities in the main programmes to ensure that the SANDF can properly do its job.

Questions:
The Chair of the Committee brought up the issue of VIP protection and transportation provided by the DOD and alluded to some problems in the past. Mr. J. Grundling, Chief of Finance DOD, stated that the DOD only responds to an order from the President's Office and if there is a question of its legitimacy, it is ultimately the responsibility of that Office, not the DOD.

Mr. L Ngculu (ANC) inquired why funding to the Service Corp, an activity funded under Joint Support designed to assist demobilized soldiers, is decreasing in expenditure allocation as the rate of demobilization is increasing. Mr. J. Grundling provided the answer that the Service Corp is not being supported by the government and despite rationalisation, people are not coming in for skills training. The Service Corp remains inefficient and will continue to have its funding cut.

The question period had to be brought to an end as a special memorial service was being conducted that required the presence of the members. The Chair closed the session and urged members to consult amongst themselves prior to the next meeting on 20 January 2000 which will examine the Printer's Proof & Explanatory Memorandum.




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