Armscor Draft Bill: briefing

Defence

04 April 2000
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Meeting report

ARMSCOR BILL: BRIEFING

JOINT STANDING COMMITTEE ON DEFENCE
5 April 2000
ARMSCOR BILL: BRIEFING

Documents handed out:
Redrafting the Armaments Development And Production Act


SUMMARY
The Department of Defence gave a presentation on the state of the proposed legislation to govern Armscor and the defence industry and outlined the role of the National Conventional Arms Control Committee (NCACC) which had been established to oversee this process. One of the key objectives of the process was to differentiate between Armscor’s arms and non-arms procurements. The committee strongly expressed the view that Denel should be directly represented on this committee and the department agreed to look into this. The atmosphere of the meeting was, at times, tense but on the whole good-natured.

MINUTES
The chairperson of the Defence Portfolio Committee and acting chairperson of the Joint Standing Committee on Defence, Ms T Modise, welcomed the delegates from the Department of Defence and from Armscor.

Briefing
Mr T Motumi from the Policy and Planning Division of the Department of Defence briefed the committee (see document).

Mr Motumi said that the process to review the Armscor Act had been initiated by the Minister of Defence in 1999 and one of its key objectives was to differentiate between Armscor’s arms and non-arms dealings.

As a background to the proposed bill on Armscor, the history of Armscor and the acts governing it was outlined. It had begun as an advisory committee to the Union Defence Force known as the Defence Resources Board and it served in this capacity from 1948-64. Acts 57 and 63 of 1968 led to the creation of Armscor itself. In 1977 there were some amendments to the act and then, in two Acts of 1992, Armscor was unbundled into Denel (under Act 57) and what remained of Armscor (under Act 46).

A number of requirements were set down for the current redrafting of the Act. Among these was the need to clearly differentiate between what fell under arms procurements and what fell under non-arms procurements. Armscor was to be responsible for arms procurements only. The Public Finance Management Act (PFMA) of 1999 also had implications for the way in which Armscor is run. In terms of chapter six of this legislation, Armscor became a schedule two company. There are also currently existing regulations governing arms control including temporary legislation passed in 1995 as a result of the Cameron Commission of Inquiry and this had to be taken into account too.

The NCACC had been established when the Minister had instructed that there should be a review of the legislation and a committee established to do this. It included representatives from a number of different sectors and organisations including the Departments of Defence, Public Works, Trade and Industry, and Foreign Affairs, the Centre for Conflict Resolution, and the South African Aerospace, Maritime and Defence Industries Associates Organisation amongst others.

Mr Motumi outlined the terms of reference for the redrafting of the legislation and what the functions of Armscor were to be. He added that the legislation would need to clearly spell out what the role of the Minister of Defence should be as well as what interaction there should be between Armscor and the Department of Defence. It had to be made clear who Armscor was accountable to, what its relationship with other departments (such as the Department of Public Enterprises) should be, the relationship it should have towards the South African Police Services (SAPS) and what the role of intelligence within Armscor should be.

In terms of Armscor’s accountability, it had to be specified whether this was to the Minister of Defence or to others and to what extent it should be accountable to Parliament and parliamentary committees. The auditing requirements of Armscor also had to be specified as did the taxation requirements and whether or not Armscor fell under the Companies Act. The roles and functions of the main office bearers within Armscor also had to be specified and the lines of reporting they should follow. The same needed to be made clear for Armscor’s subsidiaries.

The chairperson asked Mr Motumi how the Secretariat of Defence was involved in the committee. Mr Motumi responded that the secretary of the committee reported to the Minister of Defence in Council. The chairperson remarked that because the reporting was done in Council, this made it more of a political process. Another member of the Department of Defence said that it was felt to be better to do the reporting through Council as the Minister could then address issues directly to the NCACC.

The chairperson asked whether it was correct to say that if the Secretary of Defence were not a member of the committee, then he would in any case, have to be directly involved in the committee? Mr Motumi said that the Council of Defence could not take decisions without the Secretary of Defence being involved.

A member of the committee asked what was the relation of this process to the review of the defence-related industry white paper? Also, what was the relation of Denel to this process? One of Mr Motumi’s colleagues replied that the NCACC had decided on focusing on acquisition management which was therefore what was included in the Defence Act. The new white paper on the defence industry dealt with all defence issues.

Another one of Mr Motumi’s colleagues addressed the issue of Denel, saying that it fell under the Department of Public Enterprises. The Minister of Defence was ultimately responsible for Armscor and Denel was viewed only as one of its suppliers. The new white paper on defence did address the issue of Denel though. When Armscor’s structures were formed in 1968 and after that, it was done in the environment of the Apartheid embargoes. In 1995 the positions of Armscor and Denel were reviewed. Due to Denel having to operate in an era of increasing globalisation, and due to other factors, it was decided that there was no reason to bring Denel back into the fold of Armscor because there was no longer an embargo environment.

A member of the committee then asked, in the drafting of this bill, what was the overall thinking behind the reviewing of the Armscor Act? Also, how was proper co-ordination of this process ensured and why did there need to be the distinction on arms and non-arms dealings? A member of the Department of Defence answered that Armscor was also the tender board for arms and because it was necessary to determine whether tender applications should go to Armscor or the State Tender Board, there needed to be a clear distinction between arms and non-arms procurements. With respect to why it was necessary to review the Act, he said that much of the current legislation was more than 32 years old and therefore irrelevant. When Armscor was first established it had many more functions than it does today and therefore a lot of the contents of the legislation was no longer applicable today.

Another member of the department added that there were two different categories into which acquisitions fell. In the first category were arms products, which required design and development and in the second category were off-the-shelf products such as boots and helmets. There was a grey area in between though (with products such as uniforms) and this needed to be cleaned up.

The chairperson asked to see once again, the slide showing the composition of the committee. She noted that it had representatives from the Department of Defence, the Centre for Conflict Resolution from the University of Cape Town as well the defence industry in general, yet none specifically from Denel. She asked why this was? The member of the Department of Defence replied that Denel was represented through the South African Aerospace, Maritime and Defence Industries Associates Organisation, which represented the whole of the defence industry. The chairperson replied that it might be better, nevertheless, to have Denel directly represented on this committee seeing that it was shaping Armscor’s future. The department member said that Denel would be one of Armscor’s suppliers and that for this reason it was perhaps not appropriate for Denel to be directly represented on the committee.

The chairperson replied that she did not agree with this reasoning, asking whether it would not actually make a difference to have Denel directly represented on the committee? She said the committee was not imposing this view, just suggesting it to the department. The NCACC had a lot of representation from different sources and they could well have had someone from Denel who would have added to the process of shaping the legislation. Mr Motumi admitted that the chairperson had a point but said that Denel was just one of many defence suppliers. Although perhaps they should be represented by virtue of being the biggest, the South African Aerospace, Maritime and Defence Industries Associates Organisation did represent their interests.

A member of the committee asked why the Centre for Conflict Resolution was represented on the NCACC? Mr Motumi said that the Minister had requested their representation because of their knowledge and background and their input into the Cameron Commission of Inquiry. Another member of the Department of Defence assured the committee that they would take forward their point regarding the inclusion of Denel.

A committee member said that the defence industry was quite fractious and because Denel was still a state-owned enterprise, it should be represented on the NCACC. Mr Motumi replied that they would investigate the role of the NCACC in order to give it greater legitimacy and to clarify exactly what its mandate was as well as what the mandate of the entire defence industry was. The chairperson added that everyone would be glad to know that there would be a meeting devoted to reviewing the NCACC on the 10 April.

There was a comment that it had still not been made clear exactly what the process was that the NCACC used in drafting the legislation and how there could be more representation from this committee towards the NCACC.

Another member said that he was frustrated that the committee had not received the department’s presentation beforehand. In order for the committee to be better informed, they would need to receive the reports beforehand.

The chairperson reinforced that this was a good point and that there was an existing understanding that they would not discuss reports unless they had received them at least ten days in advance. She acknowledged though, that in this case it was not the department’s fault that they were not available. However, while having copies of the presentation would help, what the committee really needed was a draft of the bill. The committee wanted this as soon as possible.

A member of the department said that the previous white paper did include some earlier representations to which the chairperson responded that this was a fairly young committee and as a result had not been in existence at the time of some of these representations.

Mr Motumi then began the conclusion of his presentation, speaking about the process to redraft the Armaments and Production Act. The department would look at what other relevant processes were in place in order to draw from them and it would establish a policy framework to guide this process. It would also commission discussion documents on issues that may influence the drafting process. It would look at what structures were ultimately desirable and what trade-offs would need to be made to get the best structures and to get a new mandate. All the resulting recommendations would be made to the Minister in Council, together with a number of alternative models. The Minister would then be the final arbiter of what model was chosen. After this the drafting process would begin with the use of the state legal advisors as well as whatever other expertise may be required. The committee would then review the draft bill after which it would be presented to the state lawyers and would then go back to the NCACC who would hold public hearings on the bill. Holding public hearings within this committee was also its prerogative. Eventually the bill would be sent to parliament, would hopefully be passed and the regulations would flow from that.

The chairperson said to the department that she hoped they would be available for any questions the committee members still wanted to forward to them, after which she adjourned the meeting.

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