White Paper & Defence Review Restructuring: briefing; Special Defence Account Amendment Bill: adoption; Armscor Amendment Bill:

Meeting report

DEFENCE PORTFOLIO COMMITTEE
14 June 2005
WHITE PAPER AND DEFENCE REVIEW RESTRUCTURING: BRIEFING; SPECIAL DEFENCE ACCOUNT AMENDMENT BILL: ADOPTION; ARMSCOR AMENDMENT BILL: DELIBERATION

Chairperson: Professor K Asmal (ANC)

Documents handed out:
Department PowerPoint presentation: Defence Special Account Amendment Bill
Defence Special Account Amendment Bill [B15-2005]
Defence Update 2005: Report 1
Defence Update 2005: White Paper and Defence Review - Powerpoint presentation
Armaments Corporation of South Africa, Limited Amendment Bill [B14-2005]
Memorandum on Armscor Amendment Bill
Draft Bill on Establishment of Military Ombudsman: Second Draft of April 2005

SUMMARY
The Department of Defence presented the Armscor Amendment Bill that proposed to exclude both the Chief and the Secretary of Defence from the Board of Armscor. As the proposal to exclude the Secretary had not been made in writing, the Committee requested that this be done before a decision was made.

The Special Defence Account Amendment Bill proposed changes to bring the Act into line with the Public Finance Management Act. The amendments would bring the Act into line with current legislation. Outdated references and processes would be removed. Executive authority and accountability would rest with the Minister of Defence. The Committee approved the Bill and referred it to Parliament for adoption.

The Department also led discussion on Chapters 1-4 of the White Paper on Defence. Topics covered included a changed strategic environment, collective security, South Africa’s approach to national security, and the role, functions, objectives and missions of the SA National Defence Force (SANDF). The Committee raised issues of terminology, length, detail, disarmament and the seriousness with which its reports on defence issues were dealt with by the relevant state bodies.

MINUTES

Armscor Amendment Bill
The Bill proposed to exclude the Chief and Secretary of Defence from membership of the Armscor Board of Directors. This proposal had not been discussed by Cabinet. The Chairperson requested written verification of this, as there was no mention of the exclusion of the Secretary in the original draft.

Mr B Engelbrecht (Director Budgeting, SANDF) explained that the current proposal to remove the Secretary from the Board was because of a perceived conflict of interests. The initial proposal was that the Chief of Defence should allow the Committee to give a directive that the Secretary also be removed. At present there was no proposed amendment but a request that the Committee consider this.

The Chairperson noted that only the removal of the Chief of Defence had been placed before Cabinet. The Chief of Defence was part of the Defence Council, which made submissions for acquisitions. Armscor was the agent that ordered the required acquisitions. This meant that the Chief of Defence was both the initiator and the judge. He asked what action the Department of Defence wanted from the Committee regarding the Secretary of the Department.

Mr Engelbrecht added that the recommendation was being presented to the Committee, and it should issue a directive. The Chairperson pointed out that the Committee was entitled to pass amendments. However, if an amendment was substantial, it should be referred back to Cabinet. The request to remove the Secretary was a substantial change. He asked if the request had been put into writing and was told that it had not.

The Chairperson pointed out that he had requested a written statement from the Department but it had not been forthcoming. He added that if the Committee were to pass the Bill, it could be adopted by Parliament within a week. The Bill had so far taken 15 months to pass and Treasury was tired of waiting for clarification of its functions. He asked the Members’ opinion – should the amendment be passed or should a written document be requested?

Mr S Ntuli (ANC) felt that the Committee should insist on a written document. Mr M Sayedali-Shah (DA) agreed that the Committee should not make recommendations without the document.

Mr N Sendall (SANDF Chief Director: Defence Policy) recalled that during the 1999 process to draft the Armscor Act, a policy document had examined the governance of Armscor. This policy document became a Bill that the Cabinet processed in 2002. At this stage, the Minister of Public Service and Administration had recommended the removal of the Chief of Defence and the retention of the Secretary. The Bill had been referred to a Joint Standing Committee that had found no conflict of interest with the Secretary serving on the Board.

The Chairperson confirmed the view of the Committee that the recommendation be placed in writing before the Committee could act on it. A Member of the delegation again requested that the Committee deal with the issue. However, The Chairperson pointed out that it was clear that there were people in the Department who wanted the Secretary removed. A systematic presentation supported with reasons should be made to the Committee

An observation was made in Xhosa. The Chairperson translated a further request for the issue to be submitted in writing.

Special Defence Account Bill
Mr B Engelbrecht presented the Special Defence Account Bill (see presentation attached).

The Chairperson had received this very important Bill six weeks ago, and had requested additional information from the Parliamentary Liaison Officer. He found the explanatory memorandum inadequate as it did not clarify what the Bill was trying to achieve. The Committee could not exercise its oversight powers unless it had a clear understanding of the subject. Mr Sayedali-Shah agreed that he too found the purpose unclear.

The Chairperson said that the explanatory memorandum needed to be very clear and written in plain English. He did not know what the Special Defence Account was and asked if there was an additional document on this?

Mr Engelbrecht replied that an introduction to the purpose of the Special Defence Account had been forwarded the previous day and it was his intention to provide more background as part of his briefing. The Special Defence Account was regulated by the Special Defence Account Act and the amendment of this Act was currently on the table for discussion.

National Treasury had expressed dissatisfaction last year with the contents of the Special Defence Account Act, because it was one of the few remaining Acts not amended since the implementation of the Public Finance Management Act, 2000. One concern related to the oversight role of the Minister of Finance. As part of the Budget preparation, a document was submitted annually to both the Minister of Defence and the Minister of Finance. This document prescribed all acquisition projects and required authorisation by both Ministers, and therefore required interaction between these two. The Public Finance Management Act had placed the executive authority and full accountability with the Minister of Defence. The National Treasury no longer saw the need for its involvement. This was the focus of the proposal.

In addition, the Act still referred to the Exchequer Act that no longer existed. The amendments would bring the Act into line with current legislation, specifically references and processes which had become outdated. He requested the Committee’s support for these changes.

The purpose of the Act was to allow for the purchase of equipment and payment of scheduled costs. The amendment would bring the Act into line with the Public Finance Management Act, and would allow the Department some flexibility in the management of finances and procurement.

The Chairperson pointed out that the Committee did not have the capacity to check on the Bill and requested that all the amendments be double-checked for correctness. This was done while the meeting was in progress and written confirmation was brought in to the Chairperson.

Mr Engelbrecht pointed out that the purpose of the amendments was to bring the Act into line with other Acts, remove obsolete references and procedures, and update the recommendations regarding the role of the Minister of Finance.

The Chairperson expressed approval of the explanation of the Act and Mr Sayedali-Shah agreed that it now made more sense. Regarding the accounting officer and the issue of sensitive activities, he asked if the oversight of funds in that area was effective. He also asked who the ultimate accounting officer was.

Mr Engelbrecht replied that the Secretary for Defence was the accounting officer for the fund. Annual detailed submissions were made to the Minister of Defence to approve the budget. This was then presented to the Minister of Finance. The Minister of Defence was provided with monthly feedback on expenditure. The Auditor-General had dedicated staff for auditing accounts in this area. Mr Engelbrecht emphasised that this was important because opportunities might exist for the misuse of funds. In the last five years there had been no problems. In consultation with the Auditor-General, an annual update of current Department policies had been made.

Adv H Schmidt (DA) asked about the role of the Minister of Finance. Mr Engelbrecht replied that currently the Minister of Finance’s role was to approve, in conjunction with the Minister of Defence, the SDA budget. The Public Finance Management Act made the accounting officer totally accountable for funds allocated to him and the role of the Minister of Defence was very specific. The SDA budget was 10% of the total defence budget (used primarily for the purchase of equipment) and the National Treasury did not deem it necessary for the Minister of Defence to be involved so specifically.

Mr Schmidt asked if another Strategic Defence Package were to be bought in future, how it would be dealt with. Mr Engelbrecht replied that Strategic Defence Packages would be handled in a very intimate manner with National Treasury. A Defence Programme Manager within National Treasury would mean that Treasury was very actively involved with the payment and management of Strategic Defence Packages.

The Chairperson commented that Treasury had said that normal financial rules regarding expenditure should be followed and the Special Account was part of history. Closed systems gave rise to abuse.

Finally, the Committee recommended that Parliament pass the Bill. The Chairperson added that there would be a short debate in Parliament.

White Paper on Defence
Mr N Sendall briefed the Committee on the White Paper on Defence (Please see presentation attached).

Discussion:
Mr Sayedali-Shah observed that despite the discussion, it seemed the matter of vision was not forthcoming. What exactly did the Department of Defence envisage as the core component of the army, force design, the size of reserves and the financial implications? This was not clearly stated. The Chairperson pointed out that the discussions were still at an early stage.

Mr Schmidt commented that although he had not read the document thoroughly, he agreed with Mr Sayedali-Shah and asked what would flow from it and to what the issues related to. Was this still to be done?

The Chairperson said that this was the first report and looked at the political aspects. He felt that it was better to have less rather than too much. The report in his view needed honing down.

He commented that terrorist activities were not so important now. Although international terrorism was an issue, territorial terrorism had waned compared to the 80’s. The political aspects of defence needed a more systematic examination, particularly the relationship between underdevelopment and poverty. The relationship between poverty and tension was very important. The President had recently made a brilliant speech to 190 countries where he pointed out that the major powers reflected their own power but did not represent the developing world. The Chairperson emphasised that the poor needed special attention.

The report needed much more concrete evidence of the needs of the Defence Force and its priorities. What were the strategic and urgent issues that needed prioritisation?

Mr Sayedali-Shah said that the 2005 update discussed the process of force design and structure but he would like to know what progress had been made. The Chairperson asked when talking of force design, how much reliance there was on domestic production? DENEL had requested a 25% weighting in favour of this. This issue needed discussion – was it better to create employment and use more expensive local products than to buy from overseas suppliers? The issue of civil control of the Defence Force also needed discussion as this differed from civilian control.

Mr O Monareng (ANC) complained about the language in the mission statement, citing terms like "information onslaught". The Chairperson agreed and said the use of apartheid language should stop. The mission statement should be more evocative and rewritten into three or four paragraphs. The whole report was too long.

Mr Sendall pointed out that the document had been informally exchanged and discussed with the Department of Foreign Affairs. He added that their work had to be integrated with the work of other processes as well. The Cabinet instructions on the National Security Strategy had to be integrated with this process especially on national security matters. The Department of Foreign Affairs had to be consulted regarding peacekeeping missions, and interaction with the Minister of Public Enterprises was necessary regarding the defence industry. It was necessary to work around all these factors.

The Chairperson replied that this would affect the Committee’s programme. It would possibly be necessary to have a joint session with the Portfolio Committee on Foreign Affairs on peacekeeping missions. Mr Sendall replied that they had worked with Foreign Affairs on the content issues regarding peacekeeping missions.

Mr Sendall added that the problems with language would be edited out. The Chairperson replied that it was not an editing problem but was to do with substance. He asked whether some of the matters referred to were necessary e.g. the "information onslaught". Was there an attempt here to act as an intelligence-gathering agency? Mr Sendall replied that the term referred to information technology and not spying.

Mr Sendall said that the report aimed to be detailed but not nebulous. This report (Report 1) dealt with the first four chapters. Chapter 5 would examine force design and the required defence capabilities. Chapter 6 would deal with resource requirements. Chapter 7 would discuss aspects of governance and how internal governance was affected through control by various bodies e.g. National Treasury and Parliament.

The Chairperson asked why this was necessary. Mr Sendall replied that many things had changed and it was necessary to map out elements of governance that were involved with control. Chapter 7 had been written while Chapter 5 and Chapter 6 were not yet complete. Chapter 5 had been begun in December and included a very comprehensive force design and requirements. This had been done using computer modelling. This chapter would be sent to the Defence Staff Council this month for detailed discussion.

The Chairperson asked if exact numbers would be specified. Mr Sendall replied that the chapter on Force Design would stipulate exact requirements. The Acting Chief Financial Officer had instructed a start on Chapter 6 and a model would be used to build and validate requirements. By the end of September, the second phase dealing with costing would begin.

Mr S Naidoo, Deputy Director: Research and Analysis, Department of Defence agreed with the comment on the President’s speech regarding poverty. The environment and its issues were not determined by developing countries and powerful players set the international context. There was a need to rework terminology. Terrorism was still an issue and it was important to determine how South Africa would react to international perceptions.

The Chairperson observed that a real problem was the unwillingness of the major powers to involve themselves in disarmament. Regarding collective security, he proposed that a simple statement that South Africa supported collective security would be adequate.

Mr Sayedali-Shah said that too much detail in a white paper was unnecessary. Mr Naidoo replied that there was a dilemma regarding detail as the constituents wanted their input to be visible. There was a need to find a balance.

The Chairperson pointed out that the Standby Force was a structure and not a permanent force. It did not exist but could be mobilised. Five or six countries needed to make a decision regarding this. Mr Sendall said that the African Standby Force was similar to the UN Standby Force but required a more permanent planning element and some logistic warehousing.

Mr Sayedali-Shah asked what happened to the Committee’s reports. Once the report had been compiled who in the Department of Defence read it and implemented recommendations? Mr Sendall replied that the reports went to the Ministry and were dealt with at the Defence Staff Council.

The Chairperson asked whether the report on the Draft Bill on the Establishment of the Military Ombudsman was ready, as had been requested in the meeting of 17 May 2005. Mr Sendall replied that it was not. The Chairperson asked that this report be sent shortly, stating that it included the Committee’s recommendations and that Members were looking forward to the Bill’s implementation. Responses from the Minister and the Department were needed in writing.

The meeting was adjourned.