SANDF Budgetary Allocations: briefing

A delegation from the Department of Defence (DoD) briefed the committee about the 1999 - 2001 Defence budgetary allocation and its implications. The presentation took the following form:

Introduction - Mr J Grundling

DoD Budget and Planning Submission - Col D Fourie

Implications of Medium Term Allocations - Capt (SAN) R Hauter

Medium Term Expenditure Survey - Mr J Grundling/Brig April

Budget Cycle - Mr J Grundling

Questions

DoD Budget and Planning Submission

Col. Fourie went through the budgetary allocations (using transparencies) explaining the need for the rise in allocations from R 9.7 million in 1989/90 to that of R 11.3 million for the following years. The overall increase was attributed to inflation and the carry-through on salary improvements.

Mr Loots from the ANC wanted to know about the occupational compensation for TBVC members. Col. Fourie replied that compensation for the SADF was at present being paid by the Department of Finance and was not a Defence matter anymore. Mr Loots then wanted to know if this was in line with the terms of the Act of 1993.

A National Party committee member asked on what personnel figures were these calculations made. Col. Fourie replied that calculations were based on intended numbers.

Mr. Yengeni asked if over the years the buying power remained the same. Col. Fourie stated that in terms of the allocations the department was trying to implement proficiency savings but was busy with the transformation exercise. It was endeavouring to meet the allocations on a 40%, 30% and 30% basis yet power was affected by inflation. The main reason for deviation are the allocations per activity which do seem to vary. This is attributed to efficiency savings, the transformation exercise and the intention to reduce personnel.

The budgetary allocations (past and projected) were looked at in terms of the following areas:

The Minister

The Defence Secretariat

The Chief of the SANDF

Personal Management

Joint Training

Military Intelligence

Joint Operations

Logistical Management

Financial Management

Religious Services

Service Corps

BMATT

Corporate Communications

Legal Services

Inspectorate Services

Communication and Management Information

Part Time Force Management

Military Police

Policy and Planning

Acquisition Management

Support Account

SA Navy

SA Army

SA Airforce

SA Medical Health Services

Capital Renewal

Salary Improvements

Carry Through Costs

Provision for Inflation

Mr Yengeni asked what money had been allocated to the DoD in terms of next year’s elections and the deployment of the Defence Force. He also asked about the special defence account as well as the need for more allocations for the consumption of products . Col. Fourie replied that the budget allocation for the elections would be addressed by Capt. Hauter. The issue of the special account would also be addressed later.

The summary of the budget is as follows:

98/99 99/00 00/01 01/02

Total 9,958 837 10,486 934 10,987 249 11,387 802

It is made up of the following programmes:

1. Administration

2. Land Defence

3. Air Defence

4. Marine Defence

5. Medical Support

6. General Support

7. Special Defence Account

What was made clear in this presentation was the decrease in personnel that was to be made from 93 000 to 68 000. The transfer payment to the special defence account was also noted. The DoD expected an increase of between 3 - 5 % due to inflation.

Implications of Medium-Term Allocations

Capt. R Hauter addressed the implications of the medium-term expenditure. As background he pointed out that in 1989 the defence budget was 4.6% of the GDP; for 1998 it was 1.5% of the GDP.

In the past the Dfence budget was allocated on a 19, 37, 44% and a 52, 36 and 12% basis. However the aim for the future was to project it on a 40, 30 and 30% basis.

There has been a substantial cut of approximately R 770 million.

With regards to the transformation process there were various restrictions. Closing, moving and amalgamating bases would all cost money and people there would have to be rationalised. A saving would therefore not necessarily appear as there were a certain amount of costs involved.

He also addressed capital expenditure. The current shortfall of R 770 million was attributed to the non-saving on rationalisation.

1. The present shortfall on personnel and operating expenses was R million 1500

2. Capital Shortfall 98/99 R million 770

3. Capital Shortfall 99/00 R million 400

4. Overall Shortfall R million 2670

The implications of the new budgetary allocations would be felt in the following areas :

Implications for SA Army

Operations

-support to South African Police Service (SAPS)

-Elections ‘99

-Border control

Intelligence - especially in the army where activities would be curtailed by lack of funds.

Voluntary Military Service - where funds were virtually zero

Rations/Fuel - there were severe limitations here, artillery and the aircraft corps would be hit badly.

The output for the army would therefore be zero tangible output. The estimated amount needed to overcome this would be R 450 million.

A question was posed to the delegation regarding the implications of no help to the SAPS. In response the committee was told that crime prevention had been dealt a severe blow. There were at present 55 companies supporting the police. By the end of 1998 it was predicted that there would be 30 and by the end of 1999 there would be only 16 companies.

The financial implications of taking personnel from a military base to a polling station or alternate police environment was queried. Mr. Grundling stated that the minute the Defence Force has to deploy troops costs "go sky high" in terms of fuel, accommodation and food. However the money can be reclaimed from State expenditure. This had been done in Richmond recently. A transfer of money could also be made from SAPS to the Defence Force.

Implications for SA Airforce

Fixed costs are extremely high, as are maintenance costs.

-Flying hours have had to be reduced to 35 000 to 20 000.

-International and Regional Co-operation affected.

-EEZ - trying to patrol the Exclusive Economic Zone has been reduced by 75%.

-Support to the civil authorities

-VIP flights

-Base and unit closure

The airforce shortfall was R 650 million.

Implications for SA Navy

-Vessel status - in order to be an operating navy the country needs 18 vessels, at present there are six and at one stage they were down to three. The reason for this is that there is no money to maintain the vessels.

-Sea days have been reduced from 1400 to 600.

-Deterrent status affected as seen in the number of international exercises that the SA Navy participates in.

-EEZ (exclusive economic zone)

-Training hampered.

Implications for SA Medical Health Services

-Increase in patient load

integration

married women now included

rationalisation

-Occupational Health and Safety Act of 1993 - there is pressure here for the department to comply.

The shortage in this area is approximately R 50 million

Implications for Divisions

Capacity for transformation

Intelligence Division - will have to close offices in smaller countries around the world.

Policy and Planning

General - i.e. the Military Academy and various colleges.

Mr Yengeni wanted to know in terms of policy and planning what are the strategic implications for the sub-region and the continent. Mr Grundling replied that the reductions had cut too deeply into Defence. The state saw Defence as the most probable area to cut back for the purposes of the RDP. DoD was assessing where savings could be made. They have overspent by R 400 million and will also do so this year because of various contractual commitments. Its present ability to deliver is inadequate. The primary strategic issue is that 1.4 % of GDP is not enough.

Secondly, Grundling stated that the government has not provided for an efficient organisation. It has planned to reduce numbers this year by 7000. Forecasts in this area for 1999 are 12 000 and for 2000 they are 5000 personnel.

Thirdly due to the decrease in the budget, the SANDF had not been able to renew and replace capital equipment. This would mean the loss of major capabilities. Provision must therefore be made to re-equip as soon as possible.

Medium Term Expenditure Survey

Brigadier J April gave a presentation on the medium-term expenditure survey using the following format:.

The Purpose and Scope

Identify and qualify services and outputs of the DoD and link it to medium term expenditure trends

Format of Survey

Part A : Dept Aims and Objectives

Confirmation of Aims of Budget Vote

Conf. Description of each programme

Indicate outputs and outcomes

Part B Trends in Outputs and Services Rendered

Description of Services

Indications of Outputs

Measures of Long Term Outcomes

Trends and Outputs Delivered

Part C Policy Developments and Expenditure Implications

Summary of Key Policy Developments

Policy Changes and Shift Functions

List of Policy Documents

Part D Revised Expenditure Estimates

Audited Expenditure Figures from 95/96

Conditional Grants

Services provided from distinct institutions

Transfer payments

Expenditure on capital projects

Departmental receipts on donor funds

Part E medium Term Expenditure Estimates

Summary of budget planning submission

Implications on Defence Policy and Service Delivery

Part F Income and Expenditure of Extra Budgetary Accounts and Funds

Details of Special Defence Accounts

Details of Medical Trade Accounts

Medical Training was then discussed.

Mr Grundling concluded with a presentation of the budget cycle. This included a schedule of dates which include the important steps between now and when the Cabinet makes a budgetary decision:

REMAINDER OF BUDGET CYCLE

1 Medium Term Expenditure Committee Hearing 8 Sep 98

2 Medium Term Expenditure Survey Completed 30 Sep 98

3 Ministers Committee Conduct Ministerial Hearings on the Budget Mid Oct 98

4 Ministers Committee Discuss Medium Term Budget Policy Statement 27 Oct 98

5 Cabinet Discuss Medium Term Budget Policy Statement 4 Nov 98

6 Minister of Finance Consider Medium Term Expenditure Proposals 10 Nov 98

7 Ministers Committee Consider Medium Term Expenditure Estimates 12 Nov 98

8 Cabinet Consider Budget Proposals 18 Nov 98

9 Medium Term Budget Policy Statement Published by Minister of Finance Mid Nov 98

10 Cabinet Approve Medium Term Expenditure Allocations End Nov 98

11 National Departments Submit Printer's Proof 12 Jan 99

12 Budget Briefing to JSCPD Mid Feb 99

13 National Budget Tabled in Parliarnent Mid Mar 99