REPORT OF
THE PORTFOLIO COMMITTEE ON DEFENCE AND MILITARY VETERANS ON BUDGET VOTE 22: DEPARTMENT
OF DEFENCE AND MILITARY VETERANS AND THE ENTITIES, NAMELY ARMSCOR AND THE
CASTLE CONTROL BOARD, DATED JULY 2014
1. BACKGROUND
The Portfolio Committee on Defence and
Military Veterans having considered the request of the National Assembly to
consider and report on the Strategic Plans, Annual Performance Plans (APP’s)
and budget allocations of the Department of Defence, the Department of Military
Veterans and the entities tabled by the Minister of Defence and Military
Veterans, and in terms of the Public Finance Management Act (No. 1 of 1999),
reports as follows:
2. INTRODUCTION
The
Portfolio Committee considered the Strategic Plans and the Annual Performance
Plans for the 2014/2015 financial year of the Department of Defence, the
Department of Military Veterans and the two entities of the Department, namely
Armscor and the Castle Control Board. The Committee further considered the
adequacy of financial resources for the implementation of these plans and
interrogated the allocation received by the Departments and the entities from
National Treasury, the trends over the Medium Term Expenditure Framework (MTEF)
both in terms of allocations and expenditure and, in the instance of the
entities, in terms of revenue collected. This Report details the findings and
recommendations of the Committee after engaging the Departments, and the
Entities.
3. CONSIDERATION OF TABLED PLANS
3.1 Purpose
of consideration of tabled Plans and Budgets
The purpose of Portfolio Committee’s
interactions with the two Department and two entities was two-fold, namely:
·
To provide an overview of the projected
spending by Departments and the Entities over the medium term; and
·
To gain an understanding of how performance
indicators and targets are derived and how progress against these targets are
tracked and reported on.
The presentations made by the two Departments
and the Entities focused on the approach followed in the development of
indicators and targets; as well as an
attempt to integrate the relevant indicators and targets of the Entities
with that of the Department.
3.2 Approach
of the Portfolio Committee in consideration of the Budget Allocations, Strategic Plans and Annual Performance
Plans
The
presentations and documents that form the basis of the deliberations of the
Portfolio Committee were considered together with the tabled Plans. In terms of
the key performance indicators and targets contained in the Plans, the
Portfolio Committee analysed the tabled plans. Discussions focused on key
strategic priorities relevant to the programmes of the Departments and that of
the Entities.
3.3 Government policies and other guidelines
This
Report is based on various policy documents which make reference to the
relevance of the Defence Force, the specific allocations as well as additional
allocations to the DODMV. These documents include the:
•
National Development Plan which for instance
make reference to youth unemployment and South Africa’s position in the Region
and on the Continent.
•
New Growth Path which refers to the
development of the National Youth Service and the filling of vacant funded
positions.
•
Medium Term Budget Policy Statement where
reference is made to R150 million for the DRC operations and the growth in
salary requirements.
•
Budget Review 2014 which indicates that over
the MTEF period additional amounts will be spent on improving the operational
capability of the SA Air Force.
•
Reports of the Auditor-General with reference
to the qualified audit report and unauthorised, fruitless and wasteful and
irregular expenditure.
•
State of the Nation Address with reference to
appreciation for the peacekeeping role of the Defence Force and the adequate
resourcing of the Defence Force in line with the 2014 Defence Review.
4. DEPARTMENT OF DEFENCE
4.1 Ministerial Priorities
The
Overarching Strategic Statement for 2014/15 provides an updated situational
analysis of factors that have a bearing on the output deliverables of the DOD.
Some of these are included in the Minister’s Strategic Priorities and Strategic
Focus Areas. These factors include the following:
·
The South
African Defence Review. The Draft Defence Review is a
national-level policy, converting government security policy into orientations
and tasks for defence and projecting a coherent set of aims and objectives
(Note that the Defence Review was approved by Cabinet in March 2014 and was
tabled in Parliament on 2 July 2014).
·
Corporate
Governance and Accountability. The Defence Secretariat will be
strengthened in line with its legislative mandate to ensure departmental
effectiveness and efficiency.
·
DOD Supply
Chain Management. To prevent unnecessary losses and to promote
accountability and governance, the DOD undertakes to revise its Procurement
Policy and ensure timeous payment to Small-Medium and Macro Enterprises within
30 days.
·
National
Cost Containment Measures. Pending the finalisation of the Defence
Review, consideration will be given to departmental strategic resource
prioritisation, limited structural expansion and implementation of National
Treasury cost containment measures in curbing expenditure in the DOD.
·
Border
Safeguarding. The DOD remains committed to Operation CORONA, the
SANDF’s border safeguarding operation which sees up to 13 sub-units deployed
along the country’s borders.
·
Human
Resources.
The following human resources aspects, inter alia, will receive attention:
Human Resources Expenditure; Organisation and Individual Performance Management;
Ethics and Integrity; and Service Delivery Improvement Plan.
4.2 Policy Priorities and Focus Areas
·
Enhancement of the SANDF’s Landward Defence
Capabilities.
In order to undertake
all required missions, the enhancement of the Landward Defence Capabilities is
essential and this enhancement has been considered a priority since 2013/14.
The Landward Defence Capability has not enjoyed the advantage of being part of
the Strategic Defence Packages and is thus lacking technologically advanced
Primary Mission Equipment. These capabilities that require attention include
the Infantry Capability, which encompasses the production of new generation
infantry combat vehicles. The funding of
this priority formed part of the financial year 2013/14 onwards strategic budgeting
function of the DOD for which the Landward Defence programme was allocated R13.6 billion.
·
Maritime Security Strategy.
The National Development Plan (NDP) 2030 recognises piracy and the
smuggling of counterfeit goods as some of transnational crimes that need direct
intervention. The SA Navy will continue with Operation COPPER (anti-piracy) as
well as support other operations such as Operations CORONA (border
safeguarding operation) and PROSPER (SANDF’s support to the SA Police Service in crime
prevention). The expansion of
Naval Base Durban should continue to be resourced in future financial years.
·
Job Creation.
In line with the directives of the National Development Plan’s (NDP)
prioritising of job creation, the DOD will continue to ensure that job
creation, within available resourcing, will be effected through approved
projects within the Defence industry. The 2014 Defence Review will inform the
finalisation of the White Paper on Defence Industry and the concomitant Defence
Industry Strategy.
·
National Youth Service (NYS).
The NYS Policy, which will set the norms and standards of the NYS
programme, will be developed in 2014/15 and approved in 2015/16. In 2013/14, it
was stated that the Department will continue with the execution of the NYS
programme through the utilisation of core Defence capabilities to provide
initial training to selected youth prior to absorption into respective
Government Institutions. In the past financial years since 2011/12, more than 5 000 NYS members underwent training under the auspices of Training Command at
various bases.
·
Restructuring and Support of the Defence
Industry.
The restructuring of the Defence Industry will focus on required Defence
capabilities and the sustainability thereof. The White Paper on the Defence
Industry has been included as a chapter in the 2014 Defence Review. The
drafting process of the Defence Industry Strategy has gone through several
stages of stakeholder consultation since its commencement. This aim is also in
line with the directives of the NDP and the New Growth Path which aims to create
increased employment opportunities.
·
Revitalisation of the Reserves.
As part of the one-force concept, the Reserves will continue to be
transformed and revitalised to fulfil the various Defence roles allocated to
them in support of the regulars. A total of R25.2 million has been allocated
for the Defence Reserve Direction, in Programme 1 (Administration), for the
financial year 2014/15. This amount is, however, only expected to grow at an
average of 5.5 per cent to R26.1 million in 2015/16.
In addition to the
abovementioned policy priorities for the Minister of Defence and Military
Veterans, a number of strategic focus areas have been identified which should
be prioritised by the Department and the implementation thereof monitored by
the PCDMV.
·
Military Skills Development
System (MSDS)
The MSDS is a
service system that supports the rejuvenation of the DOD’s Human Resources
Renewal Strategy to ensure SANDF rejuvenation. The reduction in the number of
MSDS compromises the ability of the SANDF to ensure a rejuvenated, prepared and
employed capability as force multiplier for both internal and external
operations. Until the size of the annual intakes increases, there will be
shortages of young and fit deployable soldiers in both regulars and reserves.
For 2014/15, approximately 4 272 MSDS members will be in the system.
·
Transformation within the
SANDF
The representation
of both men and women in the SANDF command structures remains a key focus area
for the financial year 2014/15. The Departmental policy continues to address
the aspects with regard to the representation in for instance women at
recruitment level, military command level, Defence Attachés and Gender and
leadership seminars.
·
DOD Audit
The DOD continues
to strengthen its internal mechanisms of accounting to ensure a clean audit.
For 2013/14, the DOD received two audit qualifications on movable and tangible
capital assets and intangible capital assets. For 2014/15, the DOD will focus
on resolving challenges with asset management to ensure a clean audit. In this
regard, “Operation Clean Audit” will be enhanced through the Audit Management
Team.
·
Corruption and Fraud
The DOD continues
to adopt a zero tolerance attitude to all forms of corruption and fraud within
the Department. The DOD Corruption and Fraud Prevention Plan, which is valid
for three years, was reviewed and approved on 9 July 2012. In addition, the DOD
will enhance the detection, investigation and prosecution of corruption and
fraud.
5. OVERVIEW OF BUDGET ALLOCATION 2014/15
The defence budget allocation of R42 831.2
million for 2014/15 constitutes 3.75 per cent of the financial year’s total
appropriation of R1 142 562.4 million. Although the budget allocation for
2014/15 increased by 5.3 per cent in nominal terms, it decreased by 0.81 per
cent in real terms in comparison to 2013/14. In 2013/14 a real percentage
growth of only 0.58 per cent was recorded. The latest allocation thus signifies
a continuation of the slowdown in funds allocated to the Department of Defence
(DOD).
Matters that have been prioritised for the
year 2014/15 include, inter alia, the
following:
·
Effective management of the Department.
·
Maintaining current defence capabilities.
·
Ongoing border safeguarding deployments.
·
Execution of ordered peace missions.
·
The implementation of the maritime security
strategy, including anti-piracy patrols off the Mozambican coast.
·
Improved operations within the SA Air Force
and the South African Military Health Services (SAMHS).
Table 1 indicates the percentage of the
Department’s budget that was allocated to each programme in 2013/14 and 2014/15
respectively. The Landward Defence Programme received the largest allocation,
and this is mainly due to its large personnel requirement. Furthermore, marginal
increases in allocation can be observed in Programme 1 (Administration),
Programme 4 (Air Defence) and Programme 5 (Maritime Defence). These trends are
in line with the set ministerial priorities and indicate the prioritisation of
the management of the Department, the implementation of the Maritime Security
Strategy and the increased operating of the SA Air Force.
Of concern is the allocation towards
Programme 2 (Force employment) as a percentage of the overall allocation for
2014/15 which is 0.72 per cent lower than in 2013/14. This is despite the
Department’s prioritisation of foreign peace missions, including the SANDF’s
participation in the 2013-launched UN Force Intervention Brigade in the DRC.
Similarly, the allocation towards Programme 6 (Military Health Support) as a
percentage of the overall allocation for 2014/15 is lower than in 2013/14,
bringing into question the aims of the Department to reprioritise this
function.
Table
1: Percentage of budget allocated to programmes
R thousand |
2013/14 (R million) |
Per
cent of total budget per programme |
2014/15 (R million) |
Per
cent of total budget per programme |
Change
in percent allocation |
Programme 1: Administration |
4 509.0 |
11.09 % |
4 866.5 |
11.36 % |
0.27
% |
Programme 2: Force Employment |
3 555.7 |
8.75 % |
3 437.0 |
8.02 % |
-0.72
% |
Programme 3: Landward Defence |
13 604.9 |
33.46 % |
13 854.9 |
32.35 % |
-1.11
% |
Programme 4: Air Defence |
5 714.4 |
14.05 % |
7 166.9 |
16.73 % |
2.68
% |
Programme 5: Maritime Defence |
3 107.3 |
7.64 % |
3 678.5 |
8.59 % |
0.95
% |
Programme 6: Military Health Support |
3 762.1 |
9.25 % |
3 849.1 |
8.99 % |
-0.27
% |
Programme 7: Defence Intelligence |
767.9 |
1.89 % |
792.1 |
1.85 % |
-0.04
% |
Programme
8:General Support |
5 636.8 |
13.86 % |
5 186.3 |
12.11 % |
-1.76
% |
TOTAL |
40 658.2 |
|
42 831.2 |
|
|
In line with the
Department’s strategies, the biggest real percentage increase (18.10 per cent)
is allocated to Programme 4 (Air Defence) while Programme 5 (Maritime Defence)
also received a sizeable real percentage increase of 11.47 per cent. Programme
1 (Administration) also received a small real percentage increase. The latter
is mostly related to the increased allocation for office accommodation to the
Department of Military Veterans (DMV).
The most significant
decrease can be observed in Programme 8 (General Support), which received a 13.36
per cent real decrease. This funding for this programme is, however, expected
to recover over the MTEF period as it is required to assist the expected
increase in personnel by 2016/17. Of concern is the 4.11 real percentage
decrease in the allocation to Programme 2 (Force employment) given that foreign
peacekeeping deployments have been noted as a Departmental priority. Border
control is a further crucial function that is funded from this programme.
Landward Defence and Military Health Support received real percentage decreases
of 4.11 and 3.66 per cent respectively. The latter is of specific concern given
the ongoing challenges faced at military hospitals throughout the country.
The increase in the compensation of employees
may relate to expected annual increases as hardly any changes in the expected
personnel numbers are foreseen from 2013/14 to 2014/15. The increase in
spending on contractors relate mostly to specialised personnel required for
aircraft maintenance and the outsourcing of military health requirements to the
private sector.
5.1 Personnel information and salaries
The Department has a funded establishment of
76 538 posts. This is lower than the number of funded posts recorded in the
2013 National Treasury’s ENE, which notes the DOD to have 80 380 posts. The
number is, however, set to grow to 78 582 by 2016/17 in efforts to rejuvenate
the Landward Defence capability and build capacity within the Defence Works
Formation. Spending on Compensation of employees is
expected to increase slightly from R21 373 million in 2013/14 to R21 980.2
million in 2014/15. The latter amount constitutes 51.32 per cent of the
allocated budget. While the number of funded posts for 2014/15 is less than in
2013/14, the slight increase in allocation can likely be attributed to annual
salary increases. Similar to previous years, the high ratio of funds to be
spent on compensation of employees is a concern, as less than half of the
budget is left to be spent on other priorities. This has the potential to
impact negatively on ensuring the execution of the SANDF’s core mandate and the
maintenance of its operational readiness.
5.2 Infrastructure
spending
There is a significant decrease in
infrastructure spending in 2014/15 compared to previous years. While R1.2
billion and R980.2 million was allocated for this purpose in 2012/13 and
2013/14 respectively, the allocation for 2014/15 is only R109 million. This is
expected to increase to R121 million by 2016/17. The DOD had 46 refurbishment
projects in 2013/14 of which 20 are expected to continue over the MTEF period.
A total of R3.8 billion has been allocated for their completion. It is further
stated that the DOD is prioritising the refurbishment of physical
infrastructure at its bases over the MTEF period.
6. OVERVIEW OF ALLOCATION PER PROGRAMME
6.1 2014/15 Allocations to Programme 1:
Administration
The Administration programme, which consists
of 15 sub-programmes, constitutes 11.36 per cent of the Departments total
budget for 2014/15. In nominal terms, the budget for this programme increased
by 7.9 per cent whereas the real percentage change showed an increase of 1.63
per cent. Sub-Programme 14 (Office Accommodation) represents the largest
sub-programme and accounts for 46.13 per cent of the programme’s total budget.
This is largely related to an increased allocation for the Department of
Military Veteran’s office accommodation and the establishment of operational
law structures.
In terms of economic classifications, there
is an increase for Compensation of Employees which increased from R1 464.6
million in 2013/14 to R1 550.2 million in 2014/15. This is likely due to the
increase in personnel from 3 807 in 2013/14 to 4 082 in 2014/15. This is
influenced by the establishment of the Defence Force Service Commission which
requires personnel funding from Programme 1 (Administration).
·
Performance
Indicators for Programme 1 (Administration)
Three performance indicators for Programme 1
(Administration) were provided by the DOD and the only significant variation
with previous years is the reduction in the number of Military Skills
Development Service (MSDS) members in the system per year. This is of concern
given that the DOD stated that one of its aims is to “rejuvenate the landward
forces.” The MSDS is central to the rejuvenation of the SANDF. Furthermore, a
new indicator for the number of Reserve Force man days was created to be
measured from 2014/15 onwards.
6.2 2014/15 Allocations to Programme 2:
Force Employment
The allocated budget for Programme 2
decreased with 3.3 per cent in nominal terms and 8.98 per cent in real terms.
This decrease may be viewed in line with the underspending at the end of the
2013/14 financial year. The programme constitutes 8.02 per cent of the
Department’s total budget and has as its objective to provide and employ
defence capabilities to conduct all operations and exercises. It should be
noted that in 2013/14, an additional allocation of R150 million as part of
unforeseen expenses was made to the SANDF for participation in the UN mission
in the DRC.
Similar to previous years, peace missions,
border safeguarding and anti-piracy operations have been identified as
priorities in this programme. This relates to the strategic priorities set by
the Minister. However, given the prioritisation of these aspects, it is unclear
why there was a sudden reduction in the allocation for Programme 2.
·
Performance
Indicators for Programme 2: Force Employment
A number of performance indicators for
Programme 2 were set in the DOD Annual Performance Plan. There are no significant
shifts in terms of the performance indicators. The number of external
operations is set to decline from six in 2013/14 to five in 2014/15. This is
likely due to the termination of the Central African Republic mission. The
number of joint, interdepartmental and multinational military exercises
conducted per year is set to increase from five to nine by 2014/15.
Furthermore, the number of sub-units deployed to borderline safeguarding is set
to remain constant at 13 units over the MTEF period.
6.3 2014/15 Allocations to Programme 3:
Landward Defence
The Landward Defence programme is the largest
programme in the defence budget constituting 32.35 per cent of the Department’s
total budget for 2014/15. It provides prepared and supported landward defence
capabilities for the defence and protection of South Africa. The 2014/15
priorities set for this programme includes the preparation and provision of
forces for both internal and external deployments. The two largest
sub-programmes in this Programme are (1) the Infantry Capability and (2) the
Support Capability. While allocation for this programme increased by 1.8 per
cent in nominal terms, it decreased by 4.11 per cent in real terms from 2013/14
to 2014/15. This can be considered in line with the reduction of funds for this
Programme due to virements and shifts in 2013/14.
The largest reduction in funds from 2013/14
to 2014/15 in Programme 3 (Landward Defence) was for the Support Capability,
which decreased by 15.31 per cent in real terms. The aim of this sub-programme
is to provide support to units, bases and deployed combat units. Given the
ongoing focus on regional and internal deployments of the SANDF, it is thus
unclear how this reduced allocation for support services will affect deployed
units. The General Training Capacity allocation is also being reduced by 13.08
per cent in real terms. This may be related to the decreased intake in MSDS
members from 2014/15 onwards. It is, however, uncertain how this decreased
allocation will impact on the level and quality of training. Furthermore, the
allocation for Strategic Direction decreased by 5.43 per cent in real terms
from 2013/14 to 2014/15.
·
Performance
Indicators for Programme 3: Landward Defence
In previous years, the DOD Annual Performance
Plans indicated four Performance indicators for the Landward Defence Programme.
However, three of these were considered to contain classified information. As
such, only one performance indicator is referenced in the 2014/15 Annual
Performance Plan. However, the indicator reported on in 2013/14 was ‘the
percentage compliance with DOD formal training targets (number of learners on
planned courses)’. According to the 2013/14 Annual Performance Plan, up to 5
722 learners were to be enrolled on courses. There is, however, no similar performance
indicator mentioned in the 2014/15 Annual Performance Plan.
6.4 2014/15 Allocations to Programme 4: Air
Defence
The Air Defence programme, which has 11
sub-programmes, is the second largest programme in the Defence budget
constituting 16.7 per cent of the Department’s total budget. Fund allocations
to this programme increased by 25.4 per cent and 18.10 per cent in nominal and
real terms respectively from the previous financial year. Sub-programme 4 (Transport and Maritime Capability) represents
the largest sub-programme and accounts for about 26 per cent of the programme’s
total budget. This increase is because of an
increase in deployments and presidential commitments, which resulted in the
reprioritisation of R341.9 million from the Special Defence Account over the
medium term to improve the South African Air Force’s operational capability.
The increase in this programme is in line with strategic priorities. For
instance, Maritime Security Strategy has been prioritised and the Transport and
Maritime Capability sub-programme is critical in supporting the SA Navy in
Operation COPPER. With 202.93 per cent, this sub-programme also represents the
highest real percentage increase for Programme 4.
·
Performance
Indicators
For 2014/15, only one performance indicator
(Number of force employment hours flown per year) is provided by the DOD. This indicator is different to the one provided for
2013/14 (Number of learners on planned courses) in which the DOD reported on
four performance indicators for Programme 4. However, three of those indicators
were not provided in the 2013 APP due to information being confidential. This
was in contrast to the 2012 APP which provided a number of performance
indicators per Sub-programme. A total of 14 performance indicators were
provided for in the 2012 APP.
6.5 2014/15 Allocations to Programme 5:
Maritime Defence
The Maritime Defence programme has 5
sub-programmes and is responsible for providing prepared and supported maritime
defence capabilities for the defence and protection of South Africa. This
programme constitutes 8.58 per cent of the total defence budget for 2014/15.
The programme showed an increase of 18.4 per cent and 11.47 per cent in nominal
and real terms respectively as compared to the 2013/14 allocation. Sub-programme
2 (Maritime Combat Capability) received the largest increase of 79.46 per cent
in real terms. This increase is in line with identified strategic priorities
and is projected to continue over the MTEF period due to the procurement of
harbour tug-boats and payments for the replacement of offshore patrol vessels.
Sub-programme 4 (Maritime Human Resources and Training Capability) also
received a real percentage increase of 1.6 per cent stemming largely from the
requirements for anti-piracy operations.
·
Performance
indicators
For 2014/15, only one indictor ‘Number of
hours at sea’ has been identified for Programme 5 (Maritime Defence). This is a
reduction from the four performance indicators identified for this programme in
2013/14, of which three lacked information due to confidential security
classifications. In addition, the 2014/15 indicator has changed from ‘Number of
learners on planned courses’ as provided in 2013/14. The Number of hours at sea
decreased from 22 000 in 2013/14 to a projected 12 000 in 2014/15. In
contrast, Operation COPPER continues and the SA Navy may soon commence
patrolling the waters of Namibia and Angola based on recent agreements.
Accordingly, it may be argued that there should be a possible increase in sea
hours rather than a decrease from 2014/15 onwards.
6.6 2014/15 Allocations to Programme 6:
Military Health Support
With an allocation of R3.85 billion in
2014/15, the Military Health Support programme constitutes 9 per cent of the
total defence budget. The programme received an increase of 2.3 per cent in
nominal terms which translates to a decrease of 3.66 per cent in real terms.
There is a clear need to provide extra funding for this programme as can be
observed in 2013/14 already when a virement of R119.553 million was made to the
Programme. With regards to the various sub-programmes, sub-programme 4 (Specialist/Tertiary Health Service)
received an increase of 14.13 per cent in nominal
terms which translates to an increase of 7.47 per cent in real terms. Other
real increases were noted for Sub-programme 6
(Military Health Maintenance Capability) and Sub-programme 3 (Area Military
Health Service) at 2.23 per cent and 2.22 per cent,
respectively.
·
Performance
indicators
In 2013/14, six performance indicators were
identified for Programme 6 of which three lacked information due to a
confidential security clearance. For 2014/15, no indicators are indicated for
this programme in the APP.
6.7 2014/15 Allocations to Programme 7:
Defence Intelligence
This Programme has three sub-programmes. No
major shifts were apparent for the 2014/15 financial year. Programme 7 (Defence
Intelligence) is the smallest of the defence programmes with an allocation of
R792 million, an increase of 3.2 per cent in nominal terms and a decrease of
2.87 per cent in real terms as compared to 2013/14. It provides a defence
intelligence and counter-intelligence capability to the SANDF. Sub-programme 2 (Operations) received an allocation of
R473.6 million, which translates to an increase of 3.27 per cent in nominal
terms and a decrease of 2.76 per cent in real terms. Sub-programme 3 (Defence
Intelligence Support Services) received an allocation of R318.5 million, which
translates into an increase of 3.01 per cent in nominal terms and a decrease of
3.01 per cent in real terms.
·
Performance
indicators
Only one indicator has been identified for
this programme as compared to four in 2013/14, of which two were classified. In
addition, the current indicator is ‘Percentage compliance with number of
ordered commitments (external operations)’. This is different from the 2013/14
indictors which were ‘Percentage compliance with the approved force design’,
Percentage compliance with the approved force structure’, ‘Number of Defence
Intelligence products’ and ‘Number of vetting decisions taken in accordance
with requirements’.
6.8 2014/15 Allocations to Programme 8:
General Support
The General Support programme is the third
largest programme in the defence budget and constitutes 12.1 per cent thereof.
The programme received an 8 per cent decrease in nominal terms which results in
a 13.36 per cent decrease in real terms. This should be viewed against the fact
that in 2013/14 there was a virement of R635.981 million to the programme. The
largest decrease was observed in Sub-programme 5 (Departmental Support) with a
real percentage decrease of 36.34 per cent. A real percentage reduction of
31.44 per cent was also observed for Sub-programme 2 (Command and Management
Information Systems).
·
Performance
indicators
In 2013/14, several performance indicators
were identified for Programme 8 (General Support) of which three lacked
information due to a confidential security clearance. For 2014/15, no
indicators are indicated for this programme in the APP.
7. DEPARTMENT OF MILITARY
VETERANS
7.1 Medium-Term Strategic Focus
The DMV Strategic Plan for 2012 to 2016 lays
the foundation for the structuring of programmes within the Department, the
allocation of funds and the construct of the subsequent APP for 2014/15. The
Strategic Plan is closely linked to Government’s medium-term strategies. From
this, the Executive Authority has derived a number of priorities that inform
delivery on the legislative mandate. These priorities are outlined below and,
where applicable, their link to the 2014/15 financial year is alluded to:
·
The
provision of immediate social services to relieve distress among the most
vulnerable military veterans. This priority is reflected in Programme 2
of the Department’s 2014/15 budget which refers to socio-economic support services.
Funding for this programme increased from R122.2 million in 2013/14 to R168.1
million for 2014/15.
·
Provision
of comprehensive support services to military veterans and, where applicable,
to their dependents, subject to availability of resources. Support
services included in this entails health support, memorialising military
veterans, education and skills development, facilitation/advice on business
opportunities, pensions, housing and burial support. In 2014/15, these matters
will be addressed in the Department’s Programme 3 (Empowerment and stakeholder
management). The fund allocation for this programme is set to increase from
R76.5 million in 2013/14 to R157.9 million in 2014/15. Of this amount, R100.2
million (or 63.5 per cent) is allocated to the empowerment and skills
development sub-programme.
·
The
promotion of the heritage of military veterans and memorialising and honouring
military veterans. As part of Programme 3 (Empowerment and
stakeholder management), a total of R14.3 million is allocated to ‘heritage,
memorials, burials and honours’ for 2014/15, signifying a decrease of more than
50 per cent for this sub-programme. This is mainly due to the fact that the
“DMV will no longer have military veterans honouring functions”.
·
Maintenance
of a credible and secure national military veterans’ database. The
maintenance of such a database is essential for the Department to be able to
assist deserving military veterans. However, the finalisation and transparency
of the database has been an issue of contention and has been questioned by the
Portfolio Committee on several occasions. The DMV regulations, gazetted on 19
February 2014, pose similar challenges.
·
Promotion
of empowerment programmes for military veterans. This priority
focuses on the pursuit of initiatives that will widen military veterans’ access
to economic participation. This will include preferential procurement
mechanisms within the Department of Defence and other social partners as well
as the operationalisation of a special-purpose vehicle (SPV) to provide
incubator programmes for military veterans. This priority is also addressed by
Programme 3: Empowerment and stakeholder management.
7.2 Overview
of 2014/15 Budget Allocation
While previous financial years have seen the
DMV largely involved in capacity building, the recent increase in funding and
expansion of its activities seeks to bring the Department closer to being fully
operational. This is reflected in the fact that while in the first years of its
establishment, Programme 1: Administration received the most funding, there has
been a marked increase in funding of Programme 2: Socio economic support as
well as Programme 3: Empowerment and stakeholder management in 2013/14 and
2014/15.
Table 2 indicates the percentage of the
Department’s budget that was allocated to each programme in 2013/14, 2014/15
and projected for 2015/16 respectively. Similar to previous years, Programme 1
continues to receive the largest proportion of funding in 2014/15. This is only
set to change in 2015/16. The decreasing percentage of Programme 1 as part of
the overall allocation is, however, not due to decreased funding for that
programme, but rather due to increased allocations for Programmes 2 and 3. The
largest increase in funding for the 2014/15 financial year is for Programme 3,
which reflects a real increase of 94.36 per cent. This is, however, set to
stabilise by 2015/16 while Programme 2 will continue to rise to become the
largest programme in terms of funds appropriation.
Table
2: Percentage of budget allocated to programmes
Programme |
2013/14 (R million) |
Percentage of total budget per programme |
2014/15 (R million) |
Percentage of total budget per programme |
2015/16 |
Percentage of total budget per programme |
Programme 1: Administration |
152.8 |
43.48% |
178.2 |
35.34% |
169.2 |
27.88% |
Programme 2: Socio Economic Support Services |
122.2 |
34.78% |
168.1 |
33.34% |
267.5 |
44.08% |
Programme 3: Empowerment and Stakeholder
Management |
76.5 |
21.77% |
157.9 |
31.32% |
170.2 |
28.05% |
TOTAL |
351.4 |
|
504.2 |
|
606.8 |
|
·
Economic
classification
In terms of economic classifications, there
is a slight increase in Compensation of employees, which increases from R80.6
million in 2013/14 to R92.2 million in 2014/15. Goods and services increase
from R260.8 million in 2013/14 to R404.1 million in 2014/15. The most
significant contributor to the increased allocation for Goods and services is
consultants (R62 million for 2014/15) and housing (which increases from R60
million in 2013/14 to R103 million in 2014/15). There is also a significant
increase in the allocation for travel and subsistence, which increases from
R21.9 million in 2014/15 to R52.2 million in 2014/15. This is of particular
concern given the DMV’s small staff complement. Training and development will
increase from R23.6 million in 2013/14 to R79 million in 2014/15 while
Machinery and equipment decreased from R10 million to R7.9 million.
·
Personnel
information and salaries
The Department has an organisational
structure of 169 posts. There is, however, uncertainty as to the number of post
filled by the end of 2013. National Treasury states that the DMV had 63 filled
posts by November 2013. However, the DMV APP notes, on page 27, that it had 87
filled posts by December 2013. It is unclear if 20 personnel members were then
hired in December alone. The Department aims to fill all 169 posts by 2016/17.
These figures raise the concern that the Administration programme may be
staffed at the expense of other programmes which relates more directly to the
core functions of the DMV. Furthermore, given the significant real percentage
increases in the allocations for programmes 2 and 3 (29.53 and 94.36 per cent
respectively), there is a particularly small staff complement to manage
projects related to this increased funding.
8. OVERVIEW OF ALLOCATION PER PROGRAMME
8.1 2014/15 Allocations to Programme 1:
Administration
The 2014 APP reflects an expansion of the
sub-programmes of Programme 1. While
previously consisting of four sub-programmes, it has increased to six in 2014
with the addition of the (1) Strategic Management, Policy development and
Monitoring and Evaluation sub-programme as well as the (2) Corporate Services
sub-programme. The most significant increase in the allocation of funds to
Programme 1 occurred in sub-programme 5 (Internal Audit), which increased by
69.8 per cent in nominal terms and 59.89 per cent in real terms. Similarly,
sub-programme 3 (Corporate Services) also reflects a nominal increase of 52.09
per cent and a real increase of 43.22 per cent.
In terms of economic classifications, there
are a number of concerns regarding the allocation of funds in Programme 1
(Administration):
·
Travel and
subsistence: The allocation for travel and subsistence increased from
R5.414 million in 2013/14 to R7.161 million for 2014/15. This can be considered
an extremely high allocation given
that Programme 1 only has 67 filled posts.
·
Catering
and entertainment: Catering and entertainment is reported under
three different headings in Programme 1, including ‘Catering Departmental Activities’,
‘Entertainment’ and ‘Inventory: Food and food supplies’. The allocation for
these three categories are R389 000, R315 000 and R140 000 respectively.
·
Advertising:
Of
the three programmes of the DMV, only Programme 1 reflects an allocation for advertising.
The allocation for 2014/15 is, however, set to decrease from R1.573 million in
2013/14 to R1.223 million. This is of concern given the expanded scope of work
of the DMV and the need to reach and interact further with military veterans.
·
Communications:
There
is a significant increase in the allocation for Communication from R4.481
million in 2013/14 to R8.780 in 2014/15. It is unclear what this refers to as
it cannot form part of ‘computer services’ or ‘advertising’ which has separate
allocations. If this allocation refers only to, for example, phone services and
the rental of internet lines, it represents a very high allocation for such a
small programme with only 67 filled posts.
·
Consumable
supplies: A
total of R2.090 million has been allocated for this category. However, it
remains unclear what ‘consumable supplies’ refers to and how it is different
from the other category of ‘Consumable: Stationary, printing and office’.
·
Rental and
hiring: A
total of R1.180 million has been allocated for this category for 2014/15.
However, it remains unclear as to what equipment needs to be hired/rented for
an Administration programme.
Programme
1: Performance indicators
While Programme 1 (Administration) had a
total of 18 performance indicators in 2013/14, this has decreased to 14
indicators in 2014/15. The following indicators were removed:
·
Military Veterans regulations prepared for
approval. (Note that these were approved in 2013).
·
Approved DMV Service Delivery and Improvement
Plan.
·
Percentage deviation from approved cash flow.
·
Percentage compliance with budget transfer
prescripts.
8.2 Programme 2: Socio-economic Support
Programme 2 previously had four
sub-programmes, but this has been reduced to three for the 2014/15 financial
year. The sub-programme Research and Policy Development was removed. Programme
2 constitutes 33.34 per cent of the Departments total budget for 2014/15. In
nominal terms, the budget for this programme increased 37.56 per cent while the
real percentage change showed an increase of 29.51 per cent. Sub-programme 3
(Socio-economic support management) represents the largest sub-programme and
accounts for 67.95 per cent of the programme’s total budget for 2014/15.
In terms of economic classifications, there
are a number of concerns regarding the allocation of funds in Programme 2
(Socio-economic services):
·
Catering
and entertainment: Programme 2 reports on catering and
entertainment in three different categories. In total, R1.002 million is to be
spent on catering and entertainment in 2014/15, subdivided into ‘Catering:
Departmental Activities’ (R797 000), ‘Entertainment’ (R80 000) and ‘Inventory:
food and food supplies’ (R125 000).
·
Consultants:
A
total of R35.861 million is to be spent on consultants for Business and
Advisory Services (R5.842 million) as well as Laboratory Services (R30.019
million). It can be assumed that the former related to the finalisation of the
database and the management thereof. The MTEF spending on this is, however, of
concern.
·
Stationary,
printing and office: A total of R431 000 has been allocated for
this function for 2014/15, which is relatively high given that Programme 2 only
has a staff complement of 15.
·
Travel and
subsistence: A total of R4.971 million has been allocated for travel
and subsistence. It is crucial for the DMV to explain what percentage of this
will be utilised by staff of Programme 2 and what percentage will be utilised
directly for military veterans (including the transport of veterans to and from
events).
·
Programme
2: Performance indicators
Programme 2 has a total of 5 annual
performance indicators. This is significantly lower than the 11 performance
indicators presented in the 2013 APP. The following performance indicators were
removed and are not reflected in the 2014 APP:
·
Total number of military veterans with access
to counselling and treatment of Post-traumatic Stress Disorder.
·
Number of distressed and vulnerable military
veterans and dependents provided with immediate services.
·
Number of military veterans receiving the
anticipated military veterans pension.
·
Compensation of military veterans physically
or mentally injured in action.
·
Approved military health care policy.
·
Number of provincial health-care and
wellbeing centres established
8.3 Programme 3: Empowerment and stakeholder
relations
Programme 3 consists of three sub-programmes
and it constitutes 31.32 per cent of the Department’s total budget for 2014/15.
In nominal terms, the budget for this programme increased by 106.5 per cent,
while the real percentage change showed an increase of 94.47 per cent. The most
significant increase in funds allocated in this Programme relates to funding
for provincial offices and stakeholder relations. Funding for this
sub-programme will increase from R11.076 million in 2013/14 to R43.334 million in
2014/15. The primary aim of this sub-programme will be to set up and equip the
DMV’s provincial offices. The National Treasury states that in 2013/14, the
focus was on the DMV’s negotiations with relevant authorities to set up
provincial offices.
In terms of economic classifications, there
are a number of concerns regarding the allocation of funds in Programme 3
(Empowerment and stakeholder management):
·
Compensation
of employees: The 2014 APP notes that by 31 December 2013, only five
permanent positions were filled in this programme with 40 vacancies remaining.
However, the allocation for compensation of employees for this programme during
2013/14 was R22.629 million. This is set to rise to R25.143 million in 2014/15.
It is unclear how such a large amount can be used for such a small staff
contingent.
·
Catering
and entertainment: Programme 3 has a substantially higher
allocation for catering (R3.359
million) and entertainment (R294 000) than other programmes. It can be assumed
that catering may refer to events hosted for military veterans where food is
supplied. However, the 2014 APP also notes that the DMV will no longer have
military veterans honouring functions. As such, it is unclear exactly how these
amounts will be utilised.
·
Fleet
services: A
total of R1.2 million is allocated for this purpose, but it is unclear how many
vehicles have been allocated to this programme. As such, an accurate
cost-benefit analysis cannot be done.
·
Stationary,
printing and office supplies: Given the relative small staff contingent
of five, the allocation of R895 000 for stationary and printing seems
extraordinarily high.
·
Travel and
subsistence: A breakdown of funds for travel and subsistence should be
provided for this programme. This is extremely important given that R40.042 million
was allocated to this programme for travel and subsistence in 2014/15.
·
Training
and development: Over the medium-term the DMV aims to train up
to 9 000 people at the Centre for Advanced Training. The total cost for this
over the medium term, as per the 2014 APP, comes to R227.038 million which
equates to R25 226 per trainee.
·
Programme
3: Performance indicators
Programme 3 has a total of six annual
performance indicators for 2014/15, which is significantly lower than the 18
indicators presented in the 2013 APP. The following indicators were omitted in
the 2014 APP:
·
Liberation war memorial (According to the
2013 APP this should be established in 2014/15).
·
Erection of the Tomb of the Unknown Soldier
(scheduled for completion in 2013/14).
·
Number of programmes promoting the heritage
of military veterans.
·
Number of graves established and restored
·
Military veterans company database.
·
Number of military veterans with relevant
SAQA approved certificates (there was to be 1 000 in 2014/15).
·
Number of events honouring military veterans
·
Military veterans training and skills
development policy document (This was supposed to be approved in the 2014/15
financial year).
·
Number of formal agreements with institutes
of higher learning
·
Number of veterans receiving burial support
per year
·
Number of programmes promoting the heritage
of military veterans
·
Number of programmes promoting the affairs of
military veterans approved by Cabinet.
9. ARMSCOR
The
Armaments Corporation of South Africa SOC Ltd (Armscor) was established in
terms of the Armaments Production and Development Act (No 57 of 1968) to
satisfy the requirements of the South African National Defence Force (SANDF) in
respect of Defence Matériel.The Minister of Defence and Military Veterans is
the executive authority responsible for Armscor. The Corporate Plan 2014/15 –
2016/17 of Armscor was submitted to Parliament in March 2014.
Armscor’s vision is
to become the premier technology and acquisition agency for the South African
Government and Governments of the Southern African Development Community
(SADC).
9.1 SWOT
analysis
The SWOT analysis,
which was revised by the Board of Directors in June 2013, refers to strengths,
weaknesses, opportunities and threats for the Corporation.
Strengths include the
following:
·
Armscor’s Intellectual Property (IP) assets.
·
Armscor’s position to exploit IP for product
development and upgrade.
·
International reputation on acquisition
arena.
·
Strong legal authority and a strong resourced
statutory client.
·
Strong and resourced statutory client.
Weaknesses include the
following:
·
Lack of managerial depth.
·
Narrow understanding of its mandate.
·
Single-client concentration or inability to
develop independently from the DOD.
·
Failure to understand the intention of its
creation as a legal persona.
·
Not operating as a business.
Opportunities
include the following:
·
Armscor as the only acquisition structure and
authority of its kind in the country and the continent.
·
Experience with products acquired from abroad
and major countries that did not perform in Africa.
·
The drive for standardisation on the
continent.
·
A strong SADC and close cooperation of its
security services.
·
Lack of strategic planning and force design
capabilities on the continent.
·
Lack of technologies and individual resources
to develop own solutions in the defence and general industry.
Threats include the
following:
·
International competition based on
subsidising defence export.
·
Political pressure on South Africa exploiting
its Constitution and sensitivity on arms export.
·
Sophisticated and underhand efforts to keep
Africa incapable of defending itself.
·
Concerted efforts to undermine the unity and
cohesion of SADC and the AU
·
Small armed forces in SADC and the continent.
·
Efforts to disarm the country of its
defence-related industry.
9.2 Financial plan
The Corporate Plan
refers to the three year plan incorporating the financial results of Armscor
Corporate, Research and Development, the Naval Dockyard, and AB Logistics. In
terms of revenue growth, the Plan provides for low growth as the main source of
income for services charged is subject to a moderate increase in defence
spending. The revenue is supplemented by income from investments and some
commercial income. Cost growth has been carefully managed over the planning
period in response to the negative outlook. The Plan also includes a capital
expenditure programme to maintain activities. Armscor does not declare
dividends at the end of any financial period. Surpluses generated by Armscor
will be issued to maintain its infrastructure. The three year forecast
indicates a negative position which will require Armscor to make use of
reserves to fund its operating activities. Borrowings may be required to fund
its required capital expenditure as well as strategic projects pursued.
9.3 Group Financial Statements
The Revised budget
for Armscor Group for the 2014/15 financial year excluding unfunded additional
cost indicates a projected total income of R1.225 billion, while the operating
expenditure is estimated at R1.186 billion, of which R935.5 million is for
Direct Personnel Cost and R61.7 million for External Services. An amount of
R37.7 million has been allocated for Indirect Personnel Cost, R36 million for
Subsistence and Travel and R33.3 million for Water and Electricity. The total
profit for 2014/15 is projected at R800 000, whereas the losses for 2015/16 and
2016/17 are projected at R11.7 million and R23.3 million respectively. These
projections are contrary to those contained in the previous Corporate Plan,
which projected a total profits for 2014/15 and 2015/16 at R48.7 million and
R59.4 million respectively. The
financial information of the various Armscor bodies is as follows:
·
Armscor
Corporate.
The income for Armscor Corporate for 2014/15 is projected at R734.3 million,
while the operating expenses are projected at R718.7 million of which R541.5
million is allocated for Direct Personnel Cost and R53.7 million for External
Services. It is projected that the Armscor Corporate will make a loss of R700
000 in 2014/15, R4.4 million in 2015/16 and R10.1 million in 2016/17.
·
Research
and Development. The Research and Development was previously known as Armscor Defence
Institutes. The income for Research
and Development for 2015/16 is
projected at R284.3 million, while the operating expenses are projected at
R271.2 million of which R218.7 million has been allocated for Direct Personnel
Cost. Its profit is projected at R3.8 million and R1.1 million for 2014/15 and
2015/16 respectively, while a loss of R2.4 million is projected for 2016/17.
·
Armscor
Dockyard. The income for Armscor Dockyard for 2014/15
is projected at R182 million, while the operating expenses are projected at
R170 million of which R153.7 has been allocated for Direct Personnel Cost.
After financing and non less cash flow items, it is projected that the Dockyard
will not make any profit for 2014/15. It is further projected that the Dockyard
will make losses of R5.8 million and R7.8 million for 2015/16 and 2016/17
respectively.
·
AB
Logistics. The income for AB Logistics is projected
at R24 million, while operating expenses are projected at R26.3 million of
which R21.6 million has been allocated for Direct Personnel Cost. Its losses
are projected at R2.3 million, R2.6 million and R3 million for 2014/15, 2015/16
and 2016/17, respectively.
9.4 SELECTED
PERFORMANCE INDICATORS
The Service Level
Agreement between Armscor and the DOD specifies targets to be reached for as:
·
Capital Defence Materiel Acquisition (Goals
1): Contracts to be placed by Armscor and Cash flow.
·
Strategic Defence Acquisition (Goal 2):
Contracts to be placed by Armscor and Cash flow.
·
System Support Acquisition and Procurement
(Goal 3): Contracts to be placed by Armscor and Cash flow.
·
Schedule placement (Goal 4).
·
Management of Defence Industrial
Participation (Goal 5).
·
Management and execution of defence
technology, research, test and evaluation requirements by the DOD (Goal 6)
·
Performance against mandate (Dockyard
performance management agreement) (Goal 7).
The Corporate Plan
then lists the various key performance indicators with the related goals for
the four years namely 2013/14, 2014/15, 2015/16 and 2016/17. The Estimates of
National Expenditure for 2014 and Armscor’s Annual Report 2011/12 show how the
Corporation performed its functions against the set targets.
9.5 BUDGET
ANALYSIS FOR 2014/15
The total allocation
for 2014/15 is R1 981.6 billion,
which indicates an increase from R1
924.2 billion for 2013/14. In terms of real rand change between 2013/14
and 2014/15 the Corporation’s budget has declined by R58.3 million, which
indicates a real percentage decrease of 3.03 per cent.
·
Administration. The allocation of R361.2 million for
2014/15 for this purpose, illustrates a real rand decrease of R36.7 million as
compared to the R376.8 million allocated for 2013/14. In terms of real percentage change, the
allocation indicates a decrease of 9.74 per cent.
·
Quality
Assurance. The allocation of R90.3 million for 2014/15
illustrates a real rand decrease of R1.4 million as compared to the R86.4
million for allocated 2013/14. In terms of real percentage change, the
allocation indicates a decrease of 1.59 per cent.
·
Management
of Defence Matériel Acquisition. The allocation of
R317.6 million for 2014/15 for this programme, illustrates a real decrease of
R3.2 million as compared to the R302.3 million for allocated 2013/14. In terms
of real percentage change, the allocation indicates a decrease of 1.07 per
cent.
·
Management
of Strategic Facilities: Research and Development.
The allocation of R439.1 million for 2014/15 for this goal, illustrates a real
decrease of R8.9 million as compared to the R422.4 million for allocated 2013/14.
In terms of real percentage change, the allocation indicates a decrease of 2.12
per cent.
·
Management
of Strategic Facilities: Research and Development.
The allocation of R439.1 million for 2014/15 for this goal, illustrates a real
decrease of R8.9 million as compared to the R422.4 million allocated for
2013/14. In terms of real percentage change, the allocation indicates a
decrease of 2.12 per cent.
10. CASTLE CONTROL BOARD
The Castle Control Board (CCB) submitted its
Annual Performance Plan (APP) for the 2014/15 financial year to Parliament in
March 2014. This APP may be viewed in the context of the more overarching
Strategic Plan for the financial years 2012/13 -2016/17. However, changes in
the CCB structure, most notably the appointment of an Executive Director, may
impact on the direction of the APP.
10.1 Performance Delivery Environment
The CCB set a number of adjusted and new
performance targets in the 2014 APP:
·
To reduce adverse audit
findings by at least 50 per cent.
·
To complete 100 per cent of
all scheduled and approved projects by year-end.
·
To complete two new
innovative displays per annum.
·
To increase tourism numbers
to 150 000 in the 2014/15 financial year.
·
Increase revenue from
tourism to R3.3 million in 2014/15.
·
Support and mentor 20 intern
students.
·
Involve at least 10
community users in the use of the Castle for educational and cultural exchange
programmes.
·
Increase the number of non-paying
community members accessing the Castle to
25 000
·
Increase the audience
reached through positive media coverage from 5 to 6 million people.
In addition to the above, the APP also
included new/proposed outputs for 2014/15. These include the following
expenditure:
·
R710 000 for the
Conservation Management Plan
·
R978 000 to ‘kick-start’ the
enhancement of tourism potential
·
R298 000 for the tourism
internship programme and the heritage month programme
10.2 CCB programmes and MTEF estimates
There have been no changes to the programmes
as per the Strategic Plan and the 2014 APP makes reference to four programmes.
The budgetary allocations of these programmes are shown in Table 4.
Table
4: Expenditure estimates per programme:
CASTLE CONTROL BOARD: INFORMATION |
||||
Programme |
Estimate |
Medium-term estimate |
||
|
2013/14 |
2014/15 |
2015/16 |
2016/17 |
Administration |
2 526 |
3 573 |
5 226 |
5 525 |
Maintenance and conservation |
1 463 |
1 863 |
1 950 |
2 020 |
Tourism |
67 |
75 |
130 |
150 |
Public Access |
104 |
260 |
330 |
360 |
TOTAL |
4 160 |
5 771 |
7 636 |
8 055 |
10.2.1 Programme 1: Administration
Of the various programmes, the Administration
programme is set to receive the largest allocation over the MTEF period. The
APP notes that the increased allocation for this programme is due to
recommendations by the Auditor-General that the CCB should ensure improved
corporate governance. As such, there is a need for increased human resources.
Accordingly, Compensation of employees will increase from R1.505 million in
2013/14 to R2.472 million in 2014/15 and eventually to R4.225 million in
2016/17. It is further noted that the CCB proposes that the Castle’s trade
surplus fund of R13.9 million be used for funding of the additional human
resources. Approval for the usage of this fund was obtained from National
Treasury in September 2013.
10.2.2 Programme 2: Maintenance and conservation of the Castle
There is a steady increase in the allocation
to Programme 2 over the MTEF period from R1.463 million in 2013/14 to R1.863
million in 2014/15. This is, however, a significant reduction from 2012/13 when
R3.565 million was allocated to Programme 2. The reduction in funds allocated
for 2014/15 compared to 2012/13 is of concern given that the CCB’s 2012/13
Annual Report indicated a desire to start ‘Phase Two’ of the Department of
Public Work’s maintenance project in the 2014/15 financial year.
10.2.3 Programme 3: Tourism
The Castle raises its funds through entrance
fees and venue hire. The allocation for 2014/15 is set to increase somewhat
from R67 000 to R75 000. The APP states that the CCB aims to limit the costs of
consultants now that the Executive Director has been appointed. However, the
APP also reveals that, over the MTEF period, the allocation for consultants,
contractors and special services will increase steadily from R321 000 in
2014/15 to R400 000 in 2016/17.
10.2.4 Programme 4: Increased public access to the Castle
The 2014 APP indicates significant
underperformance in this programme in recent years. Accordingly, the budgetary
allocation will increase from R104 000 in 2013/14 to R260 000 in 2014/15. The
APP is, however, unclear as to exactly how these funds would be utilised.
10.3 Economic Classifications
In addition to the ‘Compensation of
employees’ and ‘consultant fees’ highlighted above, several economic
classifications require further interrogation by the Committee:
·
Travel and subsistence
(Domestic): Until 2013/14 there were no funds allocated for domestic travel.
However, R25 000 has been allocated for this purpose for 2014/15 which is set
to increase to R70 000 in 2016/17. It is unclear as to what the purpose of this
domestic travel will be.
·
Travel and subsistence
(International): While no funds have previously been allocated for this
purpose, R65 000 was allocated for the 2014/15 financial year and this is set
to increase to R90 000 by 2016/17. It is unclear as to what the purpose of this
international travel will be.
·
Entertainment: Funds
allocated for the purpose of entertainment stood at R36 000 for 2014/15. This
is set to increase to R60 000 by 2016/17.
·
Printing and publications:
Fund allocated for this purpose increased from R81 000 in 2013/14 to R185 000
in 2014/15.
·
Museum expenses: An increase
from R259 000 to R475 000 has been allocated for museum expenses from 2013/14
to 2014/15.
10.4 Utilisation of CCB Surplus
The 2014 APP indicates a number of projects
for which the CCB surplus will be used for over the MTEF period. It was
projected that R940 000 of the surplus will be spent in 2013/14 and this will
increase to R1.868 million in 2014/15. Over the MTEF period, the largest amount
(R2.159 million) will be spent on Castle commercialisation. The finalisation of
the Heritage Management Plan and the development of a place of worship are
‘once-off’ projects which ought to be finalised in 2014/15 and 2015/16
respectively.
11. COMMITTEE OBSERVATIONS
11.1 DEPARTMENT OF DEFENCE
The Department of Defence led by the
Secretary for Defence, Dr S. M. Gulube, presented its 2014 Annual Performance
Plan and 2014 Budget to the Portfolio Committee on Defence and Military
Veterans on 9 July 2014. The following observations were made by the Committee:
·
The Department was commended on the
submission of the 2014 Defence Review to Parliament and the Committee indicated
that that it is viewed as an opportunity for the Department to arrest the
decline in the Defence Force.
·
The question was raised whether the
Department is actually underfunded given the R3.46 billion surplus in the
Special Defence Account as well as the increasing expenditure on non-core items
such as Advertising which seems to have increased from R11.9 million to R52.3
million. The Department responded by explaining the purpose of the Special
Defence Account Act and emphasised that annual roll-overs do not mean that
these funds are available for other activities especially since the act allows
for these roll-overs. The R3.46 billion is committed for various projects and
would only be a surplus if it was uncommitted. This is an issue that the
Committee will have to receive a comprehensive briefing on and it is hoped that
with the presentation of the 2014 Defence Review, this issue will to a large
extent be addressed.
·
Defence acquisition plays a major part in
adequately resourcing the defence force and it was questioned whether
acquisition projects, such as Project Hoefyster (acquisition of
Armoured Personnel Carriers for the SA Army
),
has been aligned with the security threats facing South Africa as an amount of
R15 billion has been set aside for this project. It was also questioned why the
Project has been approved before the release of the Defence Review. Finally, a
concern was raised as to whether the defence force will be able to deploy the
infantry fighting vehicles to, for instance, the DRC and maintain their
deployment in foreign deployment areas. The Department indicated that the
Defence Review was not the sole document to direct the defence force and that
other policy documents have been utilised as well to acquire capital equipment
for the Department.
·
The compensation of employees is around R21.9
billion or at least 51.9% of the defence budget. It was claimed that the
Department spends at least around R4.8 billion too much on this item. The
Secretary indicated that more time is required to appraise the Committee fully
on this issue and that the Human Resources are a major component being
addressed in the Defence Review. It is hoped that with the finalisation of the
Defence force design and defence force structure by the Chief of the SANDF,
this issue will be addressed. The Department also indicated their willingness
to engage with the Committee on the matter of the Defence Review.
·
The Committee enquired about the actual
number of members in the Defence Force, as varying figures were given in the
presentation, the 2014 ENE and the APP. It was pointed out that the 1998
Defence Review indicated a downsizing of the Defence Force personnel, but
subsequent to that, many factors - such as border safeguarding and peace
missions - have attributed to the situation where the personnel numbers actually
need to be increased. The Department undertook to inform the Committee within 7
– 10 days on the actual position regarding the personnel in the Defence Force.
·
The legal claim of R299 million against the
Department has not been reported to National Treasury and the Committee
expressed its concern in this regard as well as the impact of other legal
claims on the Department, especially against the background that the Department
is viewed as being underfunded. The Department indicated that many of the claims
revolve around complications in medical care, contractual disputes and labour
issues. Although the response indicated that National Treasury requires, inter alia, a projection of such claims,
the Committee would like the Department to pay close attention to this matter.
·
The R150 million allocated to the operations
in the Central African Republic has been transferred to the deployment in the
DRC after the CAR deployment has been terminated, but indications were that
there were around 18 soldiers remaining in the CAR, thus contradicting the
first statement. In response it was indicated that all soldiers were withdrawn from the CAR and that efforts are being
made through DIRCO and the State Security Department to facilitate the return
of equipment left in the CAR.
·
The Office of the Military Ombud is partially
staffed (44 out of the 89 posts) and it is experiencing operational challenges
as it can only deal with 50% of the case load. This is to disadvantage of serving
members and especially military veterans who face challenges when lodging
complaints.
·
The Committee has encountered complaints
about the effectiveness of the grievance procedures in the Department during
its oversight visits in the Fourth Parliament, and enquired about this aspect. The
Department responded that it has an electronic grievance procedure in place
which can trace complaints from unit level until resolution, which it believes
is functioning effectively to assist with addressing grievances in the
Department.
·
Targets set in a particular APP have been
changed in the subsequent year regarding the same APP targets, leading to a
situation where there are difficulties in comparing the progress made or to
verify whether these have been achieved or under-achieved. Although it was
indicated that the APP of the Secretariat contained a list of changing targets,
such changes should be reported in the subsequent Annual Report and the reasons
therefore should be provided.
·
The target of the number of Reserves being
used versus the hours utilised by them, is problematic. The Department should
either provide a figure of the number of personnel utilised or use a
combination of personnel numbers and man-hours. The Department responded that
in its interaction with National Treasury it indicated the difficulty with this
target and after deliberations decided to change the target to “number of
Reserve force days used.”
·
The Committee enquired about the main cost
drivers from the 2009 budget and whether these were partly the reasons for the
overall budget shortfall. The Secretary responded that National Treasury stated
that the funding for the improved salaries of soldiers must come from the
Department’s budget. No additional funding was received from National Treasury
regardless of the fact that there was a directive to improve salaries.
·
The Department is involved in Disaster
Management and the Committee enquired where the funds for this come from. The
Department explained that these activities are unfunded and that it has to be
sourced from other allocations in their budget.
·
The Committee agreed that the Strategic Plans
of the Defence Secretariat and the SA National Defence Force should be combined
and it is hoped that the next Strategic Plan 2015 – 2020 will reflect this
intention.
·
The Committee inquired about the changes in
the allocated flying and sea hours in the Force Employment programme as well as
those in Programmes 4 (Air Defence) and Programme 5 (Maritime Defence). It was
responded that these are spread across the programmes and that it is difficult
to determine the flying hours in Programme 2 (Force Employment) in advance due
to various reasons. The Committee expressed its concern regarding flying hours
and expressed the need that the SA Air Force must be able to maintain
sufficient hours as per the international norms.
The following questions were allocated for
written responses from the Department:
·
Whether there are outstanding investigations
at the Infantry School in Oudtshoorn and it was requested that the Committee be
briefed on this once concluded?
·
The understaffing at the Office of the
Military Ombud and how this is being addressed should be responded to by the
Military Ombud.
·
It should be indicated in which countries the
two new defence attaches will be deployed as little information in this regard
has been made available.
·
More information should be given about the
reasons for the changes in sea hours and the changes in flying hours.
·
Whether funds have been set aside to acquire
a new VIP aircraft for the President?
·
The status of the Ministerial report on the
South African Military Health.
·
The total number of soldiers per sub-unit on
our landline borders.
·
Whether the Mobile Exit Mechanisms (MEM) were
still ongoing and, if so, whether it is effective in addressing personnel
figures in the Department?
·
Why there is an allocation for vehicle
maintenance by consultants and why this was necessary?
·
Whether Unmanned Aerial Vehicles or Drones
will be utilised as a force multiplier for the SANDF forces deployed along the
borders.
·
Whether the Department will fulfil its quota
of nine (9) planned in international military exercises?
·
Slide 54 of the presentation by the
department refers to a baseline increase for the South African Air Force. How
will this be utilised?
11.2 DEPARTMENT OF MILITARY VETERANS
The Department of Military Veterans presented
its Annual Performance Plan and Budget for 2014 to the PCODMV on 3 July 2014,
with the newly appointed Deputy Minister in attendance. The Department was commended
for the work they have done so far to deliver benefits to military veterans in
terms of Section 5 of the Military Veterans Act (No. 18 of 2012).
·
The DMV encountered challenges in the release
of funds from National Treasury, but these have been now resolved. The
Committee expressed the hope that with the current financial year’s allocation,
much progress will be made to deliver benefits to deserving military veterans
and their dependents.
·
The Committee indicated to the Department
that differences in sub-programmes
where targets were changed are problematic and that this should be avoided as
it is not only confusing but lacks consistency over the MTEF period and
complicates comparisons between the different Annual Performance Plans.
·
The lack of a credible, transparent and
secure military veterans’ database remains a concern and its completion should
be concluded as soon as practically possible to facilitate budgeting and other
management processes. The DMV should therefore inform the PCODMV of the
challenges in this regard and especially their timeframe to finalise database.
·
Clarity should be given to the Committee
regarding the contradicting personnel information in the 2014 Estimates of
National Expenditure, the Department’s 4th Quarterly Report and the
2014 Annual Performance Plan.
·
The Department spends a large amount on
consultants (R62 million budgeted for 2014/15) and this should be explained.
The DMV should also endeavour to lessen its reliance on consultants and only
utilise them when absolutely necessary.
·
The expenditure on Sustenance and Travelling
is exorbitantly high given the limited number of personnel employed by the DMV.
It should clearly indicate which amounts have been for service delivery and
which have been allocated for operational purposes. Similarly, expenditure
regarding Entertainment and catering should be clearly categorised into these
sub-categories.
·
It should be indicated whether cooperation of
other Departments at national, provincial and especially local government level
have been investigated to assist with for instance the provisioning of
accommodation for the to-be-established provincial structures. The Committee
expressed the view that there is sufficient goodwill at the other spheres of
government to support the DMV in their efforts to accelerate the provision of
benefits to Military Veterans. These opportunities should be exploited as it
will not only save costs but also assist to increase awareness.
·
The Department needs to reconsider its communication
with military veterans throughout the country as many military veterans are
complaining about a lack of information as well as difficulties to contact the
Department. Similarly, the DMV should present its Marketing strategy to the
Committee and in particular indicate how it attempts to reach rural and
indigent military veterans as they count amongst the most deserving military
veterans who require urgent assistance.
·
The Stationary and Printing expenditure
should be explained to the Committee as it is clear that a large amount is
allocated to this item while a limited number of personnel have been employed
by the Department. The DMV should consider alternative reporting to distinguish
between operational and service delivery expenditure in this regard.
·
It should be indicated how many and where the
Wellness Centers were established as
it cannot be confirmed that these have been established as planned.
·
Attention should be given to the respective Memoranda
of Understanding and Service Level Agreements between the DMV and other service
delivery agencies and it should be indicated how many have been concluded, how
many are outstanding and challenges to ensure that services and benefits are
delivered to military veterans.
·
Burial support is a crucial benefit for
military veterans and it should be ensured that access by deserving military
veterans and their dependants are not restricted or over-complicated to make
certain that military veterans are buried with the necessary dignity and
respect given the sacrifices they have made for the country.
11.3 ARMSCOR
Armscor, led by the newly appointed
Chairperson of its Board of Directors – Vice Admiral (ret) RJ Mudimu -
presented its Corporate Plan 2014/15 – 2016/17 to the Portfolio Committee on 2
July 2014. The new Board was appointed
on 1 May 2014. The following were deliberated upon in the meeting:
·
It was indicated that the new Board has deliberated
upon the appointment of a permanent Chief Executive Officer and was waiting for
an opportunity to present its report to the Minister and will then be in a
position to comment on the appointment of the CEO. The contract of employment
of the former CEO - Mr Sipho Thomo - was terminated with effect from 7 January
2010 and since then Mr JS Mkwanazi, General Manager Acquisition has been acting
CEO. It was impressed on them that this matter should be finalised as soon as
possible and be reported to the Committee.
·
Armscor participated in the process of developing
the 2014 Defence Review and had several meetings with the Defence Review
Committee. The Corporation will once again reflect on the latest version of the
Defence Review with the new Board at its upcoming strategic session. It is
especially with regards to Chapter 9, 10 and 15 of the Defence Review that the
Corporation will have to position itself in such a manner to optimally support
the Defence Force. A presentation on its position in this regard should be
given to the PCODMV as soon as possible especially since the 2014 Defence
Review has been tabled in Parliament on 3 July 2014.
·
The question was raised whether Armscor has and
will exploit its Strengths and Opportunities and limit the Weaknesses and
Threats as identified in its SWOT analysis.
It responded that these are integral to its Strategic Plan and cited several
practical examples on how the Corporation is dealing with it. It has inter alia established a Compliance
Department to assist with lowering the risks and threats and in this pro-active
manner it attempts to manage these issues. The Committee encouraged the
Corporation to increase its efforts to address these issues.
·
Several Key Performance indicators had 90% as
a target (See for instance Goals 1, 2, 3, 4, 6 and 7 in latest Corporate Plan)
and many of these have been overachieved (See achievements in the 2012/13
Annual Report regarding Goals 1, 2, 3.2, 5 and 6 ) resulting in the questioning
of whether these targets have been set too low. It was indicated that often
milestones were reached ahead of the target date resulting in an
overachievement. The Committee will monitor these targets and its achievements
and will advise accordingly.
·
Armscor’s Regional Strategy is in the process
of being finalised and is viewed as important for especially its regional outreach
and business opportunities. The Committee called on the Corporation to indicate
who is responsible for the development of the strategy and how far this process
is. Given the role of South Africa in the region and especially the Continent
and the pronouncements of the 2014 Defence Review in this regard, it is
important that the Committee be briefed on this strategy as soon as possible.
·
The Corporate Plan indicates that it will
consider the registration of some of Armscor’s business units as independent
companies. The Board was requested to supply information on the responsible person
and/or unit as well as the progress made to register these business units.
Since Armscor’s ability to operate as a business is viewed as a weakness in the
SWOT analysis, it is important that the Committee be kept abreast of
developments in this regard.
·
Simon’s Town Dockyard faces many challenges
and some of these relate to personnel and capacity issues and in particular
funding constraints to conduct its work of refitting and maintenance of the SA Navy’s
vessels and submarines. The Committee pointed out that the Dockyard should be
listed as one of the main critical success factors and should receive the
priority status it deserves to address the various challenges.
·
The Corporation was encouraged to fill the
vacancies as soon as possible while paying attention to Employment Equity in
particular Black females. It should also indicate which skills it is
developing, how much was spent on this and that it should communicate the
Skills Development Plans to the Committee.
·
The Committee requested an explanation about
the unfunded expenditure and how the Corporation is dealing with it. While
Armscor indicated that certain projects and programmes are covered by
agreements between Armscor and the SA Navy, the Committee encouraged it to
clearly indicate which projects are funded by it and which are funded by the SA
Navy.
·
The Corporation stated that it faces
Modernisation constraints and was requested to indicate how this process is
funded, especially since the DoD itself, is underfunded.
·
A profit of R84.6 million is indicated for
the Financial Year 2012/13 while this diminish to a loss of R23.2 million
(2016/17 Corporate Plan A2) over the MTEF period. Given this reality, the
Corporation was asked to indicate how it will deal with future losses.
·
According to the Estimates
of National Expenditure the target for Management of Defence Industrial
Participation was set at R349 million for 2012/13. Only R75 million was
achieved. The Corporation should indicate the reasons why it is under-achieving
regarding the targets set for the Defence Industrial Participation and why
these are pitched at 90% and not 100%.
11.4 CASTLE CONTROL BOARD (CASTLE OF GOOD HOPE)
The Castle Control Board led by Lt Gen (ret)
JT Nkonyane presented its State of the Organisation to the Committee on 2 July
2014. The Executive Director could not attend and the newly appointed Chief
Financial Officer (CFO) was introduced to the Committee at the meeting. The
following are pertinent issues:
·
The Committee wanted to be informed about the
impact of restorations at the Castle of Good Hope (CGH) on its daily
Operations. It was indicated that although it did have a negative impact, this
was managed through proper planning to ensure that the impact is limited and
interference with the daily operations at the Castle is limited. At the next
meeting the CCB should report back on this issue.
·
The Committee enquired whether the position
of a Chief Financial Officer (CFO) is affordable and if this function cannot be more cost-effectively executed by a
part-time employee. The Board responded that a CFO was recently appointed on a
three year contract and believe that given the current financial status of the
CGH it is affordable over the Medium Term Expenditure Framework (MTEF) period.
The position was budgeted for and although income dependent, it is viewed as
being affordable given inter alia the
R13.9 million surplus.
·
Responding to the question whether there were
specific plans to utilise the R13.9 million surplus over the MTEF period, it
was indicated that these plans are set out in Appendix B of the Annual
Performance Plan (APP). It remains unclear if the remaining amount in the
Surplus would be utilised beyond the MTEF period or whether some funds will be
maintained as a form of contingency-fund. The specifics of these plans need
however to be shared with the Committee as the Appendix only lists the items
and amounts for the relevant three years of the MTEF.
·
The CCB intends to increase the revenue from
tourism through aggressive marketing and increasing the number of visitors and
it is hoped that this will not have an impact on the entrance fees visitors
have to pay. The Committee will track
the increase in entrance fees and make sure that it remains accessible to South
Africans from all walks of life.
·
In response to a question whether anything was
planned for Nelson Mandela Day, it was reported that plans are being made to
celebrate the day, but that the detail thereof has not yet been finalised and
would be shared with the Committee.
·
The Committee requested to be informed about
the timeframes attached to the filling of vacancies at the CGH. As this was one
of the key performance areas on which the Executive Director will be assessed,
this is not only viewed as a priority but the intention is to have all
vacancies filled by the end of this financial year.
·
The CCB was urged to “tighten up the risks”
associated with human resources as this is insufficient to fulfill its mandate.
Similarly, the security and safety issues in and around the site, as indicated
in its Strategic Risks of the CCB, needs to be attended to.
·
Provision is made for 20 interns and the Committee
wanted to know whether they are paid a stipend, where the money for this comes
from as well as how these interns are being utilised. During the response it
was indicated that the utilisation of interns is not new and that they are
sourced from tertiary institutions.
·
On the question of how the 10 community
members will be involved in educational and cultural programmes, it was
indicated that they hail mostly from the surrounding communities and some were
sourced through NGO’s. They will be involved in an advisory capacity on how to
improve the image and profile of the Castle. Attempts are also being made to
improve its outreach beyond the Western Cape and the CCB was requested to inform
the Committee accordingly on developments in this regard.
·
The Sustenance and Travel allocation was
questioned by the Committee and in response it was stated that it was inter alia for international travel to
benchmark and/or to attend relevant meetings for the Executive Director and the
CFO. The CCB should report back to the Committee on the outcomes and benefits
of such international travel.
·
The Committee pointed out the discrepancy in
the annual target for audience where the APP refers to 5 to 6 million for
2014/15 but the ED’s performance contract refers to 15 million. It was indicated
that since the ED was absent this anomaly will be pointed out to him for
action. The CCB was requested to respond in writing to the Committee on this
issue.
·
The amount allocated for Entertainment is
R2000 and upon questioning this amount, the Committee was informed that it will
be used to entertain high profile guests such as the Minister and the Deputy
Minister. Similarly, in response to the increase in Printing and publication,
it was stated that this was to
assist the drive to market the Castle more extensively. The increase in Museum
expenditure was for the increase in exhibitions like the new Cetshwayo
exhibition in cooperation with the KwaZulu-Natal province. The Committee will
track developments in this regard to ensure that these expenditure items are in
line with the planned activities.
12. RECOMMENDATION
view that the Department of Defence is
underfunded as inter alia indicated
in the 2014 Defence Review and the increasing ordered responsibilities placed
upon the Department as well as several other important considerations
highlighted in this Report, it is recommended that the 2014/15 budgetary
allocations and provisions of the Department of Defence, Department of Military
Veterans, Armscor and the Castle Control Board, be approved.
13. APPRECIATION
The Portfolio Committee on Defence and
Military Veterans wishes to extend its gratitude for all those involved in
making this Report possible especially the officials from the Departments and
the entities. It expresses the wish that future interactions will similarly be
constructive and conducive to effective oversight over these important stakeholders
responsible for the preservation of the Castle, provision of defence material,
caring for our military veterans and the safeguarding of our country and its
people.
Report to
be considered.