ATC121030: Budgetary Review and Recommendation Report of the Portfolio Committee on Defence and Military Veterans, dated 23 October 2012:
BUDGETARY REVIEW AND RECOMMENDATION
REPORT OF THE PORTFOLIO COMMITTEE ON DEFENCE AND MILITARY VETERANS, dated 23
Bills Amendment Procedures and Related Matters Act (No. 9 of 2009) provides for
a parliamentary procedure to amend money bills, thus granting parliamentary
committees greater opportunity to influence the allocation of funds to the
departments they oversee.
Section 5 of
this Act compels the National Assembly, through its committees, to annually
submit Budgetary Review and Recommendation Reports (BRRR) on the financial
performance of departments accountable to them. The BRR Report must be informed
by a committees interrogation of, amongst others, the national departments
medium-term estimates of national expenditure, strategic priorities and
measurable objectives, National-Treasury-published reports, annual reports and
financial statements, as well as observations made during oversight visits.
Essentially, the BRR report should be a committees assessment of the
departments performance and service delivery (given available resources), as
well as the effectiveness and efficiency with which its programmes are
resourced. Although the BRR Reports must be published at a specific time in the
budget cycle, it is clear that the work that informs the report must be
of the Constitution sets out the mandate of the South African National Defence
Force (SANDF), which is to defend and protect the Republic, its territorial
integrity and its people in accordance with the Constitution and the principles
of international law regulating the use of force. In pursuance of this
mandate, the Department of Defence and Military Veterans provides, manages,
prepares and employs defence capabilities commensurate with the needs of
Portfolio Committee on Defence and Military Veterans (PCODMV) is mandated to, amongst
other statutory obligations, support the Department of Defence and Military
Veterans (DoDMV) in fulfilling its mandate through the rigorous monitoring of
the implementation of legislation and adherence to policies, such as the
Defence Act (No. 42 of 2002), the White Paper on Defence (1996) as well as the
Defence Review (1998).
At the time
of writing this report, a presentation on performance information relating to
the Department of Military Veterans was still outstanding. The Committee will
submit a separate report containing its findings and recommendations, once the
Department of Military Veterans appears before it.
As in the
previous years, the time constraints imposed on committees, particularly those
of the parliamentary calendar, meant that the annual reports could not be
vigorously interrogated and that this Budgetary Review and Recommendation
Report (BRRR) was drafted within this limited time period. The Committee
believes that the deadlines set for committees to consider annual reports, and draft
and table the Budgetary Review and Recommendation Reports (BRRR,) should be reconsidered.
comprises four parts detailing the analysis of the 2011/12 Annual Report and
Financial statements, the prevailing strategic objectives, the budget
allocation and financial performance, and the PCODMVs observations/recommendations.
This document should be read alongside previously published Committee reports,
including those relating to oversight visits, reports on budget votes and
strategic plans, as well as the report on annual reports.
ANNUAL PERFORMANCE AND AUDITED FINANCIAL STATEMENTS
Department of Defence and Military Veterans received an adjusted appropriation
of R34,349 billion against a budget vote of R34, 604 billion. Total expenditure
against the adjusted budget vote amounted to R34 331.437 billion, with a
reported variance of R17 650.
notes that the applicability, relevance and validity of performance targets and
indicators remain a challenge.
period under review, it is reported that, of the 276 targets set, only 119 (43%)
of these targets had been met. This was mainly ascribed to the fact that
performance targets and indicators were not suitably developed during the
strategic planning process. Furthermore, the Department succeeded in achieving eight
of the 22 selected performance indicators published by National Treasury and
which partly forms the basis of departmental planning, funding allocations and
in-year performance reporting. It is especially the compliance with United
Nations requirements and rules for peace missions, the finalisation of the DOD
border management strategy, the number of reserves,%age of vacant funded posts
and the decline in the turnover rates, that are concerning. The Committee
remains concerned over this persistent poor development of strategic objectives
and performance indicators, since ongoing monitoring and evaluation of service
delivery remains a challenge.
Auditor-General expressed an unqualified audit opinion on the financial state
of the Department. This is in part due to a conditional departure granted by
National Treasury that allowed the Department, for auditing purposes, to
disclose information on the three main categories of assets. It is expected
that the DODMV will report fully on all assets for the 2012/13 financial year.
The Committee notes with
concern that, during the 2011/12 financial year, the Department did not succeed
in resolving the impact legacy information systems have on the effective
administration of the Secretariat and South African National Defence Force
(SANDF). This meant that the Department could not adhere to the Communication
Systems Governance guidelines, Risk and Compliance functions and certain
functions in terms of the Promotion of Access to Information Act.
Furthermore, outdated systems are
incompatible with current DOD information systems and can not be fully
integrated. Given funding limitations, an immediate overhaul of information
systems is also not feasible. To ensure minimal disruption in the administration
and operation of the Department, it is reported that systems are regularly
upgraded to ensure an adequate level of interoperability.
A limited budget also
impacted on the achievement of key targets set for the financial services,
resulting in, amongst others, delays in the registration and payment of
suppliers in the procurement process. In terms of the supply chain management
sub-programme, the Committee notes the ongoing work done to ensure that the
misalignment between the scope within the functions that are to be performed
and the current Human Resource structure. This would ensure that certain HR
functions are decentralised and executed on a Service and Divisional level The
Acquisition Services also reported poor achievement of performance targets
mainly due to delays in the strategic acquisition process which is partially
due to the finalisation of the White Paper on the Defence Industry.
The Department achieved
its 14 targets, with the exception of the targeted nine joint interdepartmental
and multinational exercises. Only six exercises were successfully conducted,
due to a command decision that the SANDF should not participate in the two exercises,
while one was cancelled by the Namibian Defence Force.
The roll-out of phase two of the border
safeguarding responsibility proceeded as planned it had successfully
seven sub-units (which include
land, air and maritime defence) and had contributed to apprehending illegal
immigrants, arrests of criminals, confiscating illicit drugs and goods, as well
as the killing of 11 and arrest of 22 poachers in the Kruger National Park.
However, threats to
effective border safeguarding remain, particularly in the Madimbo training area
where a land dispute remains unresolved. The Committee notes the impact this
unresolved matter could have on effective border safeguarding, as it creates a
gap that can be exploited for the illegal crossing of people and goods. The
SANDF also urgently requires an adequate strategic heavy-airlift capability, as
the lack thereof limits the deployment and sustainability of the SANDF in external
operations, as well as the deployment of the SANDFs reaction force. The high
cost of chartering aircraft and ships to address this challenge - while noting
that this is a temporary and immediate solution - is not sustainable and cost
effective in the medium to long term.
The South African Armys
capabilities are severely overstretched, and it struggles to meet operational
commitments it lacks the required infantry, engineer, intelligence and
support capabilities. Of the 20 identified targets, only one had been achieved.
The Committee is perturbed
by the admission that, while the SA Army had provided all forces required,
these forces may not have been combat ready. The exodus of scarce-skilled
personnel, particularly those in logistics, technical and hospitality, the
ageing Prime Mission Equipment (PME), shortages of ammunition, and dilapidating
facilities, led to important targets not being achieved.
The Annual Report confirms that the Mobile
Bridge Laying System is no longer safe to use for force preparation or
operations. Also, force training had to be discontinued with the Mine Breaching
System, which is no longer in use.
are critically needed for the upgrade and maintenance of these
safeguarding is also threatened, since the required capabilities expected to be
provided by the landward defence programme would further compromise the already
overstretched deployable capabilities. The SA Army requires additional funding
for the force preparation of the 15 sub-units the SA Army should supply for
this purpose. Owing to the limited budget, current army projects (armament
planning) cannot be completed and will not meet the full capability
requirements as stipulated in the Defence Act, 2002, or the SA Army Force
Design/Structure. Sustainability of PME remains a concern, as operational gaps
have already been reported due to the end of life-cycle, obsolescence,
underfunding and late delivery on equipment. The non-performance of the Defence
Industry also contributes to the above state of affairs, as is evident in the
delays in the finalisation of Project Vistula. Leader Group training of MSDS
recruits could also not be continued, since key exercises such as Exercise Seboka
and Exercise Young Eagle were not scheduled for the period under review.
The Annual Report indicates
the achievement of most of the targets but that this Programme struggled to
achieve the planned flying hours for three sub-programmes. The helicopter-capability
sub-programme achieved 10 333.26 of the targeted 12 500 flying hours due
to budget constraints that limited the availability of the A109 as well as Oryx
and Rooivalk fleet and aircrew.
reasons were provided for the underachievement of the transport and maritime
surveillance capability sub-programme, as well as the command and control
capability sub-programme. Due to chronic funding shortages, the SA Air Force
had to narrow its work to improving the availability of systems, particularly
the provision of air mobility systems to other services.
The South African Navy
predicts that required levels of capability are not sustainable within the limited
budget. While it achieved most of its performance targets, less money meant
that facilities requiring maintenance and upgrade would continue deteriorating
and that critical shortages in core musterings could not be remedied.
Notwithstanding the above, the SA Navy met most of its targets. However, due to
the cancellation of the Military Skills Development System (MSDS) intake, there
were fewer accepted apprentices, which meant that of the targeted 4 928
targeted enrolments, only 3 713 could be achieved.
Military Health Support
While this programme
reported an achievement of 10 of the 15 targets, a limited budget and critical
shortages in health care practitioners continued to impact on the combat
readiness of and delivery of medical services by the South African Military
Health Services (SAMHS). The measures introduced to strengthen the skills
capacity would only bear fruit in the medium to long term.
Of the 1.4 million health care activities
targeted at the 88 geographical health area facilities, only 1 250 99
activities were recorded due to a lack of funding.
Only 779 751 out of the targeted
995 000 health care activities were recorded at the three military
hospitals due to the repair and maintenance programmes at these
Available stock levels were
not achieved due to limited funds and late delivery by suppliers.
Given the nature of the
responsibilities of this programme, objectives, targets and performance
information could not be disclosed. While no reasons are provided, it merely
disclosed that of the 340 defence intelligence products according to annual
schedule and client requirements provided, only 339 had been achieved.
Following a series of security breaches at
the Ministry, the Department and Armscor,Defence Intelligence instituted counter-intelligence
This programme achieved
10 of the 17 targets set for the 2011/12 financial year.
The facilities utilised by the Department of
Defence remain in a state of disrepair and continue to deteriorate and may not
be in line with Occupational Health and Safety Standards. The challenges in the
relationship between the Departments of Defence and Public Works meant that
only 52% compliance to Capital Works Programme had been achieved and
refurbishment projects could not be fully completed.
Overview of budget and financial
Budget Vote and spending
For the 2011/12 financial
year, the Department received R34, 604 billion which was decreased to
R34 349 billion,
during the adjustment period. The Defence budget vote, prior to adjustment,
amounted to 1.19% of the Gross Domestic Product or 2.53% of the total
government expenditure and represented an increase of 12.66% of the previous
year (R30.4 billion in 2010/11). The overall increase in allocation was due to
the establishment of the Department of Military Veterans, the execution of the
border safeguarding, municipal charges, funding for the new SANDF remuneration
dispensation, peace support operations and maintenance of defence capabilities.
Adjustments to the budget
decreased the total allocation to the Department by R 233 878 million.
Additional adjustments included an unforeseen and unavoidable amount of
R81 437 million to fund the SANDFs participation in anti-piracy efforts in
the Mozambican channel; and an additional amount of R200 million to fund
personnel remuneration increases.
virements were also recorded. These included R23 493 million reallocated
within the Maritime Defence Programme from Goods and Services to Transfer and
Subsidies; Public Corporations and Enterprises for cranes, lifts, pumps,
generators, gantries, fuel and piping, emergency services harbour services and
general upkeep. R0.845 million was also reallocated from the landward defence
programme to the administration programme for the payment of the Safety and
Security Sector Education and Training Authority (SASSETA).
While the Department
received an unqualified audit report, this is mainly due to a conditional
departure granted by National Treasury, exempting it from reporting on certain
assets in the annual financial statements.
For the period under review, the Department was required to only subject
the three primary categories of assets specialised military assets, transport
assets and immovable assets - to a full audit. A consistent and well-documented
policy had to be submitted on how assets disclosed had been valued and other
categories of assets had to be disclosed in an annexure on which the auditors
would not express an opinion.
Key findings were made
that the Committee believes require greater scrutiny. These relate to
compliance with Supply Chain Management laws and regulations, inadequate
contract management, the functionality of an internal audit, implementation of
senior management performance agreements, adherence to an Information Technology
Governance Framework, a classification policy for inventory and assets, and reporting
progress on a Capital Assets Plan.
2012/2013 EXPENDITURE TRENDS AND
PERFORMANCE AGAINST TARGETS
Ten priorities inform the
work of the Secretariat and Department of Defence and Military Veterans and
Enhancing the SANDFs Landward Defence Capability;
Improving maritime security in order to effectively respond
to maritime threats affecting
Through approved projects within the defence industry, the
Department will contribute to the creation of jobs within available resources;
Given the increasingly central role
Defence capabilities will be utilised to provide initial
training to selected youngsters, as part of its National Youth Service
revitalisation of the Reserve Forces continues, in order to fulfil various
roles allocated to them to support the Regular Force;
The restructuring of the defence industry is set to continue
with emphasis on required defence capabilities and sustainability; and
Work continues regarding the establishment of the Defence Works
Capability, and it is hoped that the in-house capability that will ultimately
assume the responsibility of the repair and maintenance of defence facilities
will become fully operation and resource.
budget allocation and first quarter expenditure trends
The Department received a
total allocation of R37.4 billion
which constitutes 3.81% of the total appropriation of R969.4 billion. It should
be noted that this allocation nominally increased by 9.15%, in real terms, but amounts
to 3.07% in real terms in comparison to 2011/12.
This increase was expected to be utilised
for, amongst others, the execution of border safeguarding, the
institutionalisation of the new service dispensation for SANDF members,
enhancing the landward defence capabilities, ensuring optimal human and capital
acquisition through approved
industry projects, enhancing the Defence Forces peacekeeping capability,
revitalising the reserve component, and consolidating the SADCs maritime
At the end of the first
quarter, the Department had spent R7.6 billion or 20.3% of the total available
budget. The spending is below the benchmark by approximately R85.9 million
planned expenditure was set at R7.7 billion.
The slight underspending is mainly due to the late invoicing by the
national Department of Public Works for municipal services and leases.
Spending on Compensation
of Employees exceeded the planned R4.5 billion it had spent R4.6 billion.
This is primarily within the Maritime Defence, Military Health Support and
General Support programmes and is due to the additional utilisation of Reserve
Forces, payments of Occupational Specific Dispensations and the influx of
students into the Defence Works Capability.
Expenditure on Payments to Financial Assets amounted to R109.5 million
and was used to pay unauthorised expenditure that was not approved by SCOPA and
had to be funded within the budget.
Payments to capital assets amounted to R64.2 million, exceeding the
R47.9 million targetted for this period. This is due to the Air Defence
Programmes procurement of transport equipment.
allocations across programmes
represents 9.95% of the total Defence Budget, the fourth largest of the
programmes, and it executes the Departments overall management, administration
and policy development.
In nominal terms,
it increased with 0.33% and in real terms it shows a decrease of -5.26%. Within
the Administration programme, sub-programme Office Accommodation is the largest
at 50.54% - the sub-programme manages the payment of accommodation charges,
leases and municipal services - with the Human Resources Support Services and
Financial Services second and third respectively. The Military Veterans
Management sub-programme received R 51 million, as opposed to R 45 million the
previous year. The increase in the Ministry sub-programme from R56 million in
2010/11 to R65.9 million in 2012/13 is due to the expansion of organisational
structures within the office of the minister. The 2012 Estimates of National Expenditure
(ENE) discusses the Department of Military Veterans (DMV) in the latter part of
the Vote, and the DMV also has a 5-year Strategic Plan (2012 2016) and an
Annual Performance Plan.
the end of the first quarter, expenditure was R736 million or R19.7% of the
R3.7 billion allocated. Planned expenditure was R905.2 million and the variance
is due to the late invoicing of DPW for municipal services and leases.
increased with 14.53% in
nominal terms and 8.15% in real terms. This programme provides and employs
defence capabilities to conduct all operations and exercises. There was a 73%
nominal increase in the sub-programme Support to the People, while the Special
Operations and Regional Security sub-programmes also saw increases of 14% and
4.75% respectively. There was a substantial decrease in the sub-programme
Defence Capability Management of 30%. This may be partly due to the decrease in
the number of personnel deployed daily in external operations per year,
but the Department needs to expand on this.
first quarter expenditure, suggest that this programme exceeded targeted
expenditure by R94.7 million it had spent R615.1 million. This is due to
internal payments made to the Air Defence programme for the deployment of
helicopters used in regional operations.
The Landward Defence
programme is the largest
programme in the defence budget encompassing 33.84% to the total budget. It
provides prepared and supported landward defence capabilities for the defence
and protection of
At the end
of the first quarter, this programme spent R2.7 billion of its allocated R12.7
billion. Planned expenditure was R2.8 billion and thus planned expenditure was
not met by R 51.2 million, mainly due lower expenditure on compensation to
The Air Defence
programme is the second largest
programme in the Defence budget encompassing 18% of the total budget. It has
eight sub-programmes and provides prepared and supported air defence
capabilities for the defence and protection of the country. It has seen a 6.20%
and a 0.28% increase in nominal and real terms respectively from the previous
financial year. The Air Combat capability consumes the largest part of the Air
Defence programme with 23.49% which signifies a 2.47% increase from the
previous year. The Base Support Capability sub-programme is the second largest
sub-programme with 23.23%, also an increase of 1.17%. The Helicopter Capability
is the third largest with 13.04% of the Air Defence programme. The nominal
decrease of 30.33% in the
Transport and Maritime Capability
sub-programme is due to the finalisation of the replacement of the Astra
training aircraft avionic suite project.
30 June 2012, this programme had spent R1.1 billion of its R6.7 billion
behind the targeted R1.2 billion expenditure. This is primarily due to internal
payments received from the Force Employment programme for the deployed
helicopters used in regional operations.
programme consists of 6.8% of the total defence budget and is responsible for
providing prepared and supported maritime defence capabilities for the defence
and protection of
at the end of the first quarter is reported to have exceeded the R69.9 million
the Department spent R605.4 million against the planned R535.4 million
expenditure. This overspending is due to the payment of an appreciation allowance
to all members and the additional utilisation of the Reserve Force.
programme consists of 8.85% of the total defence budget. The
programme is also the fifth largest programme in the defence budget (comprising
8.85% of the total budget) and
saw a slight increase in nominal terms of 0.52% in
comparison with 2011/12. The largest sub-programme is the Specialist/Tertiary
Health Service sub-programme with 34.47% followed by the Area Military Health
Support with 30.22% in terms of the percentage of Programme 6. These are also
the largest sub-programmes in monetary terms with R1.017 billion and R1.054
By 30 June
2012, this programme had exceeded its planned payment by R33.3 million actual
expenditure is recorded at R749.6 million against the planned R716.3 million.
The rise in spending is due to the payment of Occupational Specific
Dispensation to health care personnel.
is the smallest of the defence programme with an allocation of
R 709 million, an increase of 7.26% in nominal terms and an increase of 1.28%
in real terms in comparison with 2011/12. It provides a defence intelligence
and counter-intelligence capability. It has three sub-programmes of which the
largest decrease was in the Strategic Direction sub-programme with a nominal
decrease of -97.66% and a real decrease of -97.79%. The other two
sub-programmes, namely Operations and Defence Intelligence Support, have
increased in nominal terms with 3.92% and 13.23% respectively. The Operations
sub-programme is the largest with 59.75% with the Defence Intelligence Support
weighing in at 40.25% of the programmes total budget.
than anticipated cash flow within the Compensation of Employees sub-programme,
meant that a higher expenditure was recorded by Defence Intelligence. Actual
spending was recorded at R204 million ahead of targeted R202.9 million.
programme is the third largest programme in the defence budget with 13.54%, and
has seen an increase in nominal terms of 22.53% and 17.71% in real terms. The
programme consists of five sub-programmes and is responsible for general
support capabilities and services to the Department. The Joint Logistic
Services is the largest sub-programme comprising 43.63% of the programmes
allocation. This programme experienced a 2.61% increase in comparison to the
previous year. It is followed by the Departmental Support and Command and
Management Information System sub-programmes with 21.13 and 20.11 respectively as
percentages of Programme 8.
received transfer ahead of schedule, and this accounts for the higher than
anticipated spending during the first quarter. This programme spent R891
million, and this exceeded the R826.1 million anticipated.
The Minister of Defence
and Military Veterans is requested to ensure the implementation of the
As the case
in previous years, underperformance against set targets by each programme is
attributed to funding constraints. While the Committee recognises the need for
an increased allocation, there is a need for better planning and management of the
This requires the
Department to acquire appropriate skills to ensure that strategic objectives
are well developed and that performance indicators adequately measure
deployments should not be funded with money intended for, and at the expense of,
other programmes or activities. We recommend that the Department, in
consultation with National Treasury, investigate the establishment of a
contingency budget ring-fenced for such deployments.
Alternatively, the swift refunding of the
Department for cost associated with the deployment of defence capabilities
should also be considered.
Committee notes that, to date, a comprehensive briefing on the implementation
of Operation Corona had not been presented to Parliament, as previously
We urge the Department to
submit this information to Parliament as soon as possible. The Committee is of
the opinion that, in order for the SANDF to effectively safeguard the
borderline, a sufficient number of soldiers have to be deployed to conduct
foot, air and vehicle patrols.
comprehensive progress report on the implementation of Operation Corona,
including a frank needs-assessment and implementation challenges should be presented
to the Committee
conditions of facilities remain a cause for concern. These conditions not only
impact on the morale of the SANDF, but could also threaten the health and
safety of our soldiers. As such, the arrangements between the DODMV and the NDPW
should be speeded up to ensure that the Defence Works Capability can execute
more of the repair and maintenance priorities.
efforts to achieve an unqualified audit opinion are commendable. The continued
strengthening of an internal audit unit is essential.
Internal Audit committees play an integral
role in ensuring that effective internal controls are in place, thus enabling
departments to identify areas of weakness before they become areas of audit
qualification. Asset management still remains a major challenge. The Department
should brief the Committee, on a quarterly basis, regarding progress made with
the resolution of matters raised by the Office of the Auditor-General.
Section 5 of
the Money Bills Amendment Procedure and Related Matters Act (2009) compels the
National Assembly, through its committees, to submit Budgetary Review and
Recommendation (BRR) reports on the financial performance of departments
accountable to them on an annual basis. The BRR Report must be informed by a
committees interrogation of, amongst others, each national departments
medium-term estimates of national expenditure, strategic priorities and
measurable objectives, National-Treasury-published expenditure reports, annual
reports and financial statements, as well as observations made during oversight
visits. This Report is essentially a committees assessment of a departments
service delivery performance given its available resources, as well as the
effectiveness and efficiency with which its programmes are implemented.
Although BRR Reports must be published at a specific time in the budget cycle,
it is clear that the work that informs the report must be ongoing.
Regrettably, progress made with the
implementation of the Committees previous recommendations, is an outstanding
Report to be considered.
The Administration programme
executes the Departments overall management, administration and policy
development. It consists of 15 sub-programmes with the latest addition being
the Department of Military Veterans.
Force Employment provides and
employs defence capabilities including operational capability, to successfully
conducts all operations and joint, interdepartmental and multinational military
The Landward Defence Programme provides prepared and supported landward
capabilities for the defence and protection of South Africa.
The Air Defence programme provides prepared and supported defence
capabilities for the defence and protection of South Africa.
Maritime Defence provides for prepared and supported maritime defence
capabilities for the defence and protection of South Africa.
The Military Health Support programme provides prepared and supported
health capabilities and services for the defence and protection of South
Defence Intelligence provides
defence intelligence and counter-intelligence capability.
 The programme provides general support capabilities and services to the Department of Defence
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