ATC141031: Budgetary Review and Recommendation Report of the Portfolio Committee on Defence and Military Veterans: 2013/14 and 2014/15 First Quarter Performance of the Department of Defence & Entities, and Department of Military Veterans, dated 29 October 2014
THE BUDGETARY REVIEW
AND RECOMMENDATION REPORT OF THE PORTFOLIO COMMITTEE ON DEFENCE AND MILITARY
VETERANS: 2013/14 AND 2014/15 FIRST QUARTER PERFORMANCE OF THE DEPARTMENT OF
DEFENCE & ENTITIES, AND DEPARTMENT OF MILITARY VETERANS, DATED 29 OCTOBER
The Money Bills Amendment Procedure and
Related Matters Act (2009) provides for, amongst others, a parliamentary
procedure to amend Money Bills. This procedure grants parliamentary committees
greater opportunity to influence the allocation of funds to the departments
they oversee. Section 5 compels the National Assembly, through its committees
to submit annual Budgetary Review and Recommendation (BRR) reports on the
financial performance of departments accountable to them. The BRR report must
be informed by a Committees interrogation of, amongst others, national
departments estimates of national expenditure, strategic priorities and
measurable objectives, National Treasury-published expenditure reports, the
relevant annual reports and financial statements, as well as observations made
during all other oversight activities.
Section 200 of the Constitution (1996) defines
the mandate of the South African National Defence Force (SANDF), while the
civilian control over the SANDF is confirmed in Section
through the establishment of the Department of Defences (DOD) a civilian
This mandate is to
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 line with this mandate the DOD provides,
manages, prepares and employs defence capabilities corresponding with the needs
of South Africa.
Corporation of South Africa (
) and the Castle
Control Board (CCB) report to the Department of Defence, in line with Schedule
2 and Schedule 3 of the Public Finance Management Act (No.1 of 1999), governing
public entities. It is important to note that while
receives funding from transfer payments, the CCB generates its own revenue
As per the Military Veterans Act (No 18
2011), Department of Military Veterans (DMV) must
oversee and manage the implementation of Governments framework and
programme on military veterans
line with these responsibilities, the DMV ought to set national policy
standards for the provision of benefits and support services to military
veterans and their dependents and to ensure that ultimately, assisting military
veterans in living a quality lives.
The Portfolio Committee on Defence and
Military Veterans supports the DOD, DMV,
the Castle Control Board fulfilling their mandates through the 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), the Defence
Review (1998), as well as the Military Veterans Act (2011). Additionally, it
must scrutinise legislation which supports
the mission statement of Government; their budget and functioning; as well as
the deployment of the South African National Defence Force (SANDF).
The Committee made use of the following
information, in preparing to report on
Castle Control Boards financial and service delivery performance: previous
reports and recommendations relevant to their service delivery and financial
performance, the 2013/14 Annual Reports and Financial Statements, National
Treasury-published expenditure reports, as well as documents produced by its
content and research support team. The committee also made use of the
Portfolio Committee on Defence and Military Veterans Legacy
serves as a useful orientation documents.
Our interactions on the 2014/15 budgets and
annual performance plans proved equally useful, particularly at the time when
the Committee is still acquainting itself with the defence portfolio.
DEPARTMENT OF DEFENCE
OVERVIEW OF EXPENDITURE AND FINANCIAL
South African National Defence Force (SANDF) has, during the past five
financial years, become increasingly involved in continental peace support
operations, and domestically, assumed responsibility for securing South
borders. As a result, the Landward Defence, Air Defence, and General Support
programmes have since 2010/11 consumed the largest share of the defence
allocations; while Maritime Defence, Force Employment, and Landward Defence
programmes allocations have significantly increased.
performance for the 2013/14 financial year
the period under review, the Department received a total budget allocation of
R40.24 billion. This allocation was later adjusted by R414. 841 million
mainly due to unforeseeable and unavoidable expenses that included the SANDFs
deployment in the Democratic Republic of the Congo (DRC) as part of the United
Nations Force Intervention Brigade.
Landward Defence (34, 3 per cent), Air Defence (15.53 per cent) and General
Support (12.04 per cent) continue to consume the largest share of the total
budgetary allocation, the Department still spends the largest portion of its
budget (51.85 per cent) on compensation of employees and transfer and subsidies
(18.28 per cent). This means that only 29.87 percent of the Defence budget is
utilised for operational expenses, mainly for property payments (R2.96
billion), contractors (R2.3 billion) and computer services (R889 million).
shifting of funds between programmes (virement) were also approved for the
period under review: R 245,116 million was reallocated from the General Support
programme mainly for the compensation of employee R52 million was allocated
to the Air Defence programme; R50 million was allocated to the Maritime Defence
programme; and R143, 112 million to the Military Health Support programme. Other
approved virements included R 18, 457 million and R 85 million increases in the
transfer payment to
, to respectively fund the
Institute of Maritime Technology and to fund critical shortfalls within the
Dockyard. In order to pay for municipal services
and leases, R68
million was transferred from the
General Support programme to the Administration Programme.
to the R9.5 million fruitless and wasteful expenditure reported for the 2012/13
financial year, this figure has dramatically increased in 2013/14, to R307,497
This staggering increase was reportedly due to a R303 million penalty incurred
in the cancellation of a certain contract. Additional expenditure was also recorded
for interest charged (R 141 000), state funds utilised for private use
(R24 000) forfeited funds (R21 000), storage charges (R13 000)
and other cases (R10 000).
expenditure for the 2013/13 financial year included R 1 073 billion for SANDF
members remuneration which required the Ministers authority, and R210.836
million due to non-compliance to PPPFA for which the Department has still to
receive a National Treasury exemption.
Department reports significant underspending per programme that amounted to
R210.663 million and is associated with the procurement of goods and services. The
Force Employment programme underspent by R 173, 143 million, which is
attributed to an underspending in goods and services, payment for capital
assets and transfer payments. Underspending in the Maritime Defence programme
is recorded at R26 184 million: spending in the goods and services
sub-programme was delayed owing to challenges related to the delivery of spares
and component parts required for the repair and maintenance ships and
submarines. Military Health Support also underspent due to challenges
experienced with the refurbishment and upgrade of (SAMIL) ambulances.
analysis of expenditure per quarter reveals higher than expected spending
: spending in the first quarter unusually peaked: R
14, 848 million was paid for financial assets an amount that was not budgeted
for. Between July to
its projected expenditure (and
budget) spending R 120,3 million (and not R115 million) on buildings and other
structures, R1.24 million (and not R163 million) on biological assets. A claim
against the state not reported to National Treasury meant that between
September and December 2013, the Department recorded higher expenditure (R299
million) on financial assets, while underspending on air defence programme.
OVERVIEW OF PROGRAMME PERFORMANCE
Programme 1: Administration
This programme comprises 20 sub-programmes that
include policy and planning, financial services, acquisition services, human
resource support services, defence international affairs, legal services,
inspection services, religious services, Defence Reserves Direction, and
Defence Foreign Relations.
of the programme is to develop policy, and manage and administer the
While this programme spent its entire R4.511 million
allocation, it had only achieved 70 per cent of its targets: 88 targets were
set for the period under review, of which 15 were overachieved, 47 achieved,
and 26 under achieved. Performance information contained in tabled documents
inconsistent: in 2012/13 a total number of 106 targets
had been reported, while in 2013 only 88 targets were reported on.
The Department ought to notify Parliament once
information contained in tabled documents are amended or changed.
Programme 2: Force employment
This programme provides and employs defence
capabilities, including an operational capability in order to successfully
conduct all operations and joint, interdepartmental and multinational military
The Department had set 16 targets for this programme:
eight was achieved, while six was not achieved. Performance on two targets
relating to force design and structure is not known owing to it being
classified. Targets not achieved relates to the non-execution of a number of
joint and international and multi-national exercises. Despite recording low
spending on the Defence capability management (41.7 per cent) and Support to
the people (53.0 per cent) sub-programmes, the programme had, by the end of the
quarter (December 2013) spent 95.03 per cent (R3.346 billion) of its final
3: Landward Defence
The programme provides prepared and supported landward
defence capabilities for the defence and protection of South Africa.
Significant achievements included the internal and
external employments as well as the successful international deployment of the
reserve forces. Consistent spending throughout the financial year resulted in
the programme spending 100 per cent of its budget by the end of the year. In
terms of performance targets, a total of four targets were set for this
programme of which one was achieved and three were classified.
4: Air Defence
The air defence programme provides prepared and
supported air defence capabilities for the defence and protection of the
Republic of South Africa: it provides four helicopter squadrons,
three medium transport squadron
, one combat squadron, and a
24 hour air command and control capability.
Spending on this programme was generally slow
throughout the period under review. By the end of the third quarter, only 67.8 per
cent (R3.907 billion) of the adjusted budget had been spent. The Command Post,
Helicopter Capability and Strategic Direction sub-programmes recorded the
slowest spending compared to other sub-programmes. The figures stood at 57.1
per cent, 40.2 per cent and 46.2 per cent, respectively. In terms of
performance targets, a total of only four targets were set, of which three were
classified and one was underachieved. These targets were in line with those
presented as part of the Annual Performance Plan. As with the Administration
programme, it is noted that the number of set targets for this programme is
significantly less than what was provided in the previous financial year and
contained in the 2012/13 Annual Report.
5: Maritime Defence
The programme provides prepared and supported maritime
defence capabilities for the defence and protection of South Africa.
As was the case with the Air Defence Programme, slow
spending was also recorded for the Maritime Defence Programme throughout the
year. By the end of the third quarter, for example, only 67.7 per cent (R2.137
billion) of the adjusted budget was spent.
In terms of performance targets, only four targets were set of which
three were classified and one was underachieved. These targets were in line
with those presented as part of the APP. The number of set targets for this
programme had also significantly decreased compared to information contained in
the 2012/13 Annual Report.
Programme 6: Military Health Support
The purpose of
is to provide prepared and supported health capabilities and services for the
defence and protection of South Africa. Six targets were set of which three were
classified and three were overachieved. There
less performance indicators measured in the 2013/14 Annual Report than in the
2.7 Programme 8: General Support
The programme spent 100 per cent (R5.637 billion) of
its final budget. Quarterly spending trends show that spending for this
programme was generally on track throughout the year. In terms of performance
targets, a total of 17 targets were set for this programme, which is
significantly less than the 38 provided for in the 2012/13 Annual Report.
Targets reported on were in line with those presented in the APP.
PERFORMANCE FOR THE FIRST QUARTER (1 APRIL 30 JUNE 2014)
2014/15 FINANCIAL YEAR
This section summarises the DODs
performance in the first quarter of the 2014/15 financial year. It should be
read along with the Committees report on the Department of Defences 2014/15
budget (Vote 22).
Summary of financial and
By the end of the first quarter 2014/15 the DOD had spent
19.4 per cent of its R42.831 billion budget. This is 1.3 per cent lower than
what was projected (20.7 percent), and is also 0.9 per
lower expenditure than spent in the first quarter of the previous financial
year. Expenditure on almost programmes was below target. The biggest variance
between the projected and actual spending was reported in relation to the Air
Defence programme which spent only 14.2 percent of its allocated budget against
a projected 17 per cent.
within the 8 per cent limit set by National Treasury.
The Department also spent little on compensation for the
first quarter, spending only 24
per cent of the total
allocated budget of R21.98 billion. Such slow spending is a cause of concern
particularly given the vacancy rate in critical positions such for air crew, combat
(Navy), engineering and technical services, and require urgent attention.
Low spending on the Special Defence account was also
recorded, particularly sub-programmes air combat capability, artillery
capability, mobile military health support, operational intelligence, special operations,
strategic direction, as well as transport and maritime capability.
Programme 1: Administration
The programme spent 2.3 per cent less than the targeted
22.8 per cent of its R4.86 billion allocation. The Departments Management and
Office accommodation sub-programmes recorded the lowest spending, only spending
5.2 and 4.1 per cent of their respective allocations. Spending for the Communication
Services sub-programme was recorded
per cent and Defence Foreign Relations
sub-programmes at 11. 4 per cent while Defence Reserve
recorded an overspending of 30 per cent
on the following items (economic classifications) were also recorded: non-profit
institutions (25 per cent), Household (6.8 per cent), and provinces and
municipalities (4.8 per cent). Less than expected expenditure was recorded for
software and intangible assets (7.5 per cent) and goods and services (4.1
Programme 2: Force Employment
This programme spent 19.8 per cent of its allocated
R3.437 billion allocation 0.3 per cent which is lower than the projected 20.1
per cent. Despite it could spend 10.9 per cent of its budget on buildings and
other fixed structures, the Department had not recorded any
by 30 June 2014.
Low spending on machinery
equipment (5.1 per cent), and specialised military
assets (4.7 per cent) were recorded. Defence capability management and operational
direction sub-programmes recorded the lowest spending it spent 15.3 per cent
and 20.9 per cent against the respective projection of 18.6 and 24.2 per cent.
Programme 3: Landward Defence
A slightly lower expenditure of 21.3 percent of the total
R13 845 billion was recorded. In the armour capability sub-programme only
22.3 per cent of the allocation was spent and not the projected 24.5 per cent.
The programme also recorded an underspending on machinery and equipment as well
as specialised military assets.
Programme 4: Air Defence
The programme only spent 14.2 per cent of its R7.167 billion
- 2.8 per cent lower than the projected expenditure. Significantly low spending
was recorded for the helicopter capability sub-programme (one percent against projected
20 per cent), the transport and maritime capability sub programme (2 per cent
against projected 7.4 per cent) and air capability sub -programme which spent
only 10 per cent of a planned 12.9 per cent allocation.
DEPARTMENT OF MILITARY VETERANS
OVERVIEW OF EXPENDITURE AND FINANCIAL
Department of Military Veterans had not submitted its annual report for the
period under review, by 30 September 2014, and is only expected to table it by
the end of October 2014. Owing to this, a comprehensive review of the DMVs
budget management and performance is therefore not possible and is only limited
to evaluating the following information at the committees disposal:
the progress made with recommendations made by
the Committee in 2013, the 2014 Annual Performance Plan, submitted quarterly
expenditure and performance reports as well as written responses to questions
posed by the Committee in previous interactions and briefings.
earlier mentioned, the Department of Military Veterans derives its mandate from
the Military Veterans Act (No. 18 of 2011), which requires it to provide
national policy and standards on socio-economic support to military veterans
and to their dependants, including benefits and entitlements to help realise a
dignified, unified, empowered and self-sufficient military veterans community.
2011, the Department has been in the process of establishing itself
administratively and building capacity to perform all functions as required by
the Act. As part of the process of establishing and expanding the Department,
the allocation of funds has increased significantly since 2010/11.
Greater scrutiny of how funds are utilised
against the targets set in the strategic plans and annual performance plans
going forward, is thus imperative.
performance for the 2013/14 financial year
the period under review, the Departments budget was not separate from that of
the Department of Defence and had been included as a sub-programme (Military
Veterans Management) under the Administration programme. It has been
allocated, according to the Estimates of National Expenditure (ENE) an amount
351,431million for the 2013/14 financial year.
this time, the Committee had regular interactions with the Department regarding
the progress made with establishing its administration and building its
capacity to perform its functions and provide support to military veterans as
envisaged the Military Veterans Act (No. 18 of 2011).
the DMV strengthens its capacity to ensure the delivery of services and
benefits to military veterans, greater spending in the programmes Socio
Economic Support and Empowerment Stakeholder Management is expected to
The effective management of the Administration
programme is therefore critical since it provides management and strategic
administrative support to the Ministry, and overall management of the
Department. In 2013/14 it received R152, 8 million and challenges requiring
urgent resolution remain the filling of critical vacancies, the
and implementation of appropriate information technology systems (IT), the
establishment of an effective internal audit function, the acquisition and
upgrading of provincial satellite offices, and the reduction of expenditure and
reliance on consultants.
Expected increases in the spending by the Socio-economic
Programme will be aimed at
the delivery of decent housing to military veterans, as well as the provision
of bursaries and health care services. In 2013/14 it received an allocation of
million which had increased to R168,1 million
The planned increase in Empowerment and
Stakeholder Management programme will be for the training and skills
development, to form partnership with private sector companies and other organs
of state, in order to encourage employment creation for military veterans.
However, while the allocation for the 2013/14 financial
year amounted to R176.5 million, this amount had decreased to R157.9 million in
Compared to the 2013/14 financial year,
compensation of employees increased from R80.6 million to R92.2 million in
2014/15. Goods and services increased from R260.8 million in 2013/14 to R404.1
million in 2014/15: the most significant contributors to the increased
allocation for Goods and services are 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 increased from R21.9 million in 2014/15 to R52.2 million in
2014/15. This is of particular concern given the DMVs small staff
. 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.
areas of concern
relating to the 2013/14
budgetary allocation that require clarity include: the drastic increase in
funds allocated for travel and subsistence; the specific use of the funds
allocated to housing, and how this will be funded beyond the MTEF period; whether
a cost-benefit analysis had been completed to determine if the outsourcing of
various services such as cleaning and security services is the most cost-effective
operational model; and the timeframes for the filling of all vacant positions.
The Committee is concerned that for the period under review, only 29
were filled and 53 additional personnel was appointed.
Moreover, while the size of the DMV personnel
was small, it had spent R13.3 million allocated to travel and subsistence in 2012/13.
PERFORMANCE FOR THE FIRST QUARTER (1 APRIL 30 JUNE 2014)
2014/15 FINANCIAL YEAR
summarises the DMVs performance in the first quarter of the 2014/15 financial
year and should be read along with the Committees report on the Department of
2014/15 budget (Vote 22)
published in July 2014.
Summary of financial and programme performance
instability (the absence of the Director-General and Chief Financial Officer)
negatively impacted on the first quarter spending and performance, thus
resulting in performance targets not being achieved. Such leadership
instability has now been resolved and the Department will mitigate its impact
on performance through the implementation of action plans aimed at ensuring
backlog in targets are
Of the 22 targeted performance areas, the Department
had achieved 15.
This constitutes a 68
per cent overall achievement rate.
during this period had spent 8% per cent of its budget amounting to R40 million
- R125 million less than projected.
per the 2014 Annual Performance Plan, it reflects an expansion of the sub-programmes
from four in 2013/14 financial year, to six sub- programmes to include
Strategic Management, policy development and monitoring and evaluation
sub-programme, as well as the corporate services sub-programme. It also reduced
its performance indicators from 18 to 14, and those removed include Military Veterans
Regulations prepared for approval, the approved DMV service delivery and
improvement plan, percentage deviation from approved cash flow, and the
percentage compliance with budget transfer prescripts.
The Department achieved ten of the twelve
targets thus recording an 83 per cent achievement rate. Spending
slower than expected it had spent R15 million which is R29.8 million less
this programme, the Department had achieved two of the four targets set. While
50 per cent achievement rate was recorded, targets could not be measured in
accordance with acceptable performance standards. The programme spent 6.23 per
cent of its budget, which constitutes a R42 million variance. The programme
also previously had four sub-programmes but these been reduced to only three
for the 2014/15 financial year: the Research and Policy Development
sub-programme was removed. It should be noted that this programmes total
number of performance indicators have also been reduced to 5 only. Removed
indicators are the number of military veterans with access to counselling and
treatment; the number of distressed and vulnerable military veterans and dependents
provided with immediate services; the number of military veterans receiving
anticipated military veterans pensions; compensation of military veterans
physically and mentally injured in action; approved military healthcare policy
and the number of provincial health-care and wellbeing centres established.
3: Empowerment and Stakeholder Relations
The programme had six targets planned for
implementation during the period under review and only three were achieved.
programme spent 9
% of its budget which constitutes
R15,4 million with a variance of R24 million by
30 June 2014. The 18 indicators presented in the 2013 annual performance plan
was reduced to only six and the following 12 were removed: the establishment of
a liberation war memorial; erection of the tomb of the unknown soldier; the
number of programmes promoting the heritage of military veterans; the number of
graves established an restored; military veterans company database; the number
of military veterans with the relevant SAQA approved certificates; the number
of events honouring military veterans; military veterans training and skills
development policy document; the number of formal agreements with institutes of
higher learning; the number of military veterans receiving burial support per
year; the number of programmes promoting the heritage of military veterans; and
the number of programmes promoting the affairs of military veterans approved by
CORPORATION OF SOUTH AFRICA
The Armaments Corporation of South Africa Ltd (
is the arms procurement agency of the Department of Defence. Initially
established through the Armaments Production and Development Act (No. 57 of
51 of 2003) it provided for its continued existence, including its functions,
accountability and finances.
strategic direction is encapsulated in its three-year
plan which is also aligned to the Governments Medium-Term Strategic Framework
(MTSF) and the DOD Outcomes derived from the MTSF. In short,
ought to play a supporting role in terms of
contributing to MTSF Outcome 3: (All people in South Africa are and feel safe).
The Corporation has identified the
following elements (policy, economic, social, technological, physical legal and
military) that may impact on its core functions: owing to competing Government
priorities the defence budget and allocation to
in terms of the exiting funding model was unlikely to increase; the quality of
corporate governance and accountability will be prioritised; South Africa is
likely to play an increasingly prominent role in continental peace keeping
operations and lending support to other government departments;
the slow growth in the international defence
industry required greater collaboration and consolidation within the industry;
and defence capability will increasingly rely on investment in and protection
of defence technology.
Defence Industrial Participation (DIP) relates to the obligation
of a foreign supplier to
defence related business in South Africa as a result of a Defence
acquisition. No new DIP agreements
were entered into during the period under
continued to manage 16 agreements. The
DIP agreement with
European based missile developer and manufacturer), which relates to the
Strategic Defence Package (SDP) had not been
met: the 2011/12 Annual Report
that MBDA had an outstanding obligation of R946 million, while the 2012/13
Annual Report indicates an outstanding
obligation of R933 million.
also responsible for the management of the Simons Town Naval
Dockyard. The dockyard carries out planned
preventative maintenance, corrective
reconstruction and repairs, and upgrades all of the naval ships and
submarines. It however faces several
challenges in meeting the requirements of the
Navy to keep its fleet operational.
Some of the
projects undertaken that
challenges during 2013/14 include the SAS
was docked on
27 June 2013 owing to
These challenges were
exasperated by the
experienced with the procurement of appropriate spares and material. The
also underwent maintenance from 7 October 2013 and the
availability of spares was also a challenge which impacted
on the completion
deadline. In addition
to the above challenges, the Dockyard continues to suffer
critical skills shortages, including the exit
of trained submarine personnel.
OVERVIEW OF EXPENDITURE
AND FINANCIAL PERFORMANCE
of expenditure for the 2013/14 financial year
The net value of
the Group increased from R1.804 billion in 2012/13 to R1.908 billion for the
period under review owing to the net surplus recorded for annual operations.
Notwithstanding the above, the Groups total comprehensive income significantly
decreased from R1
billion in 2012/13, to R103,3
million in 2013/14. As compared to 2012/13, this major decrease is due to
property revaluation which contributed R1
last years profit. The total profit for 2013/14 was influenced by the
inclusion of the results of the
Other significant financial information include the recorded
decrease in the revenue of the corporation from R9,2 million in 2012/13 to R6,8
million in 2013/14;
R393 892 fruitless
and wasteful expenditure was incurred, significantly more than recorded for the
previous financial year.
included interest paid on late payments (R202), penalties on late deliveries
(R393 455) and fines (R235).
expenditure to the total value of contracts placed (R68.5 million) was reported
and this related to the application of a 25 per cent Black equity selection
criterion as requirement, which is
in line with the Preferential Procurement Policy Framework Act
(PPPFA) of 2000.
application for an exemption from National Treasury is still outstanding.
of programme performance
Three-year Corporate Plan sets out two groups of performance
indicators: one deals with performance against
functions as defined by the service level agreement (SLA) with the Department
of Defence, while the second measures performance against the set strategic
objective. Although only 13 Key Performance Indicators (KPIs) were listed in
2013/15 - 2015/16 Corporate Plan, a total of 42
KPIs were reported in the 2013/14 Annual Report: 29 of the KPIs have been
achieved, while 3 of the KPIs (31 per cent) have not been achieved.
Report of the
Similar to the
previous reporting period,
opinion from AGSA for
the financial year 2013/14. Nonetheless, AGSA noted owing
to irregular expenditure recorded, the
expenditure was not adequately managed and
annual financial statements submitted for auditing were not fully prepared in
accordance with the prescribed
financial reporting framework. Moreover leadership
was not effectively exercised since internal controls were not
in incidents of non-compliance.
The Castle Management Act, 1993 (No. 207
of 1993) provides for a Castle Control Board (CCB) to govern and manage the
Castle on behalf of the Minister of Defence and Military Veterans. The National
Heritage Resources Act (No. 25 of 1999) provides for the management of the Castle
as a national heritage site.
Annual Performance Plan (APP) of the CCB identifies the strategic objectives as
the preservation and protection of military and cultural heritage of the Castle
of Good Hope; to optimise the tourism potential of the Castle; and to optimise
accessibility to the Castle by the public.
For the same period, the CCB aimed to
elf-sustainability of the Control Board and the Castle; manage and
maintain the Castle as a Defence endowment property; effectively manage its
assets and comply with legislation; improve its maintenance and facilities management;
adhere to sound acquisition and procurement principles; human resources
development; sound financial management; and the enhancement of educational
OF FINANCIAL PERFORMANCE
Castle Control Board (CCB) does not receive transfer payments from the DOD and
is struggling to be self-sustainable.
The Castle noted an increase in both revenue and
expenditure during the financial year 2013/14. This resulted in a decrease of
its annual surplus from R883 000 (2012/13) to R41 000 (2013/14).
variations between the current and preceding financial year were also found.
This related to a surplus of R41 000 for 2013/14 as compared to R883 000 for
2012/13. This represents a decrease of 95.36 percent from the past financial
year, partly due to the appointment of the CEO which increased the expenditure
on Staff Costs to a total of R1.775 million in 2013/14, as compared to R864 000
in 2012/13. The CEOs remuneration is R695 000, which led to an increase of 680
percent on this specific item. Additionally, bonuses have increased by more
than 60 percent. Other notable increases include operating expenses on Military
Tattoo (229 percent) and Advertising (98 percent). There is also a recorded
spending on CCB Special Days (R144 000), which was not recorded in the 2011/12
and 2012/13 Annual Reports.
2013/14 Annual Report indicates that the financial statements of the Castle
received an unqualified audit opinion from the
Auditor-General. The audit report
a marked improvement in the management of the Castle, while no instances
of fruitless or wasteful expenditure were
recorded. However, the audit opinion
challenges relating to predetermined objectives (specifically
rogramme 2: Preservation, interpretation
and showcasing of the history of the
and programme 3:
Increased public profile and position
all sectors of the community
.), as well as issues
relating to the establishment of
effective internal audit function
and sound internal controls.
In terms of the guidelines
of the Castle Management Act and the performance indicators, the CCB identified
four programmes against which to measure performance. Of the nine performance
indicators, two were not achieved.
Administration through good Corporate Governance
The CCB appointed a CEO in
April 2013 and corporate governance was further addressed through the
appointment of a
Chief CFO in March 2014. In terms of
performance indicators, two targets were set. These included the number of CCB
meetings, and the number of Audit and Risk Committee meetings. One target, the
number of CCB meetings, which was set to four, was over-achieved as the CCB had
Preservation, interpretation and showcasing of the Castle
The 2013/14 Annual Report
notes improvements in the showcasing of the Castle through numerous exhibitions
and, specifically, in terms of the number of learners visiting the Castle. The
Castle increased the number of learners visiting the establishment to 29 391,
significantly exceeding the set target of 25 200. This is in line with Outcome
1 of the Governments MTSF (Improved quality basic education). With regards to
Repairs and Maintenance, the reasons provided for underspending include savings
in respect of Department of Public Works and DOD preventative maintenance on
site, anticipation of the major renovation of the Castle as well as budgeting
challenges experienced at the start of the financial year.
Maximising the tourism potential of the Castle
The expected number of
visitors to the Castle according to the 2013/14
is sole performance indicator for this programme. For 2011/12 the number of
visitors was 137 639 indicating an increase of 7 639 compared to the estimated
130 000 for the financial year. In terms of the
Annual Report, a total of 141 084 was recorded as the number of visitors to the
Castle. This translates to 2.7 percent less
the estimated visitors of 145 000. Such underperformance was ascribed to the
closing of the Castle on 15 December 2013, and the activities on the Grand
Parade around the passing of the former President Nelson Mandela.
Programme 4: Increased public profile and positive perception
across all sectors of the community
The Castle exceeded the
target for projected income from events, film and fashion shoots by R309 575.
It should be noted that the target for 2013/14 was set at R275 625, with the
actual achievement for the previous financial year (2012/13) having been R426
950. This illustrates that the target was set very low from the onset, hence
the huge achievement. In terms of Printing, Publication and Marketing of the
establishment, underspending was recorded at R69 011 as compared to the planned
R104 000. The
reason provided include
of the CEO experienced in marketing.
The Department of Defence should be adequately
resourced in order for it to resolve all operational challenges and in order
for the SANDF to fulfil its core responsibilities. During the recent
interrogation of its annual report, the Department illustrated the impact
had on its capacity to
fulfil responsibilities: currently, the SANDF cannot afford to deploy the
required number of troops who are sufficiently equipped, to secure South
Africas borderline. Furthermore, the successful implementation of the updated
defence policy (South African Defence Review 2014) will require that future Defence
budgetary allocations support efforts to restore our Defence Forces
capabilities in order for it to defend and protect all South Africans.
Notwithstanding this, the Committee urges that care should be taken to ensure
that all expenditure adheres to the principles and guidelines that govern the
use of public funds.
Department is expected to reduce the size of its personnel from the current 78 707
to 74 000 people. In this context the existence of an effective Mobility Exit
Mechanism (MEM) is of critical importance to ensure that, while it reduces its
staff component, the Department and SANDF retain core skills and competencies, and
that any negative impact of such downsizing is contained.
Maintenance and repair of defence facilities are critical
to ensure that the morale and commitment of soldiers remain at a high
The Defence Works Formation
should be properly funded and the appropriately skilled personnel should be
appointed to ensure that this formation succeeds in improving the conditions of
defence facilities and in order for the Department to become less reliant on
the Department of Public Works (DPW).
Furthermore, both the Department of Defence and the Department of Public
Works should urgently resolve enduring challenges relating to their working
relationship in order to prevent further delays in restoring defence
The Department has made great strides in eliminating audit
work is still required to ensure
effective management of assets.
In particular, the
Department should focus on ensuring
the development of appropriate information
systems that will support its asset management responsibilities.
Moreover, the Department should
the strengthening of its internal audit
function as this function is essential to
ensure that any risks and compliance
are identified and detected prior to annual audits.
Department of Military Veterans
implementation of the
Military Veterans Act, particularly
the maintenance of a
military veterans database, the fair application of a means-test, and the
efficient delivery of benefits and support
services to military veterans are essential to
that military veterans quality of life is enhanced and that military veterans
receive the necessary support and
acknowledgement for their selfless service to
The Committee has consistently raised concerns about the delays
in the finalisation
and implementation of
memoranda of understanding (MOUs), and Service Level
Agreements (SLAs) between departments and other state agencies
relevant in the
of support to military veterans.
According to written responses
to the Committee, the Department has entered into partnership with
three Departments: the Department of Rural
Development and Land Reform,
Department of Agriculture, Forestry and
Fisheries, as well as the
Water and Sanitation.
MOUs are aimed at job creation and skills
the Committee urges
that such job
creation initiatives should be
and should assist military veterans in improving their
quality of life and
self-sufficiency. Every effort must be made to ensure that
that have entered into agreements and partnership with
the Department of
honour their commitments and obligations.
The Committee is concerned that despite an existing MOU between
Veterans and the Department of Human Settlements, military veterans
have to date not accessed housing
benefits. The Department had, in a previous
indicated that housing benefits were not delivered to military veterans due
to it only receiving an allocation for the
roll-out of such benefits in the 2013/14
year, while service level agreements had only been signed with six
provinces by the end of March 2013.
This meant that provinces and municipalities
had only begun the initial processes for
including houses for military veterans as part
their housing projects. We urge the two Departments to finalise the required
processes as urgently as possible.
Military Veterans as well as their dependents
require access to reliable health care
and the Committee has requested the Department to provide clarity on its
medical care policy.
We welcome the admission that the Military
section relevant to medical care,
veterans and their dependents can access medical care.
The Committee urges the Department of
Military Veterans to fill existing vacant
with not only suitably qualified personnel, but also with individuals who are
sufficiently committed and
appropriately skilled to assist both with identifying the
needs of military veterans as well as
accessing benefits and services
Information on benefits and services and how
this should be applied for should not
overly bureaucratic and should be easily available. This means that the
Department should develop a more effective
communication and marketing strategy
raise greater awareness regarding its work
endless delays in the appointment of a chief executive officer
a cause of
and the Committee urges that the leadership instability at
resolved as soon as possible.
is essential that
, as part of the domestic
defence industry, supports the
of the SANDF and that the necessary precautions and remedial action is taken
to ensure that
intervenes to properly manage the delays
and cost overruns
certain armaments acquisition projects. Related to this,
is also urged to
the transformation and rejuvenation of the Dockyard to ensure that it
provides repair and maintenance services to
the SA Navy, as required.
is urged to prioritise the training and development
personnel, and should ensure that scarce skill vacancies and BBBEE
targets are aggressively pursued.
Committee commends the CCB for their efforts to
improve the management of
the Castle. We are nonetheless still concerned over enduring weaknesses in
supply chain management and internal controls.
of the Supply Chain Management (SCM) policy should be addressed as soon as
possible and the relevant CCB as well as Castle staff should be trained to
ensure 100 per cent compliance with National Treasury guidelines. This will
assist in ensuring a decrease in irregular spending. The CCB should also
provide the Committee with a clear action plan on how it will deal with the
leadership concerns raised by the A-G.
Greater effort must be made to increase public awareness of
the historical significance of the Castle. While the Committee has a role to
play in this regard,
through its oversight
activities and other parliamentary responsibilities, the CCB should
aggressively market this historical monument as a tourist attraction to ensure
an increase in both visitors and revenue. Growth in visitors and revenue will
assist the CCB in realising their objective to become self-sustainable.
The position of
and its contribution to the revenue of Castle should be prioritised. If the
operation of Het
is transferred to a private
enterprise, this shift should be concluded in a prompt and transparent manner
to maintain the image of the Castle as an exemplary tourist destination.
Since repair and maintenance is one of the
major issues in the preservation of the
the CCB should inform the Committee on a regular basis on the progress
made with this matter, especially as it
relates to the involvement and contribution of
Department of Public Works.
he Committee expresses its
appreciation to the Department of Defence, Department of Military Veterans as
and the Castle Control Board for their
cooperation as they endeavour to improve the performance and service delivery.
Report to be considered.
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