ATC151028: Budgetary Review and Recommendation Report of the Portfolio Committee on Defence and Military Veterans, dated 28 October 2015
BUDGETARY REVIEW AND RECOMMENDATION REPORT OF THE PORTFOLIO COMMITTEE ON DEFENCE AND MILITARY VETERANS, DATED 28 OCTOBER 2015
1.1 The Money Bills Amendment Procedure and Related Matters Act (2009) provides for, amongst other, a parliamentary procedure to amend Money Bills. This procedure grants parliamentary committees greater opportunity to influence the allocation of future funds for 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 must be informed by a portfolio committee’s interrogation of amongst others national departments’ estimates of national expenditure, strategic priorities and measurable objectives, National Treasury-published expenditure reports, relevant annual reports and financial statements, as well as observations made during all other oversight activities.
1.2 Section 200 of the Constitution (1996) sets out the mandate of the South African Defence Force (SANDF), while Section 204 establishes a civilian secretariat for the Department of Defence. The mandate is to ‘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 (DOD) provides, manages, prepares and prepares defence capabilities commensurate with the needs of South Africa, guided by the Constitution, relevant legislation and Executive action. The DOD furthermore oversees the two public entities which fall under Schedule 2 and 3 of the Public Finance Management Act (No 1 of 1999), namely Armscor and Castle Control Board (CCB). Armscor receives allocations from the fiscus while the CCB generates its own revenue.
1.3 The purpose of the Department of Military Veterans is to ‘oversee and manage the implementation of Government Framework and programme on military veterans’. Core functions in this regard include the facilitation, management and coordination of support to military veterans, provision of support services to the Department, oversight of national military veterans’ programmes, as well as periodic reporting in this regard.
1.4 The Portfolio Committee on Defence and Military Veterans supports the DOD, DMV, Armscor, and Castle Control Board in their efforts to deliver on their mandates. It must ensure that the Department fulfils its mandate through monitoring of the implementation of legislation and adherence to policies such as the Defence Act (No 42 of 2002), greater emphasis will now be placed on the implementation of the South African Defence Review 2014, particularly Milestone 1 (Arrest the decline of critical capabilities through immediate and directed interventions). Additionally, it must scrutinise legislation which supports the mission statement of Government, the budget and the functioning of the DOD and DMV, as well as the employment of the South African National Defence Force (SANDF).
1.5 The Committee made use of the following information in preparing to report on the financial and service delivery performance of the Defence and Military Veterans portfolio: previous reports and recommendations related to the service delivery and financial performance, the 2014/15 Annual Reports and audited financial statements, National Treasury-published expenditure reports, reports published by the Standing Committee on Public Accounts (SCOPA), Standing Committee on Appropriations as well as content and research support documents. The 2015/16 budgets and annual performance plans remain extremely valuable to the Committee’s preparation and focus.
PART A: DEPARTMENT OF DEFENCE
1. STRATEGIC OVERVIEW OF 2014/15 PRIORITIES AND POLICIES
- The Department of Defence (DOD) through the Defence Secretariat and the South African National Defence Force (SANDF) continue to contribute directly to the pursuit of national priorities as encapsulated in the 2014-2019 Medium Term Expenditure Framework, and departmental planning for the 2014/15 financial year mainly focussed on four outcomes: creating a better South Africa, Africa and the world (Outcome 11); a skilled and capable workforce to support an inclusive growth path (Outcome 5); all people in South Africa are and feel safe (Outcome 3); and a long and healthy life for all South Africans (Outcome 5).
1.2 For the period under review, the Minister of Defence and Military Veterans set the following six strategic priorities: (1) Enhancing the SANDF’s Landward Defence Capabilities; (2) Maritime Security, (3) Job creation, (4) National Youth Service, (5) Restructuring and Support of the Defence Industry, and (6) Revitalisation of the Reserves.
1.3 Linked to the above, the Minister of Defence also set six focus areas for the period under review: (1) Strengthening the Military Skills Development System as the main recruitment and source of rejuvenation of the SANDF, (2) Transformation in the DOD with special emphasis on gender (female) representation, (3) Reconfiguration of force number allocations through establishing an IT system that would reconfigure force numbers of the DOD, aligning these to other government departments, (4) Resolution of audit outcomes, (5) Combatting Fraud and Corruption and (6) Youth development.
1.4 The Defence Secretariat and the SANDF performed poorly in the pursuit of those targets that contribute to the above-mentioned broader strategic outcomes and priorities. Of specific importance in terms of its achievements are the 100 per cent compliance with ordered internal and external commitments as well as the effective utilisation of the Reserve Force. This reflects the SANDF’s capability to deliver on service requests despite resource constraints. However, some space for improvement in performance remains. This refers specifically to delays in the completion of planned capital works projects and compliance with DOD refurbishment programmes; the expansion of the Defence Works Formation; delays in filling of posts in mission areas; lower than planned serviceability of vehicles in mission areas resulted in lower achievement of reimbursements from UN and AU; number of posts filled were also underachieved due to challenges and lack of fixed posts for secondments; and a low percentage of litigation settled in favour of the DOD, led to the DOD underachieving on these targets.
2. OVERVIEW OF EXPENDITURE AND FINANCIAL PERFORMANCE
2.1 Financial performance for the 2014/15 financial year
2.1.1 For the period under review, the Department received a total budget allocation of R 42 831.2 billion. This allocation was adjusted by R25, 7 million upwards during the adjustment review. During its appearance before the Committee, the Department of Defence explained the impact a limited defence budgetary allocation has had on the operations of the SANDF. Should the Department of Defence not be allocated an increased budgetary allocation, it would not be able to fund its core operations and meet all its ordered commitment. It is thus imperative for the Department of Defence to be properly resourced to ensure that the South African National Defence Force capabilities remain at a high level and that our Defence Force is combat ready at all times. The current budgetary constraints will also hamper efforts to implement the 2014 Defence Review.
2.1.2 Significant shifts of funds between programmes (virements) were also approved for the period under review: R 503 million and R 26.6 million had been transferred from the Special Defence Account and Households, and Good and Services respectively, for the Compensation of Employees, R64.17 million was also reallocated to increase transfer payments of claims against the state and R85.7 million was shifted from General Support Programme and Administration Programme to pay municipal services and leases.
2.1.4 Significantly lower fruitless and wasteful expenditure and well as irregular expenditure had been incurred compared to the 2013/14 financial year.
2.2 Overview of programme performance
2.2.1 Programme 1: Administration
The purpose of the programme is to develop, manage and administer the Department of Defence. The programme comprises 20 sub-programmes that include Policy and Planning, Financial Services, Acquisition Services, Human Resources Support Services, Defence, International Relations, Inspection Services, Religious Services, Defence Reserves Direction and Defence Foreign Relations. This programme had by the end of the financial year, spent nearly 100 per cent of its allocated budgetary allocation (R 4, 659 billion of the R 4 660 billion).
In terms of performance targets, a total of 116 targets were set of which 15 were over achieved, 75 achieved and 26 under achieved. The achieved targets represent 77.6 per cent of the total targets for this programme. This is a significant improvement from the 70 per cent success rating in 2013/14. In terms of underachieved targets, the most
significant are (1) the low percentage of written complaints finalised, (2) the failure to establish a DOD Policy Research Capacity, (3) the DOD’s MPAT Assessment score which was lower than planned, (4) the low percentage payments in accordance with invoices received, (5) the lower than planned MSDS intake, and (6) the failure to develop the National Youth Service Policy.
2.2.2 Force Employment
The programme provides and employs defence capabilities including an operational capability in order to successfully conduct operations and joint, interdepartmental and multinational exercises. This programme spent all funds allocated to it (R3, 631 billion). The virement of R144. 834 million to this programme, was mainly to fund compensation of employees and for machinery and equipment.
Only one of the six targets set had not been achieved. Owing to cited capacity constraints such as time, personnel and funding, the five planned multi-national exercises had to be cancelled. These are Exercise Bell Buoy, Exercise Transoceanic, Exercise Firway Buoy, and Exercise Shared Accord. At this time, with resources available, the programme can only afford to deploy 13 companies along our borderlines and despite the lack of sufficient manpower to optimally secure the borderline, the SANDF had succeeded in combatting illicit trade in goods and assisted in the apprehension of illegal migrants.
2.2.3 Programme 3: Landward Defence
The programme provides prepared and supported landward defence capabilities for the defence and protection of South Africa. In terms of its Annual Report, the Department had spent 99.9 per cent of the allocated budget and virements were made from all sub-programmes. The shifting of funds to Strategic Direction, Infantry Capability and General Training Capability are mostly to fund increases in employees’ compensation.
In terms of performance, two targets were set for this programme of which one was under achieved and one classified. The under achieved target relates to General training for Regular and Reserve Forces where 75 per cent was achieved against a target of 80 per cent.
2.2.4 Programme 4: Air Defence
The Air Defence Programme provides prepared and supported air defence capabilities for the defence and protection of the country. It provides helicopter squadrons, medium transport squadrons, a combat squadron, and a 24 hour air command capability.
Spending in this programme was generally slow throughout the financial year. Virements away from the Programme was quite significant, notably the R722.318 million taken from the Transport and Maritime Capability subprogramme and the R50.004 million taken away from the Air Combat sub-programme. A notable virement of R245 990 was made to the Technical Support Services sub-programme. In terms of performance targets, only two targets were set, of which one was classified and one was underachieved. The underachieved target relates to the Training and Development of SA Air Force personnel where 73 per cent was achieved against a target of 80 per cent. Furthermore, a total of 5 026 Force Employment hours were flown for the year. This is somewhat higher than the 4 471 hours flown in 2013/14, but still falls short of the target set in 2013/14 for 6 300 hours.
2.2.5 Programme 5: Maritime Defence
The programme provides prepared and supported maritime defence capabilities for the defence and protection of South Africa. By the end of the financial year, this programme had spent its entire allocated budget. As with other programmes, a significant virement between sub-programmes occurred: a R114.709 million transfer was made to the Maritime Logistics Support Capability, while R 71, 609 million was transferred from the Maritime Combat Capability. In terms of performance targets, only two targets were set of which one was classified and the other, related to training and development, was overachieved. Similar to observations made in 2013/14, it should be noted that the number of set targets for this programme is significantly less than what was provided in the 2012/13 Annual Report.
2.2.6 Programme 6: Military Health Support
The purpose of this programme is to provide prepared and supported health capabilities and services for the defence and protection of South Africa. Of the four targets set, one was classified and one was achieved and two were overachieved. Virements of R204 081 million also occurred within this programme including R197 371 million to the area military health service support programme, and R39.975 million to the strategic direction sub-programme. Sub-programmes receiving the largest transfers (virements) are the military health product support capability (R34 815 million) and the Military Health Training Capability (R31 399 million).
2.2.7 Programme 7: Defence Intelligence
The purpose of this programme is to provide an intelligence and counterintelligence capability to the SANDF and it had spent 100 per cent of its allocated budget. It had two targets and both were overachieved and related to the number of defence intelligence products and the number of vetting decisions.
2.2.8 Programme 8: General Support
General Support provides support capabilities and services to the Department. Significant virements resulted in the final appropriation being R196.447 million lower than the adjusted appropriation. In terms of performance targets, a total of 14 targets were set of which 7 was achieved. Worryingly, the programme performed poorly in the areas of materiel disposal, ammunition disposal, spending per facilities plan, accommodation charges and procurement requests.
2.3 PERFORMANCE BETWEEN 1 APRIL 2015 and 30 JUNE 2015
This section, which is an overview of the DOD’s performance in the first quarter of the 2014/15 financial year, should be read along with the Committee’s report on the Department of Defence’s 2014/15 budget published in May 2015.
2.3.1 Summary of financial and programme performance
By the end of the first quarter the DOD had spent 21.2 per cent of its allocated budget, and the largest spending occurred in the Force Employment programme. While most targets had been met, the Department had poorly performed on key strategic areas including training, battle fitness, the availability of medical stock and certain health care activities. Programme spending is summarised as follows:
- Programme 1: Administration saw an overall spending percentage of 20.6% versus a projected target of 21.7% with only the Ministry sub-programme spending beyond the 8% limit with spending at 39.5% versus the projected 22.2%.
- Programme 2: Force Employment spent 15.9% of the projected 20.6% with the slowest spending in the Defence Capability Management sub-programme where 4.2% was spent versus a target of 20.3%.
- Programme 3: Landward Defence saw expenditure of 22.8% versus a target of 22.4% where the highest especially was on specialised military assets (29.4%) against a projection of 5.8%. Also there was no spending on Buildings and other fixed structures and transfers to public corporations and private enterprises.
- Programme 4: Air Defence spent 20.9% versus a projection of 22% with the highest overspending in the Training Capability (59% vs 21.6%) and Operational Directions (42% vs 18%).
- Programme 5: Maritime Defence spent 23% of its projected 24.1% and all sub-programmes were close to its projected spending. The higher spending on especially buildings and other fixtures at 73.2% versus a target of 16.9% is however concerning.
- Programme 6: Military Health Support spent 24.3% of the projected 24% which was R9.4 million higher than the planned expenditure. Except for the Military Health Maintenance Capacity sub-programme which recorded the slowest spending (9.9% vs 19.4%) all other sub-programmes performed well.
- Programme 7: Defence Intelligence spent 24.2% versus a projection of 24.7% with the Strategic Direction sub-programme not having any expenditure during the period under review.
- Programme 8: General Support has a spending of 17.5% versus a target of 17.2% with slow spending in the Command and Management Information Systems sub-programme (9.8% vs 13.9%). The expenditure on machinery and equipment (48.1%) was high in comparison with the target of 8.1%.
PART B: DEPARTMENT OF MILITARY VETERANS
- 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 for socio-economic support to military veterans and to their dependents, including benefits and entitlements to help realise a dignified, unified, empowered and self-sufficient military veterans community.
- Since 2011, the Department has been in the process of establishing itself administratively and building its capacity to perform all functions required by the Act. However, leadership instability and management deficiencies have had an adverse effect on the service delivery and performance of the Department. This led to the late submission of its 2013/14 annual report, a disclaimer audit opinion from the auditor general that year, difficulties in resolving audit queries, as well as several resignations and the suspension of members of the senior management.
- It should be noted that while funding allocation for this Department has steadily increased since its establishment, it is still part of the greater Defence allocation (Administration programme). Given the myriad of challenges that require urgent intervention the Committee re-iterates that greater scrutiny of how funds are utilised against targets set in strategic plans and annual performance plans, is required.
2. DEPARTMENT OF MILITARY VETERANS STRATEGIC FOCUS FOR THE 2014/15 FINANCIAL YEAR
2.1 2014-2019 Medium Term Strategic Framework
2.1.1 The Department of Military Veterans contributes to seven of the national strategic priorities:
- The military veterans training and skills development programmes as well as the provision of bursaries to eligible veterans and dependents, contributed to the realisation of improving the quality of basic education (outcome 1).
- For the 2014/15 financial year, 6 795 military veterans received healthcare services, 1 343 military veterans accessed counselling services and 1 803 military veterans were provided with healthcare cards. This is in line with outcome 2 (a long and healthy life for all South Africans).
- In line with outcome 4 (decent employment through inclusive economic growth), it is reported that 1 700 military veterans accessed job opportunities during the period under review.
- DMV contributed to outcome 5 (a skilled and capable work force to support inclusive growth path) by registering 97 cooperatives during the 2014/15 financial year.
- The DMV reports that facilitating access to social relief distress for 693 military veterans, assisted in realising outcome 7 (vibrant, equitable, sustainable rural communities contributing to food security for all).
- Finalising the memorandum of understanding with the Department of Transport, the transfer of R31,9 million to the Department of Human Settlement (for the purpose of providing houses to military veterans) and the provision of burial support to 160 eligible military veterans, will contribute to the realisation of outcome 8 (sustainable human settlements and improved quality of life).
- DMV reports that initiatives such as supporting activities of the South African National Military Veterans Association (SANMVA), the appointment of an appeals board on military veterans, and various other related institutional reforms would ultimately contribute to outcome 12 (an efficient, effective and development orientated public service and empowered fair and inclusive citizenship).
2.2 Military Veterans Strategic Priorities
2.1 For the period under review departmental planning and expenditure are focussed on the following six departmental priorities:
- Ensuring a fully functional Department of Military Veterans with an independent budget vote, systems and processes. This goal remains unrealised, for the period under review the Department’s budgetary allocation was still funded through the Defence budget vote (Vote 19: Defence and Military Veterans).
- Although the Department aimed to provide immediate social services to relieve distress amongst the most vulnerable military veterans, it had underperformed in this regard, achieving only 20 per cent of targets set.
- The Department failed to provide comprehensive support services to military veterans and their dependents and only achieved 33.3 per cent of set targets.
- Various events were held in line with the goal to promote the military veterans heritage, and memorialising and honouring military veterans.
- The establishment and maintenance of a credible and secure military veterans’ database remains marred with challenges and this affects service delivery to military veterans.
- The DMV has only achieved 33 per cent of targets set aimed at promoting empowerment programmes for military veterans.
3. OVERVIEW AND ASSESSMENT OF EXPENDITURE AND FINANCIAL PERFORMANCE
3.1 Financial performance for the 2014/15 financial year
3.1.1 As previously mentioned, for the period under review, the Department’s budgetary allocation 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. A total budget of R504.2 million had been allocated, and by the end of the financial year the Department had managed to spend only 91 per cent of its budgetary allocation.
3.1.2 Funding to the Socio Economic Support programme was prioritised and this included in-year shifting of funds from the Administration programme (R19.541 million) and Empowerment and Stakeholder Management programme (R77.936 million). This was intended for the promotion of greater service delivery to military veterans.
3.1.3 The Committee notes with concern the large amount of irregular expenditure, as well as fruitless and wasteful expenditure recorded for the period under review. Irregular expenditure amounted to R50.124 million, incurred mainly due to 19 incidents of non-compliance with supply chain management procedures and national treasury regulations (R10.224 million), non-compliance with procurement processes (R2. 980 million), non-compliance with tender processes (R13 747 million), and non-compliance with National Treasury cost containment measures (R1.105 million).
3.1.5 Fruitless and wasteful expenditure incurred (and awaiting resolution) amounted to R1 572 million. Such expenditure is mainly due to amongst others accommodation charges, venue damage and losses, LOGIS system payment, cost for a training video camera, interest paid for an overdue account, the purchase of an expensive laptop, and suppliers charging vat but not having been registered (R3 000).
3.2 Overview of programme performance
The Department has both underspent on its budget (91 per cent), as well as underachieved on targets set for the period under review – it had only achieved 13 of the 25 targets set. Such achievement is incorrectly stated as 71% per cent in annual report; the Department has in reality only achieved 52 per cent of targets set.
3.2.1 Administration programme
The Department achieved 28 per cent of total targets set, but had spent 90 percent of its budget (R143 million of the R158.63 million alloacted). While 9.8 per cent of the budget was underspent, sub-programmes such as Management, Corporate Services and Internal Audit overspent by 111 percent, 144.4 per cent and 156.3 per cent respectively. Underspending was recorded for Financial Administration (78.3 per cent), Strategic Planning and Policy Development, Monitoring and Evaluation (57.9 per cent) and Office Accommodation (30.8 per cent) sub-programmes. Areas of underachievement include the failure to receive an unqualified audit report, improving time frames to settle outstanding payments, and an underachievement in public opinion on military veterans.
3.2.2 Socio Economic Support
Total expenditure (96.1 per cent) and the poor performance (20 per cent) against set targets do not correlate. The Programme spent R225.170 million of its allocated R265.550 million, but only achieved one of the five targets set. The Department reports an overspending on the Socio-Economic Support sub-programme, but had underspent on the Database and Benefits Management, and Health Care and Well-Being Support sub-programmes.
3.3.3 Empowerment and Stakeholder Management
As with the Socio Economic Support Programme, this programme underperformed in terms of the targets set, but managed to spend the majority of funds allocated. It only achieved 33 per cent of targets set (2 out of 5 targets) but had spent 80 per cent of its budget (R63.956 million of the R79 973 million).
4. FINDINGS OF THE AUDITOR-GENERAL OF SOUTH AFRICA
4.1 The DMV received a qualified audit opinion for the 2014/15 financial year owing to discrepancies found in the registration of movable/tangible capital assets, as well as the DMV’s classification of payments not in line with the Modified Cash Standards (MCS). The Auditor-General classified the restatement of corresponding figures and material underspending on the budget, as Matters of emphasis.
4.2 Predetermined objectives
4.2.1 The AGSA found that 20 per cent of targets set for the Socio Economic Support programme, and 33 per cent of the Empowerment and Stakeholder Management targets were not specific or measurable. Indicators were also not verifiable and management failed to adhere to requirements of the National Treasury’s Framework for managing programme performance.
4.3 Compliance with legislation
4.3.1 The AGSA found that financial statements, performance and annual reports were not prepared in accordance with the Modified Cash Standards and supported by full and proper records as required by the PFMA. Material misstatements were also not corrected and records could not be provided.
4.3.2 Transfers and subsidies that were not originally budgeted for were made without the approval of National Treasury.
4.3.3 In respect of expenditure management, effective steps were not taken to prevent irregular expenditure and fruitless and wasteful expenditure as required by the PFMA and National Treasury regulations. Fruitless and wasteful expenditure had also not been identified and disclosed in the financial statements.
4.3.4 Procurement and contract management, similar to 2013/14, and goods and services were often procured without obtaining the required price quotations. Contracts were often awarded to suppliers whose tax matters had not been declared by SARS. Appropriate evidence could not be obtained that quotations were awarded to suppliers based on preference points
4.3.5 Internal audit: Internal Audit failed to evaluate the effectiveness and efficiencies of control and, reliability of operational information.
4.3.6 Sufficient and appropriate evidence could not be obtained that effective and appropriate disciplinary steps were taken against officials who made or permitted irregular and fruitless and wasteful expenditure.
4.3.7 The Auditor-General also raised several issues regarding internal control that led to a qualified audit opinion. These include leadership, financial performance and management as well as governance.
5. PERFORMANCE BETWEEN 1 APRIL AND 30 JUNE 2015
5.1 Overview of April – June 2015 performance and expenditure
5.1.1 For the 2015/16 financial year, the DMV received a total budgetary allocation of R 582.2 million, R78 million more than allocated the previous financial year (R504.2 million). By 30 June 2015, the Department had only achieved 13 of the 18 performance targets set for the first quarter, and had only managed to spend 10.5 per cent (R61.2 million) of the R139.8 million (24 per cent) projected.
5.1.2 The administration programme achieved 83 per cent of targets set for the period under review: Of the 12 targets set, 10 were achieved and 2 underachieved. Those targets not achieved pertained to the number of communication strategy activities implemented, and the submission of signed performance agreements. Spending was below projections amounting only to 14 per cent (R21.7 million) instead of the 25 percent (R39.4 million).
5.1.3 In terms of the Socio Economic Support programme, the Department managed to achieve one of the two targets. This programme also recorded an underspending of R43.4 million, only managing to spend R23.2 million (9 per cent) of planned expenditure (R66.6 million).
5.1.4 Only 33 per cent of targets set for the Empowerment and Stakeholder Management programme was achieved. Total spending amounted to R16.2 million, instead of the planned R39.6 million (25 per cent). This programme also underspent by R23.4 million.
PART D RECOMMENDATIONS
The Committee requests that the Minister of Defence and Military Veterans ensures that the following recommendations are considered and due consideration be given to its implementation. The Minister should further ensure that responses on recommendations’ feasibility and/or implementation are submitted to Parliament, within one month of the adoption of the report by the National Assembly (NA).
1. DEPARTMENT OF DEFENCE
1.1 The Defence Review Implementation Plan should be submitted to Parliament as a matter of urgency, together with confirmation of all projected resource requirements for such implementation.
1.2 In its previous report, the Committee stressed the need for the Department of Defence - the Defence Secretariat and the South African National Defence Force - to be adequately resourced. Performance information contained in the Department’s annual report illustrates the impact such underfunding has had on the operations and capabilities of our Defence Force. Given the economic climate and national priorities, it was accepted that National Treasury would not necessarily have sufficient funds available to significantly increase the Defence budget and that alternative avenues were being explored to increase the revenue of the DOD. The initiatives to cooperate with Armscor to generate additional revenue through the sale of land, equipment and related defence assets, is welcomed and should be further pursued, as it may result in less reliance on the national fiscus. The Committee cautions, however, that the sale of land and equipment should be done in a responsible and transparent way that will not be to the detriment of the Department or the state.
1.3 The re-imbursements from the United Nations and African Union for participation of the SANDF in peace operations do not accrue back to the Department, but is rather returned to National Treasury. Given that the original expenditure for deployments are funded from the Defence Budget, it is felt that reimbursements should flow back to the Department. It is therefore recommended that National Treasury, in consultation with the Department of Defence, should consider that reimbursements are received directly by the Department, and this will also assist in repairing and maintaining operational vehicles for external operations. Should this refunding take place, the Committee urges that the funds be used responsibly for operational and other capacitating needs to bring the funding model of the DOD in line with the Defence Review
1.4 The serviceability of operational vehicles in mission areas is a concern and the involvement of the Cuban technicians through Operation Thusano to further assist in addressing this challenge should be investigated, given their success in repairing and maintaining military vehicles.
1.5 The Committee notes that in several instances the Department had spent 100 per cent of the allocated budget. This is highly unlikely unless money was moved from underspending programmes. The Committee recommends that the Department makes the various movements of funds more visible, especially where 100 per cent expenditure is reported. While it is accepted that the AG had confirmed these figures and that these are not misleading the Department should provide more information in cases of 100 per cent spending in order for the Committee to have a clearer insight on their movement.
1.6 The high percentage of spending on personnel (54 per cent) against capital and operational expenditure is a cause of concern, particularly against the norm of a 40:30:30 ratio as noted in the Defence Review. The negative impact of this on the SANDF’s operational capacity is evident, as outlined in the 2014 South African Defence Review. The Committee also enquired about the split of these costs between the regular and reserve forces.
1.7 The Committee recommends that the Department decrease the percentage expenditure of personnel with an understanding that deployments generally increase such expenditure particularly in terms of travel and subsistence, and other allowances. Given the fact that there are many Reserves who are unemployed and reliant on the annual 180 days that could be deployed, the Department should endeavour to utilise the reserves more, especially since it seems to be the more affordable option, given the financial constraints. The revitalisation of the Reserves should be further prioritised to ensure the effective funding of the Reserve Force. The Committee further recommends that force rejuvenation be prioritised through the MSDS system. In this regard the DOD should also re-look the utilisation of the Mobile-Exit-Mechanism (MEM) model.
1.8 The Department continues to struggle with paying invoices (service providers) within the prescribed timeframes (30 days). Such late payments are detrimental to particularly small businesses. The Committee urges the department to ensure that invoices are paid within the 30 day period and any challenges in this regard should be resolved as speedily as possible.
1.9 The SANDF is instrumental to landline border safeguarding and curbing cross-border crime and illegal migration, and the Committees urges that every effort should be made to strengthen our Defence Force’s capacity in this regard. The Committee therefore recommends that the Department prioritise the deployment of the additional two sub-units to the landline borders in addition to the deployed 13 sub-units by the end of the financial year, as agreed. The Department should communicate progress made in this regard on a regular basis to ensure that when necessary, the committee can lend its assistance in this regard. In addition to the deployment of two extra companies, the Committee recommends that funding be made available for the gradual increase of the number of sub-units deployed along the border over the MTEF period. Liaison between National Treasury and the DOD should dictate a funding model to ensure the gradual expansion from the current 13 companies deployed to a total of 22 Companies deployed along the borders.
1.10 The low sea hours and flying hours, especially its impact on the morale of soldiers as well as the operational readiness of the SANDF, was noted with concern by the Committee. The Department is encouraged to plan expenditure in such a way that more funds are allocated to increase the number of flying hours and sea hours. These increased hours should be reflected in the performance targets over the MTSF.
2. DEPARTMENT OF MILITARY VETERANS
2.1 The Committee re-iterates that the implementation of the Military Veterans Act, particularly the maintenance of a reliable military veterans database; the fair application of a means-test; the efficient delivery of benefits and services to military veterans; are essential to ensure that military veterans’ quality of life is enhanced and that military veterans receive the necessary support and acknowledgement for their selfless service to society.
2.2 The Committee urges the Department to take the necessary steps to address the limitations found on the asset register and to ensure that payments for goods and services are in accordance with the Modified Cash Standards (MCS).
2.3 Sufficient and appropriate evidence proving that effective and appropriate disciplinary steps were taken against officials who made and permitted irregular and fruitless expenditure, is required. It is recommended that proper consequence management be implemented not only in such cases but also to prevent the recurrence of irregular expenditure, and fruitless and wasteful expenditure.
2.4 The poor performance and management in the Department frustrate efforts to improve the military veterans’ quality of life. Critical interventions are required to ensure that resolution of all deficiencies that led to the disclaimer and qualification audit opinions in 2013/14 and 2014/15 financial year, the finalisation and implementation of service level agreements and memoranda of understanding with those stakeholders responsible for the provision of services and benefits to military veterans.
2.5 The Department should ensure that financial statements, performance and annual reports comply with national standards set, and should be monitored throughout the year to ensure that progress is made in this regard.
2.6 The Committee has on a number of occasions urged the Department to ensure that all vacancies are filled with not only suitably qualified personnel, but also with individuals who are sufficiently committed and appropriately skilled to identify the needs of military veterans, and efficiently and effectively ensure good administration of the Department. It is recommended that decisive steps be taken to ensure the strengthening of recruitment and appointment processes, and that a skills audit is conducted to identify the skills set and needs of existing personnel.
3. CASTLE CONTROL BOARD
3.1 During its presentation to the Committee, the CCB listed the national cultural events it hosted (Freedom Day, Heritage Day, International Mandela Day), and re-iterated that greater effort must be made to raise public awareness of the modern role of the Castle, as well as its historical significance. Greater effort should be made to ensure that particularly rural communities and military veterans from provinces other than the Western Cape, are included in the above-mentioned events.
3.2 The Committee expresses its satisfaction that efforts made to improve the management and administration of the Castle have been successful, evident in the unqualified audit opinion of the Auditor-General of South Africa. We urge the Castle Control Board to focus on resolving weaknesses identified in policy, the drafting of key performance indicators, the three year rolling audit plan, as well as the internal audit plan.
3.3 Information presented to the Committee highlighted the particular renovations and maintenance work required to preserve the Castle. Care must be taken to ensure that such renovations do not negatively impact on the Castle’s normal operations, do not limit or disrupt visitation/tourism for too long a period, as well as the hosting of events. This would provide stability on the income or revenue raised with the abovementioned events.
3.4 Related to the above, the Committee stresses that alternative sources of revenue should be sought, focused on increasing the revenue of the Castle as well as its commercialisation. This would also ensure that the Castle’s reserves are not depleted. It is requested that the Castle presents to the Committee its Revenue Generation Strategy.
3.5 Matters relating to the authority structure of the Castle should be addressed as soon as possible.
4.1 Armscor managed to meet most of its goals set for the period under review, and had received a clean audit opinion from the Auditor- General of South Africa. However, we note that some targets had been met after the end of the prescribed period, and the Committee urges the entity to avoid such a situation in future. Instead it could consider adjusting the target deadline to ensure higher levels of performance.
4.2 Although the Dockyard suffers severe capacity constraints, it had within budgetary constraints, managed to meet its service delivery obligations in accordance with performance agreement, to the South African Navy. It was reported that owing to the huge monetary investment required to enhance the Dockyard’s capabilities, the management of the dockyard would be transferred to Denel. Care must be taken to ensure that any changes to the Dockyard’s management arrangements should not be to the detriment of the South African Navy who relies on this facility for all vessels’ maintenance and repair.
4.3 The Committee urges Armscor to ensure the resolution of the single outstanding Industrial Participation obligation by a certain company (MBDA) and related to the acquisition of the Exocet surface-to-surface missiles. The corporation should insist on the fulfilment of these obligations as agreed or should explore alternative measures to enforce such obligations.
4.4 In the light of reduced state funding, Armscor will be heavily reliant on its commercialisation strategies. In this sense, the turnaround strategy at Armscor is essential to ensure the future of the entity.
5. DEFENCE FORCE SERVICE COMMISSION
5.1 The Commission raised a number of concerns relating to its relationship with the Defence Force, and the slow bureaucratic processes that frustrate not only its work but daily operations. The Commission’s budget is now administered by the Ministry sub-programme, and would assist in improving budgetary and logistical concerns expressed. The Committee urges the Commission to provide Parliament with quarterly reports on its performance, activities and expenditure, in order for the required interventions to be made.
5.2 The Commission reported interacting with more than 7000 soldiers where it gained first hand experiences of the daily challenges faced and frustration experienced. Amongst these were pilots’ frustration at decreasing flying hours, and the work environment of especially professional, technical and scarce skilled personnel. The Committee urges the Department to finalise the South African Defence Review implementation plan in order to ensure that soldiers’ frustrations are accordingly addressed.
5.4 Commissioners voiced their frustration at slow or no progress made with the implementation of recommendations, including those made by its predecessor, the Interim Commission. One such challenge that continues to be a source of frustration and low morale is a recommendation to de-link rank from salaries. The Committee will prioritise this matter, and once it received all relevant reports and information in this regard, it will consider its options to address this burning issue.
5.5 The Committee urges that the Commission ought to be as representative as possible and that the appointment of a disabled person to the Commission would lend it a certain understanding and perspective on how to address matters relating to disabled soldiers.
6. OFFICE OF THE MILITARY OMBUD
6.1 The Committee voiced concern over the high staff turn-over levels, and sought confirmation on the total number of approved and funded posts. Given the nature of the Military Ombud’s work, the high vacancy rates of especially funded posts, is a cause of concern and urge that such posts are filled as a matter of urgency.
6.2 The Committee urges that the appointment of Deputy Ombud be prioritised.
6.3 The Office attempts to resolve all complaints within a 90 day period, but cases are often delayed due to the non-availability of witnesses, and other related documents. While such delays may occur, the Committee encourages the Military Ombud to reduce and when possible avoid any further backlogs to retain soldiers’ confidence and trust as an objective third party.
6.4 The Committee is pleased that regulations to the Military Ombud Act (2012) have been finalised and will interact with the Military Ombud regarding the regulations’ implementation and the impact this has on improving this office’s effective and efficient operation.
6.5 The Office of the Military Ombud should take care to ensure its independence and autonomy as envisaged in the Act. This is particularly important in how it conducts investigations, the kind of complaints received, as well as how it manages its budget.
Report to be considered
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