ATC160510: Report of the Portfolio Committee on Defence and Military Veterans an Budget Vote 19: Defence and Military Veterans, dated 10 May 2016
REPORT OF THE PORTFOLIO COMMITTEE ON DEFENCE AND MILITARY VETERANS ON BUDGET VOTE 19: DEFENCE AND MILITARY VETERANS, DATED 10 MAY 2016
The Portfolio Committee on Defence and Military Veterans, having considered Budget Vote 19: Defence and Military Veterans, reports as follows:
1.1 The Portfolio Committee on Defence and Military Veterans held interactions on Budget Vote 19 (Defence and Military Veterans) alongside tabled Annual Performance Plans of the Department of Defence, Department of Military Veterans, the Armaments Corporation of South Africa (Armscor), the Castle Control Board, and the Military Ombud on 3, 4 and 10 May 2016 as part of its oversight function.
1.2 The Report comprises a programme-by-programme summary of key aspects of the Defence budget allocation and strategic objectives, as well as the Committee’s observations and recommendations. Observations made in this report should not be separated from those made in previous committee reports. The documents should thus be read along with previous reports, including the Committee’s 2015 Budgetary Review and Recommendation (BRR) Report.
PART A: DEPARTMENT OF DEFENCE
1. Strategic and operational goals
1.1 The Defence strategic and operational goals for the 2016/2017 financial year are expressed through the focus areas and priorities set by the Minister of Defence and Military Veterans, the Secretary for Defence and the Chief of the South African National Defence Force (SANDF). These focus areas and priorities have been developed within the Defence framework articulated in the 2015 -2020 Defence strategic plan, and is geared towards execution of the Defence mandate.
1.2 The six ministerial priorities for the 2016/17 financial year, revolve around Planning Milestone 1 of the Defence Review’s implementation:
- providing sound defence strategic direction steering the Defence policy implementation, strengthening communication as well as clarifying command and accountability relationships within the Defence Secretariat and the SANDF;
- providing strategic resource direction through the development of an appropriate funding model with the desired end state being a Defence Funding Model;
- the renewal of the DOD Macro organisational structure through the restructuring of the DOD;
- the renewal of the Defence Human Resources component;
- through providing ‘capability sustainment and renewal, the Department intends to improve the DOD acquisition processes to support the acquisition of main equipment to ensure its capability sustainment and renewal;
- Capability sustainment direction will involve the review the maintenance of defence facilities, cooperation with the Defence Industry through establishing Defence industry engagements, and the development of strategic reserves;
- providing ‘ordered defence commitments direction’ to enable sustained ordered Defence commitments through appropriate legal instruments.
1.3 For the Defence Secretariat, the Accounting Officer (Secretary of Defence) has identified seven focus areas in pursuit of the above ministerial priorities. These are:
- For the Defence Secretariat, the Accounting Officer has identified seven focus areas in pursuit of the above ministerial priorities. These are:
- Clarifying the policy relating to defence Command and Governance Accountability, implementing Defence Review departmental instructions and guidelines, and conceptualising and implementing a strategic communication intervention strategy;
- developing an appropriate Defence funding model to ensure that the adequate resourcing of the defence function;
- renewing Defence human resources through the finalisation and implementation of a reviewed human resource management strategy, and pursuing measures to strengthen personnel training and development;
- organisational renewal which will focus on the Defence macro-organisational structure through the development of policies and strategies that will inform the updating of the Defence macro-organisational structure;
- through providing ‘capability sustainment and renewal’, the Department intends to improve the DOD acquisition processes to support the acquisition of main equipment to ensure its capability sustainment and renewal;
- it will review the Defence cooperation with the Defence Industry through establishing Defence industry engagements; and
- In pursuit of ordered defence commitments, particularly SANDF’s participation in external operations, it will enable the execution of defence commitments through appropriate.
1.4 In support of the above priorities, the Chief of the SANDF will pursue the following ten goals over the 2016/17 financial year:
- Military strategic direction will be pursued by clarifying command and governance accountability relationships, instructions and guidelines for the implementation of the Defence Review and the roll out strategic communication interventions across all levels of the DOD;
- the phased restructuring of the SANDF in line with a reviewed command and control philosophy, recognition of the importance of civilian military control which will provide a clear differentiation between command and personnel functions;
- Repairing and renovating facilities focused on curbing the further deterioration of defence infrastructure. This will mainly entail ensuring that Defence Endowment properties are fully managed by the Department of Defence and the strengthening of the Defence Works Formation capabilities to ensure that the maintenance and repair of facilities are within the control of the SANDF;
- the development and maintenance of strategic reserves to ensure the different stock levels required for possible emergencies, unforeseen fluctuations and consumption delays, delays in production and transit accidents.
- An integrated implementation of the Defence Human Resources Strategy will be pursued and will include a human resource charter that supports the SANDF’s cradle-to-grave’ concept and rightsizing efforts.
- enforcing Military discipline through the promulgation of a Discipline Plan, and the enhancement of Military discipline through the Military Discipline Bill
- the promulgation of a defence capability development philosophy and approach will informed by the development of long term plans and the pursuit of appropriate acquisition plans funded through available resources;
- For force protection, the SANDF will focus on military security and counter-intelligence capabilities, including acquiring critical ammunition to support the SANDF’s external operations. These include improving corps and professional intelligence analysts, restoring the tactical operational and strategic defence capabilities, and improving force preparation and force employment stock levels;
- the SANDF will systematically increase the SANDF its footprint on the borderline to pursue its border safeguarding responsibilities and the finalisation of a border safeguarding strategy;
- A policy and strategy on the revitalisation and transformation of the Reserves will be promulgated and implemented. This will support the reserves as a feeder systems into the SANDF, the leader group development system, expanding the capacity of reserves and providing specialists scarce skills.
- The SANDF remains committed to the modernisation of landward defence capabilities, but no output can be planned due to a lack of funding.
2. Overview of the 2016/17 budgetary allocation
2.1 Summary of expenditure trends
2.1.1 The Department received a total budget of R47.170 billion for the current financial year and this allocation is expected to rise to R48.745 billion by 2017/18 and R50.725 billion by FY 2018/19. While the budgetary allocation has increased slightly from the R45.088 billion allocation of the previous financial year, resources allocated remain inadequate, with a reported shortfall of R1.8 billion. The increase for 2016/17 reflect an actual real percentage decrease of 1.86 per cent. The allocation amounts to 1.05 per cent of the national gross domestic product and is arguably below the international standard of 2 per cent. During the interaction with the Committee, the Accounting Officer stated that increasing this allocation to at least 1.5 per cent of the GDP would greatly assist the SANDF in restoring its capabilities and fulfilling its mandate.
2.1.2 The largest expected sources of expenditure will be on compensation of employees, goods and services (contracts, property payments, equipment maintenance), maintaining the SANDF’s defence capabilities (largely driven by the implementation of Milestone 1 of the Defence Review), upgrading of the landward, air and maritime defence capabilities, expanding and maintaining defence infrastructure, border safeguarding, SANDF’s participation in peace support operations and establishing cyber security capabilities. There is, however, an urgent need to curtail the expenditure on personnel to bring it more in line with the Defence Review’s desired end-state of 40 per cent of the budget being spent on personnel.
2.1.3 The greatest challenge to the SANDF’s ability to fulfill its mandate remains an inadequate budgetary allocation. The Department has not received funding for the implementation of the Defence Review and the Special Defence Account allocation was reduced by R350 million. The latter impacts negatively on the ability of the SANDF to implement required acquisition projects such as the procurement of naval offshore and inshore patrol vessels. Furthermore, given the R1.8 billion funding shortfall, new funding models are being explored that include the generation of additional revenue through amongst others the reimbursement for UN/AU operations, disposing of redundant defence equipment, ensuring adequate and appropriate compensation for intellectual property, exploring Public-Private Partnerships (PPP), recovery of costs incurred by the Department for support given to other Government departments, and revenue raised through the leasing of surplus and redundant Defence land/facilities.
2.2 Summary of allocations and performance indicators per programme
2.2.1 Programme 1: Administration
184.108.40.206 The Department’s APP states that the purpose of the administration programme is to provide strategic leadership, management and support services to the Department as well as provide for military veterans benefits through the Department of Military Veterans. R5.151 billion has been allocated to this programme, and will fund the pursuit of the 64 performance indicators identified for the 2016/17 financial year.
220.127.116.11 During its interaction with the Department the Committee noted the low target (75 per cent) set for the payment of invoices within the 30 day period set for all Government departments. Much of the challenges experienced relate to the weaknesses in the information systems, unreliable information submitted by service providers, and the slow invoice/information verification by National Treasury. The Committee notes however, the commitment made to ensure that the Department improves its performance and ensures that service providers are paid within the national standard set.
18.104.22.168 The low target (40 per cent) set for the finalisation of court cases, brings into question the capacity of the Legal Services Division to provide sound and effective legal advice and support to the Department and SANDF. Of particular concern is the protracted legal case in Portugal that involves the Department, the number of labour disputes, the slow progress made with the appointment of military judges and the delays in the finalisation of the Military Discipline Bill. Note should be taken of the proposed Discipline Plan which will hopefully assist in addressing discipline in the SANDF.
2.2.2 Programme 2: Force Employment
22.214.171.124 This programme has been allocated R3.900 billion to provide and employ defence capabilities and operational capabilities to successfully conduct all operations that include joint, interdepartmental, interagency and multi-national military exercises. Only five of the 14 targets set for this programme have been disclosed. Funding of the regional security sub-programme has been reduced by 12.91 per cent, but this could be ascribed to the planned withdrawal of SANDF troops from Sudan. The decrease is thus unlikely to significantly impact on SANDF external operations. The 4.98 per cent increased allocation to the Support to the People sub-programme is to fund the additional two sub-units for borderline safeguarding, bringing the total units to 15.
126.96.36.199The Department indicated that it will spend more on contractors (R411.3 million compared to R369.3 million in 2015/16), as well as food supplies (R143.2 million compared to R 120.2 million in 2015/16). Given the need to modernise SANDF capabilities, the decrease in allocation for machinery and equipment for this programme (R82.1 million compared to R262.1 million in 2015/16) is unexpected and it is unclear how this will impact on the combat-readiness of deployed troops.
2.2.3 Programme 3: Landward Defence
188.8.131.52 R15.651 billion has been allocated to this programme to fund the provision of prepared and supported landward defence capabilities. For this financial year, only one performance indicator is reported, focusing on the number of learners that will attend courses over this period. The Committee notes that this target has been adjusted and reduced from 3 146 learners in the previous year, to only 2 214 learners in the 2016/17 financial year. This is of great concern, given the need for skills in the SANDF.
184.108.40.206 In terms of sub-programme share of the allocated budget, the largest increase compared to 2015/16 is found in the strategic direction sub-programme due to the intended expansion and acquisition of new infantry combat vehicles and infantry combat gear. The General Training sub-programme received a real increase of 8.8 per cent compared to the previous year while operational intelligence received 8.31 per cent. Some real percentage decreases in allocation compared to 2015/16 should also be noted, including the artillery capability sub-programme (-17.66 per cent) and engineering capability (-10.52 per cent).
2.2.4 Programme 4: Air Defence
220.127.116.11 This programme provides prepared and supported air defence capabilities. Only two performance targets are set for this financial year and relates to the number of learners who will attend courses during this period, as well as the number of flying hours set.
18.104.22.168 Air defence received a total allocation of R8.883 billion, of which the strategic direction and training capability sub-programmes received the largest increase in allocation compared to the previous year. Allocations to the technical support services, command and control and transport and maritime capability decreased. The reduction in the transport and maritime capability is a cause of concern given the current aged aircraft utilised by the SA Air Force’s 35 Squadron for conducting maritime patrols. This impact negatively on the country’s ability to constantly patrol its maritime territory and ensure territorial integrity.
22.214.171.124 The Committee further notes with concern the continued decline in the number of targeted operational flying hours. This is being decreased to 5 000 hours for 2016/17, which will likely impact on pilots' abilities to remain current in terms of required flying hours. It also impact negatively on the morale of pilots and other personnel in the SA Air Force. Furthermore, the reduction in flying hours stands contrary to the increased expenditure planned for oil, fuel and gas has which increased from R166.1 million in 2015/16 to R238.5 million in 2016/17. For the Committee this illustrates a clear need for a more appropriate allocation of resources to ensure that the defence budget funds the core priorities of the SANDF and the SA Air Force in particular.
2.2.5 Programme 5: Maritime Defence
126.96.36.199 For the provision of prepared and supported maritime capabilities, the programme received an allocation of R4.356 billion for 2016/17. Expenditure will mainly be on replacing the SA Navy’s hydrographic vessel and the acquiring of offshore and inshore patrol vessels. The maritime combat capability’s allocation was increased by 27.95 per cent compared to 2015/16, while the base support capability’s allocation was reduced by 8.39 per cent. The Committee raised concern whether the decrease in the allocation for oil, fuel and gas from R81.4 million in 2015/16 to R19.1 million in 2016/17 will impact on operations in the SA Navy, notably sea-hours.
2.2.6 Programme 6: Military Health Support
188.8.131.52 The programme’s function is to provide prepared and supported health capabilities and for the 2016/17 financial year, was allocated a budget of R4.417 billion, a 1.82 per cent real increase from the R4.069 billion allocated the previous financial year. Comparatively, the strategic direction sub-programme received the largest real increase (10.44 per cent), while funds for mobile military heath support decreased from R118.9 million to R121.2 million.
184.108.40.206 The three targets set for this financial year include 2.141 million health activities, an 80 per cent compliance with DOD training targets, and 50 per cent availability of medical stock. These targets are all lower than the audited achievements from 2014/15. Of specific concern is the fact that in 2014/15, a total of 2.312 million health activities were completed, but that only 2.141 million were planned for both 2015/16 and 2016/17. This contradicts the commitment made to ensure greater military veterans’ access to medical health care in particular. The Committee also notes that the target set for availability of medical stock (50 per cent) is lower than the achievement in 2014/15 when it achieved 54 per cent. The Committee therefore urges the Department to ensure that, given the impact the availability of medication has on the health of patients, this target be adjusted upwards and resources allocated for its achievement.
220.127.116.11 Military health facilities are in desperate need of specialist health care professional. During a recent oversight visit to particular military health facilities, the reasons provided for the exodus of specialist skills included the lack of properly equipped and technologically modern medical facilities. It is therefore a cause of concern that only R2.9 million has been allocated for machinery and equipment, and that the funds allocated to Specialist Health facilities also decreased for 2016/17. It is unclear how such contradictory allocations would impact on commitments made to ensure the provision of professional, safe, and reliable medical care to both SANDF members and military veterans.
2.2.7 Programme 7: Defence Intelligence
18.104.22.168 R900.2 million has been allocated to this programme, and the 1.56 per cent real increase in the budget is mainly due to efforts to develop the SANDF’s cyber monitoring capability. The increased allocation for the compensation of employees is in line with the need to appoint appropriately skilled personnel to the cyber security programme.
22.214.171.124 Six performance targets are set for this programme. It is reported that the Cyber Warfare Strategy would be submitted to the JCPS cluster in 2016/17, and the functions and structures of the Cyber Warfare Plan will also be finalised.
2.2.8 Programme 8: General Support programme
126.96.36.199 This programme received R5.911 billion for 2016/17, a 3.21 percent real increase from the R5.372 billion allocation in the previous financial year. Ten performance targets have been set and include targets set for the finalisation of DOD procurement policy, percentage utilisation of endowment property, modernisation of Information Technology infrastructure, the number of crime prevention operations, reducing the backlog of criminal case investigations, and in-year criminal case investigations.
188.8.131.52 Outdated information systems and the use of manual recordkeeping system have an impact on how efficiently information is managed in the Department and often led to audit queries and qualifications. The establishment and operationalisation of modern and appropriate ICT systems on the department and SANDF are of utmost importance to ensure both compliance to national standards set, and a more synchronised and professionalised businesses practices. The Committee therefore welcomes the increased allocation towards computer services (R857.5 million compared to R R727.9 million in the previous year).
PART B: DEPARTMENT OF MILITARY VETERANS
1. Strategic goals
1.1 Established in 2009, the Department of Military Veterans’ purpose is to facilitate the delivery of services and benefits to military veterans, as well as to coordinate the activities aimed at recognising the dignity and appreciation of military veterans’ contribution to freedom and nation building.
1.2 Performance information and expenditure will largely be driven by the eight ministerial priorities set. These are to:
- ensure a fully functional Department of Military Veterans, with an independent vote, systems and processes;
- providing immediate social relief of distress to the most vulnerable military veterans;
- providing comprehensive support services to military veterans and their dependents;
- promoting military veterans empowerment programmes;
- promoting military veterans heritage, memorialisation and honour;
- maintaining the credibility and security of a national military veterans database; and
- implementing a ‘high impact’ communication and marketing strategy and plan
2. Overview of the 2016/17 budgetary allocation
2.1 Summary of expenditure trends
2.1.1 R 597.6 million has been allocated for use by the Department of Military Veterans, and this allocation has increased slightly from the R582.2 million allocated in the previous year. Significantly, funds allocated to the Administration programme has decreased while spending on the socio economic support services is expected to increase. This is in line with commitments made to accelerate access and delivery of benefits and services to military veterans.
2.1.2 Vacancies and the recruitment of appropriately skilled and experienced personnel remain a challenge and has in the past led to not only chronic underspending, but dismal performance and a lack of service delivery to military veterans. While the number of employees will remain at 169 people, personnel costs will reportedly increase from R97.5 million in 2015/16 to R102.7 million in 2016/17.
3. Summary of allocations and performance indicators per programme
3.1 Programme 1: Administration
3.1.1 This programme received R143.7 million and its budget, as mentioned above, has been reduced from R157,5 million allocated in 2015/16. The internal audit capacity sub-programme received an increase owing to understaffing and underperformance of the internal audit unit. During deliberations with the Department, it was indicated, however, that the number of personnel in the Internal Audit office will not be increased owing to the established structure of the Department. Allocations for office accommodation and strategic planning, policy development, monitoring and evaluation have been reduced. Worryingly too is the smaller budget allocated for communication, as well as infrastructure and planning services.
3.1.2 It is essential that the Department prioritises the strengthening of its monitoring and evaluation capacity, policy as well as supply chain management capacity, and the current budgetary allocations do not reflect such prioritisation. Furthermore, the increased allocation for the Internal Audit capacity should be carefully monitored. Given that no additional staff will be appointed, the spending of these funds should be carefully monitored to ensure a higher quality of internal auditing as requested by the Auditor General.
3.2 Programme 2: Socio economic support services
3.2.1 This programme received an increased allocation of R294.1 million, compared to R266.3 million in 2015/16. Greater spending on particular on providing healthcare and wellbeing support to military veterans is reflected in a real percentage increase of 37.93 per cent in allocation.
3.2.2 Alarmingly, funds to be utilised for the maintenance of the military database have been reduced from R12 million in 2015/16 to R11.2 million in 2016/17. It is unclear how the Department will ensure a reliable and all-inclusive database without the necessary funding. The Committee stresses that the challenges relating to the maintenance and establishment of a reliable military veterans database means that the most deserving military veterans are deprived from accessing vital services, benefits and support. In addition, the target for the database has been set at 85 per cent while the last audited state of the database reflected 31 per cent verification. It is thus unclear whether the set target can be achieved with a decrease in funding.
3.2.3 The Committee also notes the increased allocation for Contractors from R17.3 million in 2015/16 to R24.5 million in 2016/17. It should be ensured that all services rendered by contractors add significant value to the core business of the DMV and comprise skills that are not available within the Department itself.
3.3 Programme 3: Empowerment and stakeholder management
3.3.1 This programme’s budget has been reduced in real terms from R158.4 million in 2015/16 to R159.8 million. Most significantly affected is the military veteran’s empowerment and skills development sub-programme with a 6 per cent real reduction. Reasons for such a reduction remain unclear and it is unclear whether the DMV will be able to achieve the set target of 3 000 for the number of veterans with access to training and skills development.
3.3.2 Limited access to information remains a huge challenge as many military veterans are not aware of services and benefits they could qualify for. The slow establishment of provincial and regional military veteran’s offices further limits access to information, and the reduction in this programme’s funding is a cause of concern.
PART C DEFENCE ENTITIES
1. The Castle Control Board
- Startegic objectives
- The Castle Control Board (CCB) is entrusted with the management of the Castle of Good Hope and aims to make the Castle a centre of excellence that showcases South Africa’s shared heritage. During 2016/17, the CCB will aim to ensure a stable manegment environment through efficient eladership and effective financial mangement. The CCB will also aim to ensure increased marketing and boosting tourism numbers, ensuring the safety and security of the prescint and move towards positioning the Castle as a premier National and World Heritage Site.
- Budget information and Committee discussion
1.2.1 The CCB funds all operations through revenue raised, and is not funded through the defence budget vote. The Castle generates revenue through ticket sales, the hosting of events and leasing of its facilities for film shoots. The total revenue generated for 2014/15 was R3.3 million, for 2015/16 it was R3.9 million and for 2016/17 it is expected to increase to R4.65 million. The planned expenditure increases from R7.501 million in 2015/16 to R7.945 million in 2016/17. Programme-specific increases are largely in line with inflation, except for the Tourism programme which will increase expenditure by R20 million, or 8.24 per cent in real terms, for 2016/17. In terms of targets, the most significant include the increase of the number of tourists from 152 000 in 2015/16 to 155 000 in 2016/17. The number of non-commercial cultural events will decrease from 12 in 2015/16 to 10 in 2016/17.
1.2.2 During its engagement with the CCB, the Committee noted the following key issues:
- The Committee noted that renovations at the Castle will be completed around September 2016. The Committee is cognisant of the fact that revenue-generating activities can only be implemented successfully after this completion.
- The Committee noted that there are plans to generate additional income in future as a means of maintaining the self-sustaining nature of the Castle. These means include the shifting of the Het Bakhuys to the control of the CCB, increase of sales at the curio shop, the potential leasing of property at the Castle and the development of a conference center.
- The Committee notes that an e-marketing strategy at a cost of R100 000 included the total revamp of the Castle’s website and the transfer of skills to Castle personnel.
- It was also noted that there are still challenges to establish full control of the Castle precinct within the domain of the CCB, as other roleplayers such as Iziko Museums also have a stake in the Castle. This is detrimental to the aim of establishing the Castle as a World Heritage Site.
2. Military Ombud
2.1 Strategic overview
2.1.1 The Office of the Military Ombud was established in 2012 in terms of the Military Ombud Act (No. 4 of 2012) to investigate complaints by members, former members which may be represented in lodging a complaint as well as family member(s) on behalf of a member of the SANDF, in respect of their conditions of service. Members of the public may also lodge a complaint regarding the official conduct of a member of the SANDF. The Office functions independently from the SANDF.
2.2 Budgetary information and Committee discussion
2.2.1 The full allocation to the Office of the Military Ombud increases from R44.041 million in 2015/16 to R46.810 million in 2016/17. This is set to increase only marginally over the MTEF. Of importance is the fact that a deviation of R11.308 million is recorded for 2016/17. This deviation is linked to a Policy option to develop a Case and Matter Management System, ICT requirement and additional requirements such as vehicles and SITA contracts. There is a significant reduction in spending on contractors from R438 000 in 2015/16 to R131 000 for 2016/17. There is also a reduction in the allocation for Travel and Subsistence from R2.987 million in 2015/16 to R2.399 million in 2016/17. Spending is largely consumed by personnel costs.
2.2 During its engagement with the Military Ombud, the Committee noted the following key issues:
- The Committee was informed that the impact of the Office of the Military Ombud has been positive in resolving complaints of soldiers.
- The Committee noted that the appointment of a Deputy Military Ombud has encountered significant delays.
- The Committee noted that the Office of the Military Ombud remain dependent on the Department of Defence (SANDF) for some of its activities such as IT systems and drivers.
- The Committee noted a target of 60 per cent for the resolution of complaints lodged for 2016/17.
- The Committee noted a lack of buy-in from roleplayers in the Military Ombud’s quest to become a Schedule 3 entity and that another avenues of independence are now being pursued as well.
3.1 Strategic overview
3.1.1 The Armaments Corporation of South Africa SOC Ltd (Armscor) was established to satisfy the requirements of the SANDF in respect of Defence Matériel. Armscor differs from other entities in the Defence Portfolio as it is largely profit-driven and depends on a transfer from the DOD. Armscor is currently faced with major financing deficiencies of its main client, the Department of Defence, which translates to financial challenges for the Corporation. In 2016/17, Armscor will thus focus on increasing income by at least five per cent, including through alternative means of funding. Armscor’s medium-term outlook is also significantly linked to the Defence Review which, at current, remains unfunded. Armscor will thus play a significant role in assisting the Department of Defence to ‘sweat’ assets and create alternative revenue streams as a means to partly fund the Defence Review.
3.2 Budgetary information and Committee discussion
3.2.1 Armscor expenditure trends show a nominal increase in expected expenditure by R68.4 million (or 4.2 per cent) in 2016/17 compared to 2015/16. The Administration objective will have the largest nominal increase in expenditure (R19 million), while an additional R15 million is allocated for the Research and Development objective. The latter increase is in line with Armscor’s strategic objectives. Only the Logistics Support objective will see a real percentage increase in expected expenditure as it is expected to increase from R200.7 million in 2015/16 to R215.5 million in 2016/17. In terms of revenue generation, it should be noted that non-tax revenue is expected to increase from R383.4 million in 2015/16 to R453.6 million in 2016/17.
3.2.2 Compensation of employees will increase from R1.029 billion in 2015/16 to R1.049 billion in 2016/17. The total personnel strength comes to 1 498 for 2016/17. This does, however, exclude Contracted Employees and Talent Development Programme Employees, which would bring the total to 1 758. It should be noted that while the number of permanent Armscor personnel have increased, the permanent staff contingent at the Dockyard has remained stable. This is of concern given staff shortages at the Dockyard as a key inhibiting factor to service delivery to the SA Navy.
3.2.3 During its engagement with the Military Ombud, the Committee noted the following key issues:
- The Committee noted challenges related to operations at Armscor’s Alkantpan facility in relation to the development of the area for the Department of Science and Technology’s Square Kilometer Array (SKA) project.
- The Committee noted that Armscor made significant advances in addressing the demographic composition of its staff and that this should be continued, especially in terms of attracting female technical skills personnel.
- The Committee noted that an active system is in place to ensure skills transfer as a means of maintaining institutional memory.
- The Committee noted that through its acquisitions process, Armscor aims to localise production of military and other procurement.
- The Committee noted that Armscor is in the process of, along with the SANDF, developing strategies to ‘sweat’ assets as a means of generating funds. Several examples were listed which could potentially create alternative means of income for the DOD.
- The Committee noted that problems still exist at the Dockyard which hampers its service delivery to the SA Navy, but that a revised management plan has been put forward to the Minister of Defence.
- The Committee noted that Armscor utilise the African Aerospace and Defence (AAD) event to raise awareness and build relationship with roleplayers in the defence industry. The AAD is also Africa-centered and provides space to certain African countries to display.
- The Committee noted that Armscor provides active support to military veterans, but that the DMV Database remains a stumbling block to more effective support to veterans and veterans-companies.
- The Committee noted that Armscor has engaged the United Nations on becoming a service provider, specifically for its peace-missions in Africa.
PART D: RECOMMENDATIONS
1. Department of Defence
1.1 The Department must ensure the resolution of the weaknesses relating to the payment of invoices within the prescribed 30-day period. It should set a target closer to 100 per cent compliance, and ensure that such target is achieved.
1.2 The Committee urges the finalisation of a military exit mechanism that will ensure force rejuvenation and the maintenance of skills. It further urges the development of other means such as reskilling to achieve the set target.
1.3 Scant details about the planned restructuring of the Department of Defence was forthcoming during the Committee’s interaction with the Department. The Committee will request a briefing from the Defence Review Implementation Team on how the restructuring is set to take place.
1.4 The Committee urges the urgent finalisation of the appointment of military judges. The Military Discipline Bill should also be prioritised and brought before Parliament before the end of the 2016/17 financial year. The finalisation of the Discipline Plan should be accelerated and the Department should report to the Committee on progress.
1.5 Additional funds, prioritised for the implementation of the Defence Review’s Milestone 1 will ensure that critical capacity in the SANDF is not lost over the medium-term. The Committee therefore recommends that the Department speed up its efforts to source alternative avenues to prevent such losses.
1.6 The Committee recommends that the Department ensures that skills are transferred by members of the Cuban Armed Forces who are assisting the Department to members of SANDF to capacitate them to do maintenance and repairs of defence equipment, in especially deployed areas.
1.8 The Committee recommends that the Department request additional funding or shift/reprioritise funds to ensure that additional flying hours are allocated to ensure, firstly, that pilots remain current in terms of flying hour requirements and, secondly, to ensure sufficient air support to SANDF operations.
1.9 The Committee expresses concern regarding the reduction in funds allocated to the maritime and transport sub-programme of the Air Defence Programme. It therefore urges the Department to prioritise the funding in this regard as well as for a strategic airlift capability in the SA Air Force.
1.10 The Committee expressed concern about R350 million reduction in funding to the Special Defence Account. It therefore recommends that this reduction should in particular not further delay the acquisition of offshore patrol vessels under Project BIRO, as these vessels are essential to ensure maritime territorial safeguarding.
2. Department of Military Veterans
2.1 The reasons for the delay in the appointment of an accounting officer are unclear and the Committee urges the speedy appointment of an accounting officer for the Department.
2.2 The performance target set for the Management Performance Assessment Tool (MPAT) is very ambitious and the Department is implored to set a more realistic and achievable target that takes into account the practical constraints being experienced.
2.3 The strengthening of the Internal Audit Unit has to be prioritised in order for the Department to ensure compliance with national regulations, and the resolution of audit queries. The Department should also strengthen its monitoring and evaluation, policy, and supply chain management capacity to facilitate good governance which have shown weaknesses over a period of time.
2.4 Vacancies ought to be filled responsibly and care must be taken to ensure that the most appropriately skilled and qualified persons are appointed. The Committee urges the DMV to present the results of the skills audit conducted by the DMV with the Committee. If such a skills audit has not been completed, it should be prioritised and shared with Members.
2.5 The Committee requires more details regarding the State Information Technology Agency’s (SITA) role in modernising the Department’s ICT systems.
2.6 The Department should prioritise the payment of invoices within the prescribed 30 day period, given the impact of late payments on SMME’s.
2.7 The reduction of funding to the military veterans’ database is concerning and the Committee request the DMV to provide it with quarterly updates on the status of the database and to prioritise the urgent finalisation thereof.
2.8 The slow and often lack of service delivery to military veterans are threatening nation building and reconciliation efforts. The Department should therefore enhance its overall efforts to prevent the escalation of protests by military veterans.
2.9 The slow progress made in the provision of housing to military veterans and their dependants, is concerning to the Committee. The Committee proposes that the DMV engage with provincial and local governments as well as the Department of Human Settlement to ensure the speedy delivery of such houses. The Committee also request quarterly updates on the delivery of housing to military veterans throughout the financial year.
3. The Castle Control Board
3.1 The Committee recommends that the Castle Control Board capitalise on opportunities such as Het Bakhuys and a conference center to enhance its financial sustainability.
3.2 The Board is encouraged to further ensure that the Castle becomes more accessible to cultural communities to incorporate them in their annual activities.
3.3 The Committee recommends that the Board present its plans to get the Castle listed as an UNESCO World Heritage Site.
3.4 The Committee urges the Board to get clarity of the basis on which Iziko is entitled to one third of its gate takings, especially as this can be an impediment to get listed as an UNESCO site.
3.5 The Committee recommends that the CCB continues its engagement with Iziko and its parent department to ensure effective control of the precinct as a means of fast-tracking the registration as a World Heritage Site.
4.1 The Committee recommends that Armscor enhance its efforts to ensure greater participation of local businesses in its procurement processes.
4.2 Armscor should update the Committee on its progress to source additional avenues of revenue to sustainably fund its operations. This process should be fast-tracked as a means of not only funding the Defence Review, but also creating additional revenue for Armscor.
4.3 The amount of the legal claim in Lisbon, Portugal, is concerning to the Committee and Armscor is implored to update the Committee on developments in this regard on a regular basis.
4.4 The Corporation is encouraged to earnestly investigate and exploit opportunities to support the United Nations and African Union peace support operations in Africa based on its proximity and knowledge of the Continent.
4.5 The Committee encourages the Corporation to enhance its efforts to attract and retain especially black and female scientists and technical skills personnel.
4.6 The Committee encourages Armscor to continue its support to military veterans and to expand on this capacity in future.
4.7 The Committee recommends that Armscor and the Department of Science and Technology come to an urgent agreement on the future of the Alkantpan facility. The Committee further urges an outcome that would ensure the maintenance of this strategic capability in South Africa as well as the maintenance of its current commercial viability.
4.8 The Committee recommends that Armscor updates it regularly on the status of its skills transfer programme.
4.9 The Committee recommends that the future status of the Dockyard be finalised for implementation before the end of the 2016/17 financial year.
5. The Military Ombud
5.1 The Committee recommends that the Secretary of Defence and the Military Ombud engage each other to ensure that the logistical, financial and human resource challenges are being addressed expeditiously.
5.2 The Military Ombud should explore options to ensure that it can investigate challenges being experienced by soldiers, without a complaint having been lodged.
5.3 A proper cost analysis and consultations should be done on the implications of the Military Ombud operating as a Schedule 3 entity to ensure that a comprehensive business case can be presented to the Committee. Alternative feasible arrangements to a Schedule 3 entity should also be presented.
5.4 The Military Ombud should enhance its efforts to facilitate the appointment of the deputy Military Ombud.
5.5 The Committee recommends that the Office of the Military Ombud increase its target for the number of complaints finalised from the current level of 60 per cent for 2016/17 and beyond.
6.1 While mindful of the challenges faced by the SANDF and the Departments of Defence and Military Veterans, the Committee recommends that the 2016/17 budget is approved. While the current Defence budget is inadequate to meet the needs of the SANDF, the Committee will monitor improved alignment of the limited defence budget to strategic priorities.
6.2 The Committee encourages the Department of Defence in particular to urgently finalise alternative and/or complimentary means of funding for especially Milestone 1 of the Defence Review. Furthermore, the Department is encouraged to continue engaging National Treasury to ensure that, where possible, funds for the Milestone 1 is obtained. If alternative funding is internally resourced, it should be ring-fenced and ensured that it flows back to the Department. Furthermore, funds to restore the purchasing capacity of the Special Defence Account should be prioritised in order for planned acquisition programmes to remain active. This is in line with the aim of Milestone 1, namely to arrest the decline in defiance capabilities.
6.3 It should be noted that the Democratic Alliance (DA) and Economic Freedom Fighters abstained from voting on the report.
7.1 The Committee thanks all those who appeared before it for their input and co-operation, and looks forward to fruitful interactions with all stakeholders as it performs its oversight of the Department of Defence and the Department of Military Veterans.
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