ATC201109: Report of the Workshop of the Portfolio Committee on Defence and Military Veterans with the DOD On the Force Structure, Compensation of Employees, the Development Of an Exit Mechanism And Force Rejuvenation, on 26 August 2020, Dated 4 November 2020
REPORT OF THE WORKSHOP OF THE PORTFOLIO COMMITTEE ON DEFENCE AND MILITARY VETERANS WITH THE DOD ON THE FORCE STRUCTURE, COMPENSATION OF EMPLOYEES, THE DEVELOPMENT OF AN EXIT MECHANISM AND FORCE REJUVENATION, ON 26 AUGUST 2020, DATED 4 NOVEMBER 2020
The Portfolio Committee on Defence and Military Veterans (PCODMV) conducted a workshop with the Department of Defence and Military Veterans on the South African National Defence Force’s (SANDF) Force Structure, Compensation of Employees, the development of an exit mechanism and Force Rejuvenation on 26 August 2020. The Committee also invited National Treasury and the Defence Force Service Commission(DFSC) to participate in the workshop. This formed part of the Committee’s Parliamentary programme in exercising oversight over the Department of Defence and Military Veterans.
1.1 Purpose of the workshop
The Human Resources dimension of the SANDF is an issue that the Portfolio Committee on Defence and Military Veterans (PCODMV) has frequently engagedwith the Department of Defence in the recent past without any meaningful success on certain human resource-related issues. The Committee therefore undertook to conduct a Workshop to engage closely on the selected Human Resource challenges in the DOD. The Workshop allowed the Committee to appropriately ventilate the issues and afford stakeholders such as National Treasury and the DFSC, to share their views with the Committee.
The selected Human Resource issues that were discussed in the Workshop included the continuous concerns around the Compensation of Employees (CoE), which has led to Irregular Expenditure in the DOD; and the Force Structure of the Defence Force which could assist in addressing this concern. Aligned to this, is the redefining and implementation of an effective and sustainable Exit Mechanism to facilitate the rejuvenation of the SANDF.
In addition, the DFSC was invited due to its experience and exposure to the Human Resource challenges within the DOD. This agency is tasked with providing advice to the Minister on conditions of service for SANDF members.
Cabinet has imposed ceilings on the Compensation of Employees, which has been followed by National Treasury issuing directives to government departments to decrease their wage bills. National Treasury was therefore invited to share with the PCODMV on how the Compensation of Employees challenge in the DOD can be managed, as well as for the Committee to solicit their views on possible funding options for the rejuvenation of the SANDF.
1.2 Committee Members and support staff
Members of the Committee:
Mr. V.C. Xaba (Chairperson)
Mr. TN Mmutle
Ms AJ Beukes
Ms M Modise
Mr SJF Marais
Mr ML Shelembe
Gen (ret) B Holomisa
Mr T Mafanya
Ms T Legwase
Peter Daniels - Committee Content Advisor
Wilhelm Janse van Rensburg - Researcher: Joint Standing Committee on Defence
Bryan Mantyi - Committee Secretary
Alutho Nwandla - Committee Assistant
Felicia Lombard - Communication Officer
V Adm A.E. Kubu - Chief Human Resources
Brig Gen K.M. Richards - Director: Human Resource Strategy and planning
Dr Rendani Randela - National Treasury
Mr I. Robertson - Defence Force Service Commission (DFSC) - Chairperson
Ms S. Hlapolosa - DFSC – Deputy Chairperson
Dr ZH Essop - DFSC Commissioner
Mr JM Jongile - DFSC Commissioner
Adv, NG Khumalo - DFSC Commissioner
Ms SV Mabilane - DFSC Commissioner
Adv. L Mbana - DFSC Commissioner
Dr PS Zulu - DFSC Commissioner
1.3 Overview of the Workshop Programme
The Department of Defence and Military Veterans was invited to present to the Portfolio Committee members on 1) the concerns related to Compensation of Employees and 2) the development of an exit mechanism. Having received the presentation from the DOD, the Committee was given an opportunity to reflect on the contents of the presentation.
National Treasury was also granted an opportunity to brief the workshop on the DOD’s challenge on Compensation of employees and the funding for force rejuvenation going forward. In addition, hereto, the Defence Force Service Commission also expressed its experiences and accounts from its interactions with the Members of the SANDF. The Committee deliberated on the presentations and offered its recommendations.
2. Briefing by the Department of Defence
2.1 Briefing by the DOD on Compensation of Employees
The scope of the presentation by the DOD covered the following aspects, namely Managing Future HR Capacity; CoE Allocation vs. Expenditure/Projection vs HR Capacity; DOD HR Capacity and Cost as on 1 April Annually; Budget Allocation Ratios and an outline of the Key Personnel Issues.The strategic guiding principles, as reflected in the DOD Strategic Plan 2020 – 2025, were listed as the following:
- Continue to rejuvenate the force;
- Reserves will augment HR capacity requirements;
- Eliminate duplicating structures;
- Accelerate the development of a sustainable HR Strategy and Plan;
- Optimise personnel utilisation;
- Ensure military discipline;
- Maintain the current operational capability within the current operational strength to ensure rejuvenation;
- Rejuvenate the personnel component through approved and funded mechanisms to ensure upward renewal and functional career mobility.
The Committee was informed that the Fundamental principle is that more soldiers should cost less in order to curtail growing Human Resource, particularly CoE costs.
The DOD will rely on the following HR mechanisms (which would bear a financial cost) to manage future HR capacity:
- Rely on natural attrition to reduce the force;
- Rejuvenation Strategy;
- Implementing severance;
- Managing personnel flow (career mobility);
- Affirming service dispensation management principles;
- Education, training and development.
The DOD outlined the following challenges related to the Compensation of Employees:
- The HR component will eventually consume all resources required by the DOD to execute its mandate. This is largely due to consistent budget cuts and the capping of the CoE ceiling below the existing strength compelling the Department to source additional funding from the operating portion of the budget.
- The understanding of the concept of rejuvenating the SANDF workforce has moved-on from HR redundancy to assuring available forces by causing a personnel flow which creates internal vacancies that are filled at entry level. It will allow for the retention of expertise and institutional memory which are critical for the preparation of and employing/deploying forces and be coupled to utilising available HR tools for example implementing an exit mechanism.
- The DoD may be unable to provide value against its funding from the fiscus as all other elements of POSTEDFIT will be negatively affected.
- Lifting of the CoE through additional funding (R3bn per annum).
- The tempo and pace of rejuvenating the SANDF workforce composition is dependent on the trajectory of CoE allocation, and if not addressed will result in a continued disparity between budget requirement and allocation.
2.2. Briefing by the DOD on the development of an exit mechanism
The Committee was informed that the Mobility Exit Mechanism (MEM)/Employee Initiated Severance Package (EISP) was placed on hold pending an investigation to ensure a lucrative exit mechanism beyond that of the current MEM/EISP. Moreover, an appreciation of an appropriate exit mechanism is under consideration. The Committee was further advised the DOD will reinstitute the current MEM/EISP whilst awaiting an appropriate exit mechanism to be approved and implemented.
The Key Drivers for the development of an exit mechanism were identified as:
- Curbing Stagnation. The retention of non-deployable members who have reached a career plateau erodes the SANDF’s ability to meet with human resource requirements for operations, as the mean-age of members have increased, leading to their unavailability to deploy.
- Slow Pace of Career Mobility. The career progression of members is hampered as those who stagnate in the ranks and do not meet operational requirements, whilst occupying posts stifling decision-making in the career management process.
- Rejuvenation. The SANDF is an agile and flexible force that requires young, fit and healthy members at all levels to prepare, plan and conduct successful military operations in support and aligned with the SANDF’s Mandate.
The Committee was reminded that Ministry has emphasised that the SANDF must be “supported by both a feeder system that will bring in young, fit and healthy members and accelerated, attractive retirement programme with full benefit, beyond that of the current Mobility Exit Mechanism, but without losing critical skills.”
The Government Employees Pension Fund, Rule 14.1.1.c was identified as the desired method to utilise separate members. An organisational driven mechanism which is implemented with the purpose to contribute to rejuvenation of the SANDF force composition and to secure a dignified separation of members, is required.
2.3. Briefing by the DOD on the Force Rejuvenation
The Committee was advised that Ministry had issued directives during her Budget Vote 19 of 2018 and 2019. The DOD informed the Workshop that the engagements have not brought the relief and instead focused on the condition to submit a rejuvenation plan to reduce in order to fit within the Compensation of Employee (CoE) allocation.
The Military Command Council provided the following direction:
- Cognisance must be taken of the defence and security situation in the RSA especially with regards the economic growth outlook and high unemployment rate.
- The description of the Red Quadrant (Q4) creates the perception that soldiers accounted for in this quadrant are not utilised nor are available for deployment.
- Do not divorce the rejuvenation plan from the requirements to plan, prepare and conduct military operations.
- Correct the emphasis on career management decisions which induces stagnation, and instead refocus on the service system employed and the resultant consequences thereof i.e. the impact of the long term service system guarantees service to age 60 years old and in so doing it contributes to stagnation.
- Note the political sphere in which defence operates and be wary of its influence it may have on unintended consequences of reducing the workforce of the SANDF.
- Invite National Treasury representatives to an engagement with the aim to demonstrate the SANDF planning processes with a view to engender understanding for the accuracy and extent of planning the SANDF undergoes in the process.
These guidelines required a re-think of rejuvenation of the SANDF workforce which was based on quadrant analyses leading to the separation of soldiers instead of focussing on avoiding the adverse impact such separation could result in.
Criteria for the Plan
The DOD identified as the criteria for rejuvenation:
- Accept that those serving in the long-term service system and on long service contracts will remain, though not excluded from participating in the mechanisms to rejuvenate the force composition.
- Focus on the age group 35 to 39 of the combat corps to prevent stagnation.
- Focus on those who have served six (6) to 12 years in a rank.
- Focus on the rank groups Private to Sergeant and Candidate Officer to Major.
- Base the number of potential inter-departmental transfers on government departments’ HR requirements.
- Fill combat support, support, technical and professional corps vacancies (i.e. Logistics, HR, Signals, and others).
- Explore ways to demilitarise members internally in the DOD with a view to maintain institutional memory and know-how (vacancies at levels 5 to 9).
- Exclude for planning purposes Occupation Specific Dispensation (OSD) wherein members serve (professionals).
- Exclude scarce skilled corps/mustering.
Conceptual approach-broad implications for implementation
The DOD has identified the three pillars involved in the implementation of the Rejuvenation Plan:
- Training requirements of the receiving corps/mustering.
- Impact on promotion (releasing and receiving corps/mustering).
- Impact on utilisation (releasing and receiving corps/mustering).
- Potential stagnation (receiving corps/mustering).
- Profile of members do not meet the criteria for appointment.
- May require DPSA relaxation to exclusively advertise PSAP vacancies only within DOD and expressly for interested/qualified soldiers.
- Inter Departmental Transfer.
- Currently no information is available to determine how many vacancies could be accessed and its corresponding criteria and requirements.
- A vigorous campaign/concerted effort would be required to make available potential soldier to augment HR requirements of another department.
- May require MOU to govern selection and appointment processes undertaken.
3. Briefing by National Treasury
3.1. Briefing by National Treasury on Compensation of Employees
National Treasury informed the Committee that the COE expenditure to total Defence expenditure has grown from 39.3% in 2001/02 to 58.2% in 2020/21 (Defence Review 2015 target is 40:30:30 for CoE, goods & services and capital). Compensation of employees is projected to be the largest expenditure item over the 2021 MTEF, accounting for 63% of expenditure. More importantly, NT highlighted that the current macro composition of the Defence budget is unsustainable given limited funds for other discretionary spending items to modernise the SANDF.
National Treasury further advised the Committee that given that Cabinet approved CoE budget reductions of R 1.9 billion in 2017/18 and R 2.9 billion in 2018/19 as part of the aggregate expenditure ceiling, Defence needed to take measures or implement reforms within its Human Resources as part of its attempt to stay within the CoE ceiling going forward. To date, no significant reforms or attempts by the Department to stay within the compensation of employees’ budget, have been noticed. Instead, the Department will maintain its personnel headcount at 75 500 and Reserve Force utilisation at about 2 695 963 mandays or 14 000 members per year (full time equivalent).
The DOD has since 2017/18 overspent its CoE budget resulting in irregular expenditure, and is projected to overspend the 2020/21 CoE budget by R3 billion and this will increase significantly the accumulated irregular expenditure. Moreover, the upward adjustment of the CoE budget in Defence through virement/in year reprioritisation of funds from SDA and goods and services is unsustainable hence the National Treasury has not recommended in year shifting of funds towards CoE since 2018/19.
Recommendations from National Treasury: Terminations vs Appointments
- The DoD should consider natural attrition as part of dealing with compensation pressure.
- The Department should use the Military Skills Development System (MSDS) as part of its
- The rejuvenation of the SANDF can still happen but given the constrained fiscal outlook a balance must be struck.
3.2. Briefing by National Treasury on and the funding of Force Rejuvenation going forward.
National Treasury reminded the Committee that the development of the rejuvenation strategy by Defence was in response to a recommendation by the Ministers of Defence Military Veterans, Finance and Public Service and Administration in March 2019 as well as Parliament through the Budgetary Review and Recommendation Reports (BRRR’s). In summary, the strategy aims to change the human resource profile of the SANDF without compromising the capacity requirements to plan, prepare and conduct military operations.
The Department plans to maintain its personnel numbers at 75 500 going forward despite the COE budget remaining insufficient to accommodate this number. The proposal to transfer SANDF members to other departments requires the DOD to consult theaffected departments. The Committee was more importantly advised that the current force design and structure of the SANDF is unsustainable and this leads to significant funding requirements for compensation of employees whilst eroding the Department’s capital and operating budget.
Therefore, the rejuvenation plan in its current form will not resolve the challenges faced by the Department. There will be further engagement between the DOD, NT and the DPSA officials on the defence’s rejuvenation strategy and to map the way forward.
Current Realities and challenges.
The following were listed as the challenges:
- Constrained fiscal environment and departmental baseline reductions.
- Dealing with pressure on compensation of employees Personnel reduction vs rejuvenation.
- Impact of long and open ended peace keeping missions on the budget.
- Increasing ordered commitments within a tight fiscal space.
- Conditions of service retirement at the age of 60 while no longer deployable.
- Realignment of the Defence budget to achieve the 40:30:30 ratio between personnel, operations and capital.
- Boots on the ground vs modernisation. (Numbers vs effective Defence Force)
- In dealing with personnel related challenges, what should be career pathways for soldiers to ensure rejuvenation of the Defence Force.
National Treasury: Conclusions
- There is no space for additional funding from the fiscus given the constrained fiscal environment and the need to contain the public sector wage bill.
- The Department is likely to incur unauthorised expenditure in 2021/22 unless it deals with the CoE pressure given that the SDA cut of R 5 billion will take effect and there may be further baseline reductions over the 2021 MTEF given the constrained fiscal outlook.
- In its current form, the proposed rejuvenation strategy will not resolve CoE challenges effectively.
- Defence has discretion on the utilisation of Reserves, implementation of natural attrition and MSDS intakes. These mechanisms should be considered in dealing with CoE pressure.
- Defence should strike a balance regarding the utilisation of Reserves and the maintenance of the Regular Force given the constrained fiscal environment.
- Perhaps consider reducing the Regular Force and Civilian Component that is augmented by a higher share of Reserves to have a Defence Force that is less costly and sustainable.
- Defence should consider implementing the Early Retirement Without Penalisation of Pension Benefits in line with Section 16 (6) of the Public Service Act (extended to other legislations) to reduce pressure on CoE given that there are SANDF members with a higher age profile and many years in rank.
- Any proposed plan that does not deal decisively with the Department’s personnel headcount, force design and the conditions of service of the SANDF members, is unlikely to succeed in assisting the Department to operate within the COE’s ceiling.
- National Treasury reiterates that the objective is to have an effective but affordable Defence Force.
4. Briefing by the Defence Force Service Commissionon the SANDF Compensation of Employees and related challenges.
As outlined in the Defence Amendment Act, the DFSC is mandated to make recommendations on matters pertaining to conditions of service. The DFSC has diligently adhered to its mandate which includes making recommendations on the cost of living adjustments for the SANDF. However, one challenge has been that these recommendations have never been implemented by the DOD. It has been the observation of the DFSC that the DOD HR budget has been on rise, while DOD total allocation has declined. Since the inception of the DFSC, the SANDF’s budget has been on the decline which has affected the affective maintenance of its fleet and equipment.
Compensation of Employees
The DFSC made the following observations and comments on CoE:
- DFSC’s concern on the COE in relation to the allocated budget have been communicated on numerous occasions, especially when it was time for cost of living adjustments (2016, 2018 COLA recommendations).
- The DFSC has also questioned that the SANDF enjoys the same increases as the general public service whereas their salaries are generally higher than those in the public service (2018 COLA recommendations).
- Duplication of benefits (especially MMS and SMS members) who are paid a total cost to employer package but still enjoy free medical services as a benefit provided by the SANDF. This also includes issues like the use of state vehicles by these members (2018 COLA recommendation).
- The DFSC’s has previously expressed concern on the current top-heavy SANDF structure.
- In its current form, the Support Services (e.g. HR) has more generals than the SAPS which has a permanent structure which is almost twice that of the SANDF.
- It has been acknowledged that some of these challenges is as a result of integration, however this has never been rectified post the finalisation of integration.
- The DFSC has previously recommended that the structure of the SANDF needs to be reviewed in order to correctly reflect on the organisation’s core function(SANDF pay structure recommendation, March 2018).
- The Potential Focus has previously expressed concerns on the ageing Defence Force, with majority of these members being in the Infantry Corps.
- Some of this is as a result of the integration process, where some members were on-boarded at a late age.
- At the current rate/trajectory, this won’t change unless exit mechanisms are implemented because members stay on until they reach retirement age.
- The DFSC highlighted its concerns on the lack of a succession plan in the SANDF.
- This was also linked to the failure or non-existence of career management.
- The DFSC has expressed concerns on how the SANDF is operating, they seem to be integrating every year.
- Recommendations have been made in relation to the implementation of the exit ages as proposed by the DOD HR Charter as well as the Defence Review 2015.
5. Committee Observations
The Committee noted the following:
- The Committee noted that given the current fiscal constraints it is unlikely that the Department will receive any further financial injections to assist with the identified challenges.It also appears as if NT and the DFSC have developed more options to address the COE and rejuvenation as oppose to the DOD who stressed an increased budgetary allocation. The Committee took note of the increasing COE expenditure that is encroaching on the funding of other Departmental programmes.
- The Committee welcomed the plans of the SANDF to address the mean-age of members of especially combat units, which has increased leading to their unavailability to deploy. Noting NT’s assertion that the rejuvenation strategy, in its current form, will not resolve CoE challenges effectively; the Committee decried the fact that the Rejuvenation Plan seems not to have clearly defined milestones with time frames attached to each milestone. Members reminded the DOD that a number of these plans have been presented to previous Parliaments; but progress could not be assessed due to the failure to commit to milestones with timeframes.
- Members expressed concern regarding the failure of the Department to absorb the youth who has completed the MSDS programme. The Committee agreed with the observations made by the DFSC to the unintended consequences this could have in contributing to MSDS being involved in crime as a result of frustration.
- The Committee further expressed concern regarding the perceived discrimination of Members in getting promotions.
- The Committee noted the top heavy structure of the SANDF and its contribution to the Human Resource challenges of the Defence Force. The DFSC has in the past made recommendations in this regard
6. Committee Recommendations
- The current fiscal environment motivated the Committee to recommend that the DOD and National Treasury should continue their ongoing engagementsto explore solutions to the identified challenges related to Compensation of Employees, force rejuvenation and exit mechanisms. Both parties are encouraged to seriously investigate the various options available to ensure an effective but affordable Defence Force.In addition, the recommendations of the DFSC should also be considered given their experience of the situation on the ground in the SANDF.
- The DOD should explore means to source additional revenue through the “sweating of assets” such as the selling of obsolete equipment, and the leasing of buildings and land.
- The Committee recommended that the DOD should keep it abreast of initiatives to address the average age of especially soldiers in the combat units as this is important to ensure a combat-ready and effective force.
- The Minister is encouraged to pursue avenues to fund the rejuvenation of the ageing force including soliciting the support of the Commander-in-Chief in this regard.
- In the medium term, the DOD should resuscitate the Mobility Exit Mechanism (MEM)/Employee Initiated Severance Package (EISP) which were placed on hold in order to prevent a further decline in the Defence Force. Further to this, the MSDS should be utilised as a means to accelerate the rejuvenation strategy.
- The Committee should engage the Defence Force Service Commission as well as the DOD on its experience regarding the non-implementation of outstanding recommendations.
Report to be considered.
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