ATC201202: Budgetary Review and Recommendation Report of the Portfolio Committee on Defence and Military Veterans on the 2019/20 Annual Report of the Department of Defence (Dod), Dated 2 December 2020

Defence and Military Veterans

BUDGETARY REVIEW AND RECOMMENDATION REPORT OF THE PORTFOLIO COMMITTEE ON DEFENCE AND MILITARY VETERANS ON THE 2019/20 ANNUAL REPORT OF THE DEPARTMENT OF DEFENCE (DOD), DATED 2 DECEMBER 2020.
 

The Portfolio Committee on Defence and Military Veterans (PCODMV), having preliminary considered the financial and service delivery performance of the Department of Defence (DOD) for the 2019/20 financial year, on 17 October 2020 and 1 December 2020, reports as follows:

 

1. INTRODUCTION

 

1. Description of core functions of the Department

 

The Constitution of 1996 in Section 200 sets out the mandate of the South African National Defence Force (SANDF), while Section 204 establishes a civilian secretariat for the Department. The mandate is to “defend and protect the Republic, its territorial integrity and its people in accordance with the Constitution and the principles of international law regulating the use of force”. In pursuance of this mandate, the Department of Defence (DOD) provides, manages, prepares and employs defence capabilities commensurate with the needs of South Africa, guided by the Constitution, relevant legislation and Executive direction. 

1.2        Mandate of the Committee

 

The Portfolio Committee on Defence and Military Veterans (PCODMV) is mandated to oversee the Department of Defence and Military Veterans (DODMV) to ensure that the Department fulfils its mandate through the monitoring of the implementation of legislation and adherence to policies, such as the Defence Act (No. 42 of 2002), the White Paper on Defence (1996) and the 1998 Defence Review. Recently, the 2015 Defence Review was introduced as a policy directive to guide defence activities for the next 20 to 30 years. These policy guidelines assist the Committee in its oversight activities. The Committee scrutinises legislation that supports the mission statement of Government, the budget and functioning of DODMV, and the employment of the SANDF.

1.3        Purpose of the preliminary BRR Report

 

Section 5 (2) of the Money Bills Procedures and Related Matters Amendment Act (Act 9 of 2009) allows for each Committee to compile a Budgetary Review and Recommendation Report (BRRR) which must be tabled in the National Assembly. Section 5(3) provides for a BRRR to contain the following:

1. an assessment of the department’s service delivery performance given available resources;
2. an assessment on the effectiveness and efficiency of departments use and forward allocation of available resource; and
3. recommendations on the forward use of resources.

 

In October of each year, parliamentary portfolio committees compile a BRRR that assess performance given available resources; evaluates the effective and efficient use and forward allocation of resources; and makes recommendations on the forward use of resources. The BRRRs are also source documents for the Standing/Select Committees on Appropriations/Finance when they make recommendations to the Houses of Parliament on the Medium-Term Budget Policy Statement (MTBPS). The comprehensive review and analysis of the previous financial year’s performance, as well as performance to date, form part of this process.

 

Given the above, and in the context of the extended deadline to departments and entities for the submission of annual reports, the PCODMV utilised the 2019/20 quarterly reports as well as a draft Annual Report to compile a preliminary assessment of departmental performance for 2019/20. Following the submission of the finalised DOD 2019/20 Annual Report, the PCODMV had an engagement with the DOD on 1 December 2020 after which a BRRR was finalised.

1.4        Methodology in compiling the report

 

The Report is compiled from the various activities of the Committee throughout the financial year. It is inclusive of the Committee’s meetings, oversight visits, reports on budget votes, strategic plans, annual performance plans (APP) and quarterly reports and the relevant annual reports, as well as previously published Committee reports.

 

1.  

 

The PCODMV conducted the following oversight visits during the FY2019/20:

 

• 9 South African Infantry Battalion in Eersteriver on 27 August 2019
• Air Force Base Ysterplaat on 3 September 2019
• Simonstown Naval Base on 10 September 2019
• 2 Military Hospital in Wynberg on 22 October 2019
• Youngsfield Military Base on 30 October 2019.

.

1.6        Information used to compile the Report

 

Besides the information emanating from the oversight visit, other information used in the assessment of the service delivery and financial performance include:

 

• Committee reports on the 2018/19 budget hearings, strategic plans and annual performance plans;
• The National Development Plan 2030 (NDP);
• The 2019 Estimates of National Expenditure (ENE);
• The 2020 State of the Nation Address (SONA); and
• The 2020 Auditor-General of South Africa (AGSA) Report on the DOD.

 

1.7        Structure of the Report

 

This report comprises seven sections:

• Section 1: An Introduction which sets out the mandate of the Committee, the purpose of this
         preliminary report (BRRR) and the process to develop this report.

• Section 2: Provides an overview of the key relevant policy focus areas.
• Section 3: Provides an overview and summary of previous key financial and
        performance recommendations of Committee(2018/19).
• Section 4: Provides a broad overview and assessment of financial performance of the
        Department for 2019/20.
• Section 5: Overview of service delivery and performance of the DOD for 2019/20.
• Section 6: Key Committee Observations. 
• Section 7: Key Committee Recommendations.

 

1. Overview of the key relevant policy focus areas

 

2.1        State of the Nation Address

 

The 2019 State of the Nation Address (SONA) was delivered by the President on 7 February 2019. Except for two issues, there were no other direct references to the Department of Defence. The one reference was to the involvement of the SANDF in addressing the Vaalriver pollution affecting especially the Emfuleni Municipality. The DOD deployed around four hundred and thirty-one (431) members and it was estimated that their involvement would cost around R1bn.

 

The second reference related to the re-establishment of the National Security Council (NSC). The President stated that the NSC will be re-established to ensure better coordination of the intelligence and security related functions of the State. This announcement is important to establish an integrated national security policy and hence a coherent national security strategy. References to both the National Security Policy and National Security Strategy are made in the White Paper on Defence, the White Paper on Intelligence and the White Paper on South African Participation in International Peace Missions. Given that the military strategy of South Africa is derived from the Constitution, the Defence Act, the White Paper on Defence, the Defence Reviews, there is indeed a dire need for a clear, coherent, integrated National Security Policy.

 

2.2        The National Development Plan2030

 

The National Development Plan (NDP) presents a number of Recommendations, Actions and Indicators that relate to the DOD. The following represent some of the key aspects with relevance to the DOD:

• Chapter 7: Positioning South Africa in the World. The NDP proposes the convening of a high-level, high-impact task team to investigate South Africa's foreign relations. The study should outline an implementation programme to reach these objectives, focusing on, inter alia, national defence. The DOD contributes to this focus point of the NDP through peacekeeping operations and the presence of defence attaches around the world. Chapter 7 of the NDP also recommends that South Africa should extend the current agreement that allows the South African Navy to undertake anti-piracy operations in Mozambican and Tanzanian waters, to include Kenya. South Africa’s anti-piracy operation, which involves the South African Air Force, Special Forces and South African Military Health Services as well as the South African Navy, must be strengthened in order for operations to be sustained.

 

• Chapter 7 of the NDP also recommends the strengthening of border-enforcement to curb cross-border smuggling of counterfeit goods.

 

• Chapter 9: Promoting health. The NDP notes the aim of Universal Health Care coverage and that everyone must have access to an equal standard of care, regardless of their income. The DOD provides health services to all members of the SANDF through the SA Military Health Services (SAMHS), as well as assisting mil veterans with medical care.

 

• Chapter 14: Fighting corruption. The NDP aims for corruption-free society, a high adherence to ethics throughout society and a government that is accountable to its people. The DOD furthers this goal through a number of initiatives, including the national anti-corruption hotline, Corruption and Fraud awareness campaigns as well as implementing and monitoring the DOD Procurement Policy.

The envisaged contributions are further concretised in the Medium-Term Strategic Framework (MTSF).

 

2.3        The Medium Term Strategic Framework (2014 - 2019)

 

The MTSF Outcomes to which DOD will contribute include the following:

 

• Outcome 3 (Sub-outcome 3- All people in South Africa are and feel safe): Defence will contribute to this outcome through its participation in border safeguarding. During 2019/20, the SANDF will continue to deploy 15 sub-units for the purpose of border safeguarding. However, DOD officials indicated to the PCODMV that at least 22 sub-units are required for effective border safeguarding as well as the use of force multiplying technologies. The SANDF will also be involved in anti-poaching operations in relevant national parks along the South African borders while the SA Navy will conduct similar operations to protect marine resources.

 

• Outcome 3 (Sub-outcome 4 – Secure cyber-space): The DOD states that it will continue to contribute to cyber-security initiative. During 2019/20, the development and consultation with identified stakeholders of a DOD Cyber Warfare Strategy will be undertaken, that will inform subsequent cyber security implementation instruments. However, from the 2019 APP it is clear that targets related to the development of the Cyber Strategy and Cyber-Warfare Plan were removed for the year under consideration.

 

• Outcome 3 (Sub-outcome 7 – Corruption in the private and public sectors reduced): The DOD will continue to implement measures to reduce corruption and fraud.

 

• Outcome 11 (Sub-outcome 3 – Political cohesion in Southern Africa to ensure a peaceful, secure and stable region): The DOD will contribute to conflict prevention, peacekeeping and post-conflict reconstruction and development as ordered by Government. Most notably, this includes the SANDF’s participation in UN-led peacekeeping operations in the Democratic Republic of the Congo (DRC) and SA Navy operations in the Mozambican channel.

 

DOD contributions to strategic outputs

MTSF Outcomes	Sub-outcome	Actual Achievement 2019/20
Outcome 3	Sub-outcome 3: South Africa’s borders are effectively protected and managed	15 Landward units deployed for border safeguarding. Assistance with water pollution in the Vaal River and selected municipalities. Assistance with wildfires. Supporting Operation Phakisa and the Oceans Economy. Search and rescue operations Support to the Department of Health  through requested interventions
Outcome 11	Sub-outcome 3: Political cohesion in Southern Africa	SANDF deployed peacekeeping forces in the SADC region (The DRC and Mozambican channel) 10 Defence Attaches deployed to the SADC region.

 

2.4        Overview of DOD Strategic Plan and Annual Performance Plan

 

The following strategic priorities were identified in the Strategic Plan and APPfor the DOD for FY2019/20:

 

Minister of Defence Priorities	Chief of the SANDF priorities
Defence Strategic Direction: This includes strategic direction for engagement on the 2015 Defence Review.	Military Strategic Direction: Implementing guidelines on the Defence Review; border safeguarding strategy; joint force employment strategy; developing the blue-print force design; and, a defence diplomacy strategy.
Strategic Resourcing Direction: Directing an appropriate defence resource mechanism.	Restructuring the SANDF. Compile a restructuring plan to be rolled out over the MTEF period as resources allow.
Organisational Renewal: Providing strategic direction to inform the restructuring of the DOD (new force structure) and positioning of the Defence Secretariat.	Implement HR Strategy: Appropriately compose, empower and manage the SANDF human resources. The Defence Academy will be established as resources allow.
	Enforcement of Military Discipline: Ensure the enhancement of military discipline through the Military Discipline Bill when gazetted.
	Revitalisation and utilisation of Reserves: Improved feeder system for the Reserves.
Human Resources renewal: Ensuring that the personnel profile meets both current and future defence obligations.	Renovation of DOD Facilities: Devolving the responsibility for Defence Endowment property from the DPW to the DOD and utilising the Defence Works Formation for maintenance.
	Development and maintenance of Strategic Reserves: Chief SANDF will provide a strategy on stock levels and an overarching Logistics Strategy.
	Development of SANDF capabilities: Physical development of appropriate capabilities through acquisition plans. Focus will be on development of landward defence capabilities, investigation of the establishment of a Coast Guard.
	Renewal of Landward Defence Capability: Development of a multipurpose support vehicle; resourced production to take continue in 2019/20.
Capability Sustainment: Aligning defence acquisition to the 2015 Defence Review. Notable focus on the DOD Works Capability, cyber Warfare Capability and Defence Industry Policy and Strategy.	Force Protection: Improved Intelligence Capabilities on all levels and improved preparation and force employment stock levels.
	Border safeguarding: Systematic increase of the SANDF’s footprint on the borders.
Ordered defence commitments: Sustaining ordered defence commitments.

 

1.  

 

3.1        Budgetary Review and Recommendations Report (BRRR) 2019 recommendations

 

Based on its analysis and overview of the 2018/19 Annual Report of the Department of Defence, the Committee made the following recommendations:

Recommendations to the Minister of Finance:

• The Committee recommends that National Treasury shouldnot lower the baseline DOD budget allocation in nominal terms over the MTEF period. This relates to all outlying years of the MTEF and specifically to 2021/22 where the budget is set to decrease from R52.516 billion in 2020/21 to R50.883 billion in 2021/22.

 

• The Committee urges National Treasury to provide additional funds specifically for the purpose of border safeguarding. The Committee recommends that the number of sub-units be increased incrementally over the MTEF with the aim of having 22 sub-units deployed for landward borderline duties by the end of the MTEF. Additional funds should also include an allocation for the use of technology as a force multiplier for border safeguarding purposes.

Recommendations to the Minister of Finance and Minister of Defence:

• The Committee urges the immediate engagement between the Minister of Defence, the Minister of Finance and the Commander-in-Chief of the SANDF, to finalise a funding plan that will arrest the current decline of the military. This recommendation is derived from the dire financial and resource situation shared with the Committee by especially the SA Army, SA Air Force and SA Navy during its recent oversight engagements. The finalised plan should be presented to the Committee no later than the end of the First Quarter of 2020/21. 

 

• The Committee noted comments by the DOD that savings to Compensation of Employees can be made through a process of force rejuvenation. The Committee therefore recommends a joint approach to force rejuvenation that would see the DOD develop and roll out a rejuvenation plan and National Treasury providing funding for an exit mechanism to speed up rejuvenation. National Treasury should, as soon as possible, release funds to facilitate an interim exit mechanism for the remainder of 2019/20. The DOD should finalise rejuvenation plans for full implementation from 2020/21. 

 

• The Minister of Defence and Minister of Finance should jointly investigate means to ensure the midlife upgrades for SA Navy frigates and submarines are carried out according to schedule. Joint feedback should be provided to the Committee before the end of the 2019/20 financial year.

Recommendations to the Minister of Defence:

The Committee requires a written report from the DOD with regards to the future of the Special Defence Account (SDA), including the possible phasing out of the Account. The report should further indicate how the Compensation of Employees allocation will be met once the SDA has been depleted and how it will be ensured that future defence materiel needs are addressed. The Report should further indicate whether current projects (notably Projects Biro, Hotel and Hoefyster) are under threat given limited funding in the SDA. The written report should be submitted to the Committee no later than 1 February 2020.

• The DOD should, as part of its quarterly performance reports to Parliament, include an update on the number of investigations underway related to irregular expenditure and fruitless and wasteful expenditure. This should include information on the number of cases referred to the Military Police and/or the SAPS, the number of cases under investigation and the outcome of such investigations. This information is essential to ensure improved Consequence Management in the Department of Defence.

 

• The DOD should prioritise its Internal Audit Division’s capacity through the filling of vacant posts. The DOD should provide the Committee with quarterly updates on the status of the Internal Audit capacity.

 

• The Committee urges Armscor, the DOD and the AG to finalise a plan to correctly capture tangible assets in order to avoid future misstatements and subsequent adverse findings by the AG. The DOD should report to the Committee on progress in this regard on a quarterly basis.

 

• Although the situation around reimbursements from the United Nations for SANDF troop and equipment contributions has improved, the Committee noted ongoing concerns related to these reimbursements. This relates largely to the unserviceability of the Prime Mission Equipment in the mission areas. The latest information from the Minister of Defence indicated that reimbursements to the value of R54.667 million was forfeited. The Committee therefore strongly recommends that the DOD institute further measures to improve on the reimbursement levels from the UN. Quarterly updates on UN reimbursement levels should be provided to the Committee.

 

• The DOD should provide quarterly updates on the attainment of sea hours and flying hours by the SA Navy and SA Air Force, respectively. Furthermore, spending on key military functions such as the Maritime Combat Capability and Air Combat Capability must be reported to ensure that healthy spending patterns are maintained. The Department should also report on all virements and shifts in terms of these capabilities on a quarterly basis to prevent a situation where these movements take place at the end of the financial year, signalling poor planning.

 

• The Committee observed the need for South Africa to maintain a modern military force capable of executing its constitutional mandate. Given the current financial constraints, the Committee recommends that the DOD focuses expenditure on key deliverables that would contribute to the requirements of a modern military force. The Committee will monitor quarterly expenditure to ensure alignment with this objective.

3.2        Response by the Minister of Finance

 

The following responses to the above recommendations were received from the Minister of Finance:[1]

 

The Committee recommends that the National Treasury should not lower the Department of Defence’s baseline budget allocation in nominal terms over the MTEF period. This relates to all outlying years of the MTEF and specifically to 2021/22 where the budget is set to decrease from R52.5 billion in 2020/21 to R50.9 billion in 2021/22.

The Department of Defence has an allocation of R52.4 billion in 2020/21, R50.8 billion in 2021/22 and R53 billion in 2022/23. In nominal terms, the 2020 MTEF allocations of the department are comparable to the 2019 MTEF allocations.

 

The Committee urges the National Treasury to provide additional funds specifically for the purpose of border safeguarding. The Committee recommends that the number of sub-units be increased incrementally over the MTEF period with the aim of having 22 sub-units deployed for landward borderline duties by the end of the MTEF period. Additional funds should also include an allocation for the use of technology as a force multiplier for border safeguarding purposes.

Border security remains a priority for government. The National Treasury has allocated an additional R225 million to the Department of Defence over the medium term to procure equipment and technology to support military units deployed to safeguard our borders.

 

The Committee urges immediate engagement between the Minister of Defence, the Minister of Finance and the Commander in Chief of the South African National Defence Force, to finalise a funding plan that will arrest the current decline of the military. This recommendation is derived from the dire financial and resource situation shared with the Committee by especially the South African Army, the South African Air Force and the South African Navy during its recent oversight engagements. The finalised plan should be presented to the Committee no later than the end of the first quarter of 2020/21.

The National Treasury agrees that the funding challenges of the Department of Defence should be discussed. The department is arranging a meeting with the President, the Minister of Finance, the Minister of Public Service and Administration, and the Minister of Defence and Military Veterans to address the funding challenges.

 

The Committee noted comments by the Department of Defence that savings to compensation of employees can be made through a process of force rejuvenation. The Committee therefore recommends a joint approach to force rejuvenation that would see the Department of Defence develop and roll out a rejuvenation plan and the National Treasury provide funding for an exit mechanism to speed up rejuvenation. The National Treasury should, as soon as possible, release funds to facilitate an interim exit mechanism for the remainder of 2019/20. The Department of Defence should finalise rejuvenation plans for full implementation from 2020/21.

The National Treasury agrees that the Department of Defence should develop a rejuvenation strategy. At a ministerial meeting, it was resolved that the department would develop and submit a rejuvenation strategy to the National Treasury by May 2019. The department has not yet submitted the strategy, but is engaging with the National Treasury on a draft. The Department of Defence has yet to implement early retirement without penalties, which was introduced in the 2019 Budget Review as one of the measures to reduce spending on compensation of employees.

 

1.  

 

The DOD set itself a total of 133 targets over its eight programmes for 2019/20. The majority of the targets (82) relate to Programme 1 (Administration). Of the total targets, 14 were deemed to contain classified information and were not made available for public scrutiny. The sections below will provide an overview of the key expenditure and performance as per the various programmes. Focus is placed on selected targets not achieved by the DOD.

A key matter emerging again from the DOD 2019/20 Annual Report relates to the number of classified targets in the DOD’s Annual Reports. The number of classified targets increased from 12 in 2015/16 to 14 in 2016/17 and remained at this level since. The following classified targets are of special concern:

• Percentage available of medical stock: In the 2016 BRRR, Members of the PCODMV expressed concern that medical stock levels are below 50 per cent as per the 2015/16 Annual Report. Since 2016/17, annual reports of the DOD deemed the target for medical stock levels a classified target. There is thus no means for the PCODMV to track previously raised concerns.
• Reimbursements to the DOD for SANDF deployments to the UN: In the 2016 BRRR, Members urged National Treasury to increase the reimbursement of the DOD for its participation in peacekeeping missions. There is thus a clear need to track such reimbursement levels. However, in the 2019/20 Annual Report, information regarding reimbursement levels as a percentage of the value of reimbursements is deemed classified.

 

4.1        Programme 1: Defence Administration

 

 

4.1.1     Defence Administration financial shifts and expenditure

Programme	Adjusted Appropriation	Virement R’000	Final Appropriation	Actual Expenditure	Variance
					R’000	%
Administration	6 177 144	-	5 999 035	5 993 160	5 875	0.1%

 

The Administration programme’s total expenditure for 2019/20 came to R5.993 billion, which included expenditure of R652 million of the Department of Military Veterans. The Legal Services underspent subprogrammes recorded under-expenditure of R1.423 million and the Defence Foreign Relations underspent by R4.452 million.

 

4.1.2     Defence Administration performance

 

The table below highlights selected targets in the various subprogrammes that were not achieved. Targets related to the Military Ombud and Defence Force Service Commission are excluded in this analysis as they are addressed separately by the Committee.

Administration programme: Selected non-performance on set targets

Subprogramme	Target description	2019/20 Target	2019/20 Achievement	Comments
Reserve Force Council (RFC)	% Compliance with submission dates of DOD accountability documents .	2	1	1 Report on RFC Activities submitted to the Executive Authority)
Departmental direction	Percentage adherence to DOD governance schedule (Defence Enterprise Architecture Capability Established and Integrated)	20%	10%

Policy and planning	Percentage adherence to DOD governance schedule (Strategy)	50%	0%
	DOD Enterprise Risk Management maturity level achieved	Level 5	Level 4	This indicates a regression as the DOD maintained a Level 5 rating for the past three financial years
Human Resources Support	Percentage of disciplinary cases in the DOD finalised within 90 days Public Sector Act Personnel Disciplinary Cases)	100%	10%
	Percentage collective grievances and disputes resolved	85%	59%
Legal Services	Percentage of disciplinary cases in the DOD finalised within 90 days (Military Disciplinary Cases)	100%	76%
Inspection and audit services	Measure the level of DOD Morale	Positive	Neutral	This target is only measured every two years and represents a crucial aspect of force stability. Monitoring Force Morale is also a legislative oversight function of the Joint Standing Committee on Defence.
Defence Reserve Direction	Number of marketing activities	30	25

4.2        Programme 2: Force Employment

Programme	Adjusted Appropriation	Virement	Final Appropriation	Actual Expenditure	Variance
					R’000	%
Force Employment	3 620 718	-	3 491 508	3 491 508	0	0%

 

The purpose of this programme is to provide and employ defence capabilities. In terms of financial expenditure, a trend of virements away from the programme has emerged in recent years with regular shifts away from the Regional Security subprogramme. This was again the case in 2019/20 where a virements of R135 million away from Regional Security was made, lowering the original allocation of R1.021 billion to R886.151 million in terms of the final allocation. The virements was largely related to Goods and Services (R95 million).

A total of 10 targets were set for the programme of which five were classified while the other five were achieved. Achieved targets include the following:

• 100% compliance with number of ordered commitments (external operations).
• 15 sub-units deployed for border safeguarding
• 100% compliance with number of ordered commitments (internal operations).
• 100% compliance with Southern African Development Community standby force.
• Completion of 1 interdepartmental, interagency and multinational military exercise.

 

4.3        Programme 3: Landward defence

 

Programme	Adjusted Appropriation	Virement	Final Appropriation	Actual Expenditure	Variance
					R’000	% (Per Programme)
Landward Defence	16 527 002	-	16 763 706	16 763 706	0	0.0%

 

The purpose of this programme is to provide prepared and supported landward defence capabilities for the defence and protection of South Africa. In terms of spending, all subprogrammes spent 100% of their final appropriation.

Three targets were set for this programme. One target, related to compliance with Joint Force Employment requirements, was deemed classified. The target related to compliance with DOD training targets was overachieved, with 3 454 training opportunities against an annual target of 2 485. Furthermore, the SA Army achieved both of its planned force training exercises.

The Annual Report further makes note of some successes of the SA Army during the period under review including, among others:

• Humanitarian Aid and Disaster Relief through Op CHARIOT, assisted the Department of Public Works with the construction of nine bridges and five foot bridges around the country.
• The SA Army Engineering Formation deployed one Engineering Construction Squadron in Emfuleni Municipality, Gauteng, to repair and safeguard the operational infrastructure at the Vaal River.
• Sewage clean-up operation in Mahikeng, North West.
• Support to the Department of Agriculture, Rural Development and Land Reform’s National Rural Youth Service Corps accredited leadership programmes.
• The SANDF supported an accredited leadership programme, presented at 6 SA Infantry Battalion in Grahamstown by an external training provider, contracted by the Office of the Premier over the period 26 August to 29 November 2019. The subjects, as agreed upon between the DOD and the Office of the Premier, were presented by the DOD, and 360 participants completed the programme.

 

4.4        Programme 4: Air defence

Programme	Adjusted Appropriation	Virement	Final Appropriation	Actual Expenditure	Variance
					R’000	% (Per Programme)
Air Defence	6 979 575	-	6 701 148	6 701 148	0	0%

 

 

The purpose of the Air Defence programme is to provide prepared and supported air defence capabilities for the defence and protection of South Africa. In terms of spending, all subprogrammes spent 100% of their final appropriation by the end of the financial year. 

Four targets were set of which one is deemed classified (compliance with Joint Force Employment requirements). While the Programme did well in terms of training targets and training exercises by exceeding its target, force employment flying hours remain a concern:

• Total target: 17 200 flying hours planned with 16 232 achieved. This consists of the following breakdown:
  • 12 749.5 hours for force preparation
  • 2 576 hours for force employment
  • 907.1 VVIP hours

 

Crucially, in terms of flying hours, it should be noted that the target for the Performance Indicator “number of hours flown per year” was reduced from 25 000 to 17 200 hours per year in 2019/20 due to the reduction in the budget allocation to the Air Defence Programme.

4.5        Programme 4: Maritime defence

Programme	Adjusted Appropriation	Virement	Final Appropriation	Actual Expenditure	Variance
					R’000	% (Per Programme)
Maritime Defence	4 838 487	-	4 709 411	4 709 411	0	0%

 

The purpose of the programme is to provide prepared and supported maritime defence capabilities for the defence and protection of South Africa. The Maritime Defence programme spent 100% of its final allocation of R4.709 billion by the end of 2019/20.

For the period under review, the Maritime Defence Programme had four targets of which one was deemed classified (compliance with Joint Force Employment requirements). The SA Navy managed to achieve the target of one unique training exercise, but failed to meet the target related to training (389 learning opportunities achieved against a target of 438 for 2019/20). Of­ specific operational concern is that the target related to sea hours was not achieved:

• Sea hours: 6 612.55 Sea hours were achieved against a set target of 10 000. Reasons provided include refits and maintenance and repair. This led to operational defects and the non-availability of platforms to conduct all scheduled Force Preparation and Force Employment activities. Similar concerns have emerged in annual reports since 2016/17. Sea hours for 2019/20 included the following:
  • Force Employment: 2 745.85 hours
  • Force Preparation: 3 866.70 hours

 

Similar concerns emerged during the Parliamentary oversight visits to Simons Town in 2019 where the SA Navy’s lamented the decreasing budget and noted that it impacts on the ability to perform vessel maintenance. Currently a number of primary vessels are in dire need of a mid-life refit which has been delayed due to budget cuts.

4.6        Programme 6: Military Health Support

Programme	Adjusted Appropriation	Virement	Final Appropriation	Actual Expenditure	Variance
					R’000	% (Per Programme)
Military Health Support	5 375 266	-	5 362 908	5 362 908	0	0%

 

The purpose of the Military Health Support Programme is to provide prepared and supported health capabilities and services for the defence and protection of South Africa. The programme spent 100% of its final appropriation of R5.363 billion by the end of 2019/20.

The programme had six targets of which four were deemed classified. The programme achieved 2 089 102 healthcare activities in 2019/20, falling short of the target of 2 140 550 activities. The training target was also not achieved with less learners (640) than planned (648) successfully completing training programmes. The target was reduced from 790 members trained in 2017/18 to the current 648.

4.7        Programme 7: Defence Intelligence

Programme	Adjusted Appropriation	Virement	Final Appropriation	Actual Expenditure	Variance
					R’000	% (Per Programme)
Defence Intelligence	1 020 469	-	1 002 362	1 002 362	0	0%

 

The purpose of Defence Intelligence programme is to provide a defence intelligence and counter-intelligence capability. For 2019/20, the programme spent 100% of its final allocation.

The programme reported on two targets in the Annual Report. First, Defence Intelligence did not achieve the number of planned vetting decisions to be taken (7 500) and managed to achieve 7 167 during 2019/20. Second, it well exceeded the number of Defence Intelligence Products (908) against a target of 448.

 

4.8        Programme 8: General Support

Programme	Adjusted Appropriation	Virement	Final Appropriation	Actual Expenditure	Variance
					R’000	% (Per Programme)
General Support	6 349 471	-	6 858 045	6 858 045	0	0%

 

 

The purpose of the General Support programme is to provide support capabilities and services to the Department. The programme spent 100% of its final appropriation of R6.858 billion by the end of the financial year.

In terms of performance, a total of six targets, all of which  were achieved. These targets include:

• Procurement requests fully completed within 90 days (99%)
• Utilisation of endowment property in the DOD (93%)
• Modernised, sustainable DOD ICT Integrated Prime Systems Capabilities (112%)
• Deliberate crime prevention operations (174)
• Criminal cases investigated (backlog) (56%)
• Criminal cases investigated (in-year) (47%)

 

5.         ORGANISATIONAL STRUCTURE AND HUMAN RESOURCE SUPPORT

 

The Human Resources (HR) Management chapter of the 2019/20 Annual Report deals with various issues related to personnel. The following key aspects should be considered by the PCODMV:

• Personnel spending: The Department planned an average HR capacity of 74 901 for 2019/20. As at 31 March 2020, the average HR capacity was 74 096 with a compensation of employee’s allocation of R29.193 billion for the year under review. Given the compensation of employees ceiling instituted by National Treasury in recent years, the required HR budget was R32.094 billion. As such a budget shortfall of R2.6 billion emerged. In total, the DOD spent R31.947 billion on compensation of employees, constituting 63% of its total budget allocation of R50.882 billion for 2019/20.

 

• Reduction in Navy Personnel: The SA Navy, the smallest component of the SANDF, has seen its personnel figures continue to decrease in recent years. It decreased further from 7 076 members by the end of 2016/17 to 6 992 by the end of 2017/18. It further reduced to 6 816 in 2018/19 and 6 647 in 2019/20.

 

• Critical occupation vacancy rates: In terms of critical occupations, several areas with high vacancy rates should be noted. These vacancy rates are against the approved established structure of the DOD (with a total of 89 000 personnel). However, the vacancy rate does provide a sense of requirement in the SANDF for specialists:

 

• Airspace Control has a vacancy rate of 15%.
• Aircrew has a vacancy rate of 18%.
• Engineers has a vacancy rate of 47%.
• Nursing has a vacancy rate of 12%.
• Technical has a vacancy rate of 22%.

 

• Non-signing of performance agreements by Senior Management: Of the total of 268 Senior Management Members, only 255 signed their performance agreements in time. This is particularly evident on Salary Level 15, where only 46% of performance agreements were signed. This has been a recurring area of underperformance for the DOD.

 

• Performance rewards: The total cost of performance rewards paid out increased from R197.045 million in 2018/19 to R219.591 million in 2019/20.

 

• Sick leave cost: The total cost of sick leave has fluctuated significantly in recent years. In 2016/17, the estimated cost for sick leave utilisation was R330.731 million. For 2017/18, this decreased slightly to R320.405 million, with a further reduction to R296.754 million in 2018/19. However, in 2019/20, the total cost of sick leave increase drastically to R400.189 million. The average number of days’ sick leave per employee increased from 7 in 2018/19 to 8 in 2019/20. Of specific concern is the fact that lower-skilled workers’ average sick leave utilisation increased from an average of 8 days in 2018/19 to 11 days in 2019/20

 

• Rejuvenation and exit mechanism. The Annual Report contains the following statement: “the DOD appreciated the rejuvenation of its regular force HR composition. In addition, it has also appreciated the realignment of an exit mechanism as directed by the Minister of Defence and Military Veterans. The remaining HR funding impasse is grounded on the fact that the DOD is required to maintain a HR capacity, not commensurate with the funding allocation.”

 

• Cost of suspension with pay: During the recent JSCD mini-symposium, it was pointed out to the Committee that the cost of SANDF members being suspended on full pay for lengthy periods poses a financial constraint to the Department. In 2018/19, at least 30 members were suspended with full pay for an average of 338 days, costing the Department R10.728 million. In 2019/20, at least 56 people are suspended for an average of 251 days at a cost of R14.116 million to the Department. These figures do not include suspension of Public Service Act Personnel.

 

 

6.         broad FINANCIAL concerns AND the AUDITOR-GENERAL’s REPORT

 

6.1        Revenue generation

 

The Department under collected on the following items:

 

• Transfers received due to a decrease in the United Nation’s reimbursements for Operations. Claims could not be submitted as the Memorandum of Understanding is under consideration.
• Sale of capital assets due to no equipment sold on auctions as auctioneers have not yet been appointed. Members may note that the same reason was provided in the 2018/19 Annual Report even though the 2018/19 Annual Report indicated that a new auctioneer has been appointed to the DOD.

 

6.2        Unauthorised, fruitless and wasteful, and irregular expenditure

 

Irregular expenditure, according to the DOD, amounted to R2.832 billion for 2019/20, which is lower than the R3.587 billion irregular expenditure incurred in 2018/19. According to the DOD, major contributors to irregular expenditure include:

• R2.609 billion was for expenditure above the Compensation of Employees allocation; this was due to a reduction imposed by National Treasury through budget reduction on actual employees in the services of the DOD.
• R143 million was paid for the asset verification project contract which was awarded through an unfair bidding process. This contract will only be concluded in 2021/22.
• R34 million was paid for three contracts that were awarded by means of an unfair bidding process.
• R28 million was paid for an Information and Communication Technology contract, not concluded through the State Information Technology Agency.

 

Fruitless and wasteful expenditure decreased from R37 million in 2018/19 to R20 million in 2019/20. Fruitless and wasteful expenditure in 2018/19 related mostly to the non-utilisation of leased properties and interest and foreign currency fluctuation losses for late payments due to operational challenges. The matter of the non-utilisation of a leased property was also the cause of R35 million in fruitless expenditure in 2018/19.

 

6.3        Findings by the Auditor-General of South Africa

In terms of the Auditor-General of South Africa’s (AGSA) audit outcome, the DOD obtained a qualified audit outcome with findings. This was largely due to the issue of completeness of irregular expenditure identified in the current year whilea similar issue identified in the prior year was not addressed. Findings on compliance with legislation were also reported.

In terms of the credibility of the DOD’s financial reporting, the AGSA found the following:

• Sufficient, appropriate audit evidence could not be obtained on goods and services and investments relating to sensitive projects. This inherent limitation of scope is due to the sensitivity of the environment and the circumstances under which the related transactions are incurred and recorded.
• Irregular expenditure recorded was not complete due to inadequate systems to prevent, detect and record irregular expenditure.

The AGSA also non-compliance in the following areas:

• The quality of financial statements.
• Prevention of irregular and fruitless and wasteful expenditure
• Payments to suppliers not made within 30 days
• Sufficient and appropriate evidence for consequence management could not be obtained
• Non-compliance with procurement and contract management processes

7.         COMMITTEE observations: DePARTMENT OF DEFENCE

 

The Committee made the following general observations on the 2019/20 Annual Report:

• Members expressed concern around the lack of correlation between funds spent per programme and the actual level of achievement of the Department. In most cases, close to 100% of the allocated budget for 2019/20 was spent while performance against set targets does not align with expenditure trends.
• The Committee expressed concern around the fact that some senior managers did not sign performance agreements. Members specifically raised concerns around the lack of consequence management since this has been a recurring problem.
• Members raised specific concern around the inadequacy of the current 15 sub-units deployed for land borderline control and that this contributes to the porous state of South Africa’s borders. The impact of such porous borders is the proliferation on cross-border crime and uncontrolled migration. The Defence Act of 2002 notes that the President or the Minister of Defence may employ the SANDF “to effect national border control” and the Committee considers the deployment of the current 15 sub-units as inadequate to fulfil this legislated function.
• Members expressed concern around the lengthy implementation times of the DOD strategies, notably the Cyber Security Strategy and Sensor Strategy to which updates were not provided in the Annual Report.
• The Committee noted that some targets were, in previous years, reported on and have since been changed to ‘confidential targets’ which undermines ongoing oversight efforts.
• Members expressed concern around the funding to finalise the SA Navy’s Projects Biro and Hotel and that such funding will now be dependent on savings in other projects. Members further expressed the need for the projects to remain funded and be finalised as contracted to avoid penalties being imposed and irregular expenditure being incurred. Both these projects are central to the maintenance and integrity of South Africa’s territorial waters, which is closely linked to the Constitutional mandate of the SANDF to protect the country’s territorial integrity. Maritime patrol capabilities are required to ensure effective control of South Africa’s waters, prevent crime at sea and protect natural resources.
• Members raised concerns about the inability of the DOD to effect the midlife upgrades for SA Naval platforms. These equipment upgrades are essential to ensure that the SA Navy maintains its ability to deploy its Frigates and Submarines. The Committee’s concern stems from the Navy’s revelation that its patrol capacity will decrease significantly over the MTEF should the midlife upgrades not take place. This will, in turn, prevent the SA Navy from fulfilling its Constitutional mandate to protect the country’s territorial integrity.
• Members raised concern around theslow finalisation of disciplinary cases in the Department as it relates directly to the lack of consequence management identified as a concern by the AGSA.
• The Committee noted ongoing concerns around the DOD’s over-expenditure on Compensation of Employees and relates this to the ongoing need for discussions around the SANDF’s desired Force Structure.
• The Committee expressed concern around the fact that Defence officials indicated that very little funds remain for research and development purposes.
• Members raised specific concern around the ongoing delays of more than five years in Project Hoefyster and therefore questions the ongoing viability of the project.
• The Committee expressed concern around the fact that the SA Air Force is unable to achieve its target for flying hours and recognises the impact of the maintenance backlog and equipment obsolescence in this regard.
• Given the urgent need for the DOD to develop means of generating additional revenue, the Committee expressed concern around the fact that, at least for the past two financial years, an auctioneer has not been appointed to ensure the auctioning of redundant or obsolete equipment.
• Members noted the rapid decline of the SDA and the impact that this will have on the DOD’s ability to facilitate capital acquisition. The Committee also noted the indication by the DOD’s Chief Financial Officer that negotiations with National Treasury on the feasibility of maintaining the SDA is ongoing.
• Members raised questions around the affordability of South Africa’s 44 military attaché’s and enquired about the value that they are adding.
• The Committee noted the AGSA’s observation that the SCM function does not resort under the CFO as required by the PFMA, nor does the Risk Management function reside under the accounting officer. In this regard, the Committee took note of the Secretary for Defence’s statement that they are working to realign the DOD’s procurement environment and risk management function to ensure that Supply-Chain Management resort under the control of the CFO, as required by the PFMA. These realignment initiatives are crucial to the effective and efficient management of the DOD.

8.         COMMITTEE Recommendations

 

Based on its analysis and overview of the 2019/20 Annual Report, the Committee makes the following recommendations:

Preliminary joint recommendations to the Minister of Finance:

• The Committee welcomes the provision of additional funds for the use of technology to augment border safeguarding. However, the Minister of Finance should consider an additional ring-fenced allocation to gradually increase the number of sub-units from the current 15 to at least 22 sub-units for border safeguarding by the SANDF. This increase will assist the SANDF in countering cross-border crime and adhering to its legislated function to effect national border control.
• The Ministers of Finance should consider an additional ring-fenced allocation to fund the midlife upgrades of the SA Navy vessels in need of such upgrades. The upgrade of the SA Navy’s Frigate and Submarine fleet is essential to ensure that the Navy maintains its patrol capabilities and thereby fulfil its Constitutional requirement to ensure the territorial integrity of South Africa.
• The Minister of Finance and Minister of Defence are encouraged to find means to salvage the Special Defence Account (SDA). This will be essential to ensure that the DOD can continue to maintain critical capabilities and provide continued indirect support to the Defence Industry.
• The Minister of Finance should indicate to the Committee its willingness to fund, in addition to the DOD’s main allocation, a workable and humane exit mechanism for personnel over the medium-term. This will assist the Committee in its planned engagement with the DOD going forward.

Preliminary recommendations to the Minister of Defence:

• The DOD should report on the spending progress of the R225 million for borderline technology.
• Given that Project Hoefyster is significantly behind schedule, the DOD, Armscor and Denel should jointly re-evaluate the feasibility of Project Hoefyster and present the Committee with a way forward. Key to this outcome should be a focus on SANDF capability as well as fiscal stability. The Minister, through the Armaments Acquisition Council, should provide feedback to the committee on the outcome of engagements between the DOD, Armscor and Denel on the future of Project Hoefyster.
• DOD should ensure that it invoices government departments for services rendered by the DOD and the Department should indicate to the PCODMV if there are cases where such invoices were not paid.
• The DOD should brief the Committee on a quarterly basis on the status of funding for Projects Biro and Hotel, including from which other capital acquisition projectsfunds are moved from to pay for these projects.
• The DOD is encouraged to ensure that funds earmarked for Research and Development purposes are released.
• The DOD should realign its 2020/21 Annual Report to report on the following two targets that have been classified:
  • Percentage medical stock availability.
  • Reimbursements received from the United Nations for deployments
• The Committee recommends urgent interventions to ensure improved case finalisation in the Legal Services Division, specifically the finalisation of disciplinary cases in the Department, as it relates directly to Consequence Management.
• The DOD should report to the Committee in writing the status of all outstanding DOD strategies as well as future developmental and implementation dates.
• Measures to return the DOD to a Level 5 Enterprise Risk Management maturity level rating in 2020/21 should be implemented. Progress in this regard should be presented to the Committee on a quarterly basis.
• The Committee remains concerned about the fact that the SA Air Force is not able to meet its flying hour targets. The Committee will continue to monitor this on a quarterly basis and requests the DOD to provide it with these figures quarterly as well as reasons for non-achievement of the target.
• The Committee requests a broad outline from the DOD on its envisaged utilisation and maintenance of the vessels to be delivered to the SA Navy over the MTEF. Clarity should be provided on how this will be funded and the impact that it will have on the Navy’s ability to achieve its target on sea hours.
• The DOD should effectively capacitate Defence Intelligence to increase its capacity for vetting decisions.
• Given that the Military Police managed to exceed its targets in 2019/20, the DOD should consider adjusting these targets upwards for the outlying years of the MTEF to ensure enhanced performance.
• The DOD should indicate to the Committee in writing the measures it will take to reduce the lengthy periods that SANDF members are suspended with pay and the subsequent cost to the DOD.
• The DOD should furnish the Committee with a report on the reasons for under-collection of transfers from the UN due to the Memorandum of Understanding not being finalised. 
• The DOD should urgently appoint new auctioneers to ensure that revenue can be generated from the sale of approved obsolete assets. While the Committee understands that Project Thusano is ongoing to realise the utilisation of old vehicles, the auctioning of equipment that were already found to be unserviceable should proceed without delay as the Committee was informed that some of these vehicles dated from the 1980’s.
• The Committee encourages the Minister of Defence to relay to Cabinet the dire consequences of any potential collapse of Denel to Armscor, the broader defence industry and the SANDF’s operational capability.
• The Committee encourages the Minister of Defence to speed up plans to generate revenue for the DOD and quarterly updates on progress in this regard should be provided to the Committee.
• The Committee urges the DOD to ensure that Supply-Chain Management functions are realigned to resort under the control of the CFO and the Risk Management under the accounting officer.

Report to be considered.

 

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[1] http://www.treasury.gov.za/documents/National%20Budget/2020/review/FullBR.pdf