Armscor and Castle Control Board on their Annual Reports 2010/11

Meeting report

Armscor Annual Report 2010/11
Mr Sipho Mkhwanazi, Acting Chief Executive Officer (CEO) Armscor, said the core function of Armscor was to acquire defence equipment for the military and other organs that might require that service, like the South African Police Services and the Correctional Services.

The reporting structure of Armscor dictated that the Chairperson report to the Minister; other units within the organisation reported to the Board. He said that Mr Popo Molefe, Chairperson of the Board, would step down at the end of the year. A new secretary had been appointed.

Armscor met and exceeded most of the organisational goals. Armscor received a clean audit and there were no matters of qualification or areas of emphasis. A surplus of R17 million was realised and the highlight of operations was the Strategic Defence Packages (SDPs). These formed significant part of Armscor’s acquisition portfolio and included acquisition of four naval frigates, four maritime helicopters and three submarines.

For the Air Force, 24 Hawk lead-in-fighter aircraft, 30 light utility helicopters and 26 Gripens were acquired. Except for 11 of the single seat advanced light fighter aircraft (Gripen) all product systems acquired under the SDPs had been delivered to the South African Navy (SAN) and the South African Air Force (SAAF). During the period under review the focus was on the support and maintenance of these systems. The development of an A-Data missile, jointly with the Brazilian Air Force, proceeded well and Armscor was now focusing on acquiring for the landward unit.

The Armscor Defence Institute provided support to the Department of Defence during the 2010 Fifa World Cup,by performing tasks such as analysis of chemicals and underwater surveillance.

Despite funding challenges to the Simon’s Town naval dockyard, Armscor registered many successes. It completed most of its maintenance work on various South African (SA) Navy vessels, in time for the World Cup and other events.

Gender balance was still a challenge, but Armscor had achieved most of its human capital goals. Other challenges were the retention of skills and growing talent. Armscor would continue with transformation, in order to meet its equity requirements.

Through Armscor’s strategic initiative of funding and growth, it wanted to address insufficient funding. In 2010/11 an Armscor cost model was implemented. Armscor was busy with refinement of the cost allocation within the model. There was already a positive result achieved, through cost reduction on personal expenditure. Critical vacancies were filled.

The dockyard was faced with insufficient funding, ageing infrastructure and a loss of critical skills and knowledge. The activities conducted in order to deal with the challenges were the review of the expenditure, and the processes to ensure funds were spent on the service delivery. Also Armscor had to update its service agreement with the Department of Defence (DOD).

Armscor was dealing with the challenge of losing skilled people as a result of retirement or resignations. The organisation had set goals to deal with this challenge and most were met. However transformation, gender balance and retention of skills were still an issue.

Broad Based Black Economic Empowerment (BBBEE) sought to speed up the process of transforming Armscor internally. Armscor wanted to ensure suppliers complied with the objectives of BBBEE, and roll-out of the organisation’s BBBEE strategy had been completed. There was a monitoring system in place to manage information on the transformation status of Armscor as well as the industry. The intervention yielded positive results, but there were challenges. Participation of black-female owned enterprises in the technical fields was unsatisfactory.

Armscor sought to improve stakeholder relationships by overcoming the negative image. The stakeholder relationship strategy was reviewed to better manage relationships and improve reputation. Armscor had in this regard forged close and cordial relationship with the Department. This relationship paved a way for other key stakeholder relations such as the Portfolio Committee on Defence, military veterans, the industry, the public and other Government departments.

In line with this objective, by way of corporate social investment, Armscor had adopted a school in Attridgeville (Pretoria) to assist with Maths and Science. That intervention had paid off in that the school obtained an 88.6% pass rate last year. Armscor cleaned and painted a school in the Nelson Mandela Bay Municipality. It also participated in the Cell-C 'Take a Girl Child to Work' programme, where focus was to improve exposure of the defence industry. A number of children were taken to Armscor facilities, with the intention to attract to take up careers in the defence industry. The organisation was also involved with the Kalafong Hospital where it supported the management team to strive towards service excellence. Armscor would be more involved on other initiatives in the future.

Armscor was addressing the issue of sustainability and capability in the defence industry. If the industry was sustainable it would yield results in terms of supporting Government initiatives such as job creation, transformation and economic development. Armscor had developed an integrated local industry support strategy and had coordinated a number of international defence exhibitions.

The aim was to ensure that the local industry was promoted, and also relations with similar organisations were forged. He said meetings with the suppliers to discuss contractual challenges were facilitated. The exhibitions helped expose Armscor to the technology that was available internationally. He said there were seven shows that were approved by the Department of Trade and Industry, but organised by Armscor. The organisation also organised the African Aerospace Defence (AAD) Show in Cape Town, September 2010.

Operational efficiency was challenged by outdated information technology (IT) application systems. There was a lack of alignment to Armscor’s systems, but also lack of integration and efficiency in the measurement system Armscor required. It sought to address efficiency and productivity, but due to lack of funding, the Board approved a short-term strategy. The intention was to have a hybrid of outsourcing and in-sourcing, but ultimately have the IT services provided internally.

Armscor wanted to benchmark services with other organisations so as to guide how the information and communications technology (ICT) should be run. Armscor also looked at productivity’s continuous improvement and systems in order to meet the requirements of the clients. The productivity management system was developed. The unqualified audit was a function, and an indication, of good governance at Armscor.

The review of operations indicated that four frigates had been delivered and were actively deployed locally and internationally. Present activities were focussed on completion and integration of the systems. Three types of the 2009 submarines had been commissioned and delivered, but engineering changes were required on them. The changes would be completed in 2012.

30 light utility helicopters, and nine dual seat and six single seat Gripens meant for training were delivered to the SAAF – bringing the total to 15. The other 11 Gripens would be delivered during 2012. The Hawk aircraft had been successfully delivered and had flown over 1 989 hours during the reporting period. The upgrade of the first five MK1 Rooivalk (combat helicopters) had been completed and a retrofit of the remaining six helicopters was scheduled to be completed by March 2012. As to the A-Darter Missile development – jointly funded by Brazilian Air Force, the programme was progressing well, and had been successfully integrated on the Gripen aircraft.

Challenges that were encountered with the Ground Based Air Defence System (landward systems) had been resolved. Integration of all elements commenced in February 2011 and delivery of the completed project was expected in May 2012. The challenges that Armscor had in elevating the sub-system had been overcome.

The Armscor Defence Institutes (ADI) facilities had maintained their accreditation and certification status. Accreditation was critical for these facilities as they were doing tests, evaluations and research work. Some of these facilities had increased their business portfolios and were involved with commercial companies like Girotek.

The Dockyard had registered successes despite the financial challenges it faced. The Dockyard was working with the Navy to streamline planning and feedback sessions between the stakeholders. Performance agreements had been signed relating to Armscor and the Navy. Critical skills and the renewal of the dock were affected by lack of funding. Most of the goals Armscor had set were achieved.

Financial report
Mr Gerhard Grobler, Chief Financial Officer, Armscor, said revenue had increased by 9.9% and the net asset value by 3.2% due to surplus for the period. The employer/employee related cost remained the highest cost driver as was the case in the year before. The Armscor Group received an unqualified Audit Report for the period under review with no audit report matters raised.

Positive factors that influenced the financial position of Armscor included the increase in the Government grant; changes on how funding happened for the work performed on behalf of DOD; cost reduction on personnel cost; actuarial gain from the post medical benefits fund; and reducing operating expenditure. Operating expenditure increased by 3.8% on group level despite significant hikes in electricity and water.
Negative factors included the low gross margins realised on revenue generated, and the decrease on investment revenue as a result of low interest rates. The limitation to the number of people required to do acquisition for the Department had become a funding challenge. Also the funding model did not make provisions for the rejuvenation of the workforce. The renewal of the IT infrastructure was a high risk factor in Armscor as it needed to be replaced at a significant cost. Also the maintenance of the technical capabilities that Armscor required to execute the work as required by the Department was a high risk factor. There was a critical requirement for the renewal of the infrastructure and capabilities at the Dockyard. An investigation was conducted as to what was needed to comply with the maintenance programme. There was a serious shortfall of capabilities. The Armscor Defence Institutes also required sustainable funding for rejuvenating the workforce and funding the strategic capabilities on behalf of the Department.
(Please see presentation document for full information).

Discussion
The Chairperson thanked Armscor for a clear and comprehensive presentation.

Mr P Groenewald (FF+) said billions of taxpayers’ money was spent on the Strategic Defence Package. Armscor was responsible to ensure contracts were in good order and that they were compiled in a manner that benefited SA. How was it possible that Armscor required three submarines, but one was in the dry dock and would only be released to the Navy in 2013. How was the contract completed? Who would pay for the changes, and why were these not incorporated in the beginning? He wanted to know if there was a compatibility problem with the gun systems. Did Armscor not foresee that? How was it possible that Armscor acquired frigates that were not compatible to our systems and who would carry the cost? Was the client satisfied that all the requirements for the Gripen were met?

Ms P Daniels (ANC) thanked Armscor for the clean audit, and said the organisation had been giving Parliament a hard time. She wanted to know if the client was happy with what had been delivered. She asked what was meant by compatibility systems, because specifications were not talking to the warm bodies that were supposed to be using the system. She asked if it was possible for the Dockyard to maintain itself in terms of revenue generation for upgrades. She said gender balance was a tired issue that needed not to be reported but acted upon. The Committee was not interested on the statistics; one must do something about it. Gender balance should be a thing of the past. She said something needed to be done about the lack of alignment and integration of IT systems. She asked if the employee related cost – described in the report as very high – worked in terms of retaining the skills. She said a retention strategy was needed.

Mr A Maziya (ANC) asked how was it possible that Armscor would attract skilled people if it failed to employ a permanent CEO. The Board needed to demonstrate commitment to running Armscor by appointing a CEO. He asked for the plan of action in addressing challenges at the institution. What succession plans were there at Armscor to fill gaps left by ageing staff or resignations? He said it was surprising that Armscor would complain about staff leaving its employment as there should have been people groomed internally.

Mr D Maynier (DA) registered a complaint about the absence of Dr Popo Molefe, Chairperson, Armscor. There needed not be any competing priority that could cause him not to be at the Portfolio Committee meeting. It was not optional but mandatory for the Chairperson to attend the presentation of Armscor’s annual report. He asked for an explanation why he was not present. He requested that the increase (from R232 000 to R656 000) on the Chairperson’s annual salary be explained. In light of the claim that there were budget constraints at Armscor, could the organisation confirm this increase; who approved it; and what reasons were there for an increase of an outgoing official? He said it was concerning too that the Armscor Board spent excessive amounts on overseas trips to defence shows. He said he thought there would be some scaling back on this kind of expenditure and asked for specific details about Armscor’s attendance to a recent defence show (DSEI Show) in the UK. What was the total cost of that trip, and what value did the non-executive directors add by way of experience gained on that show. He asked for an update on the Airbus A400M negotiations regarding the return of R3 billion back to SA. He asked for specific acquisition projects that Armscor was involved in.

Ms N Mabhedla (ANC) said she agreed with other Committee Members that it was a shame that Armscor was still reporting on gender balance challenges and shortage of skills. She asked Armscor to put in context statements, in the annual report, that there was lack of leadership at the organisation, and that critical posts were filled whilst the organisation had a vacant CEO post. The CEO post was critical too, why was it not filled for two years now.

Mr L Mphahlele (PAC) commended Armscor for an unqualified audit report. He asked if the surplus of R17 million realised was a profit. He wanted know the best selling commodity at Armscor. He asked for the specifics on the A-Darter missile and whether it would be integrated on other aircraft. For how long had the project been going on; how long would it take and how much was SA contributing to the whole project?
He wanted to know the representation of women and people of African descent at Armscor. It helped when these facts and figures were broken down. Also what could be done to help women-owned companies in the field of technical advancement, so as to ensure equitable representation? He asked if it was possible to spread the corporate social initiatives to rural areas as most developmental interventions were needed there.

Mr J Masango (DA) said it was unfair that a member of the Board had been acting in a position for so long. He also asked for clarification on the 'erosion' of skills. Was Armscor unable to attract and train people that were needed?

Mr Mkhwanazi replied that the engineering changes outstanding on the submarine, which had been docked since arrival, were agreed to for cost reduction and affordability of the equipment. When Armscor contracted, there was an agreement that the outstanding changes be done later and stated in the annual report. He said when new systems were taken to operational tests and evaluation, structural defects were likely to be found and would necessitate improvements. Some other changes on the concerned submarine were mainly for support systems, training, and maintenance purposes. The submarine required maintenance and repair work on some spares, but the work was scheduled for completion at the end of 2012. Compatibility of the current system that was being used posed challenges for the suppliers. The issue was being addressed and it was reaching finality.

There were challenges with Armscor’s IT system which needed to be renewed as it was using old computer programming language. It was difficult to get support for some applications that used old language, and was more expensive. He said alignment was a challenge because the system was not integrated and tended to increase workload. Extra work had to be undertaken in trying to bring together the work of different units, instead of having the unit do it. The organisation benchmarked similar organisations in France to see how they overcame challenges of IT as it was costly. He said Armscor had a short-term strategy in place dealing with savings and trying to minimise outsourcing.

The Dockyard was transferred to Armscor three years ago. This was at time when maintenance was lowest in terms of the work that had to be done. During this time the Dockyard needed to be better managed, but there were delays in doing the transfer to Armscor as a result of moratoriums and due diligence. When Armscor took over it was agreed that the Dockyard would be ring-fenced and given a payment to create enough capability and efficiency. He said this was a challenge due to the low staff complement Armscor had. The other challenge was meeting the requirement needs of the Navy. He said the organisational structure and the business plan had been agreed to. The Department had been engaged on the gap in funding versus the upgrades. He said the Dockyard was 100 years old and some equipment needed to be renewed in order to deal with improvements. Information on major acquisition projects and details of the recent defence show to the UK would be provided in writing as the delegation did not expect to be quizzed on them. He said the defence shows were critical for executive members as they got to understand the industry better. He said it was difficult to market the industry and the shows were one way of doing that, and that they helped it to be sustainable. He said there were positive results in attending.

Armscor was at a point of going for litigation in trying to recoup the outstanding money from Airbus regarding A400M. Armscor was consulting with the relevant stakeholders to ensure that it was not tackled on a legal matter. He said Armscor was seriously going the litigation route and was working with the office of the Minister as the signatory to the contract. This was a route Armscor had been avoiding as it took long and resources but was left with no option. Regarding involvement of rural communities, Armscor was looking at doing more for those areas. The starting point was to look at what was nearer, but the organisation was looking at ensuring the next time Armscor reported it would be taken care of.

The A-Darter was a development programme that started 3 years ago. It was done jointly with the Brazilian Airforce. It was progressing well. The intention of the programme was not to immediately produce but present a working model. The next phase of the project would be industrialisation and production of missiles that were required. It would cost about a billion rand and SA would contribute a significant portion. The project would be completed in 2014.

Mr Grobler said export sales contributed largely to Armscor but it did not maintain those exports for companies. There were many lessons learnt with regard to the Defence Industrial Participation (DIP). Companies should be competitive after receiving the initial start. Another lesson was that Armscor needed to provide maintenance after it had transferred the technology.

Mr Groenewald sought clarity and asked if his understanding of the reply was correct that there were mistakes made regarding the DIP.

Mr Grobler replied in the negative. The change in Mr Molefe’s salary was a decision taken by the Board. The change was backdated to two years. The figure of R17 million, quoted in the annual report as a surplus, was indeed a profit. Armscor was not profit-driven but service-driven, but indeed it was profit.

Ms Refiloe Mokoena, Director, said Armscor had entered into a service agreement with the client and there was no notice of complaint or displeasure. She said the client was satisfied. She said she took note of the comments on gender balance. She said the Chairperson recognised the Committee as most important, but he was attending to a bereavement in his family. He really would have loved to be present.

Mr Sifiso Msibi, Director: Human Resources, Armscor, said Armscor was a skills-based business that sought to acquire machinery for the defence force. Naturally the highest cost would be on people. The organisation was in a highly competitive environment. The defence industry was not attractive for the top engineering students and that would take long to change. Universities were not producing enough African engineering students. Armscor was always beaten for salaries on the few who were available. He said the organisation was not paying well. There were structural challenges that militated against getting the scarce skills. The organisation was dealing with these issues, but it needed to be realistic.

Mr Msibi said that the acting CEO (Mr Mkhwanazi) was not a Board member but was head of acquisition. The organisation embarked on an intensive search to find a suitable candidate for the CEO position when Mr Thomo left. He said interviews were conducted and a recommendation to the shareholder (Minister of Defence) was made a year ago. He said the issue was not in the hands of the Board, as it was told the matter of the appointment of a permanent CEO would be dealt with when the time was right.

Mr E Mlambo (ANC) interjected and sought clarity on the statement that a recommendation was made to the shareholder.

Mr Maynier paraphrased and sought further clarity on whether Mr Msibi was saying a recommendation for the CEO was made more than a year ago to the Minister and she had not responded. In other words the Minister was responsible for the delay in appointing a CEO at Armscor.

Mr Mkhwanazi tried to clarify, and said while it was an issue concerning the CEO, there had been reports from the office of the Minister that work in terms of the process was dealt with, but it coincided with the period when the time of the Board was expiring. The Chairperson of the Board was one of those. The feeling was that it was important that the shareholder deal with the new Board. That Board had been appointed now and also discuss with the new Board in finalising the appointment of the permanent CEO. These were the causes of the delay.

Mr Maynier said the new Chairman of the Board could hardly be in the loop of the process as he was the advisor to the Minister.

Mr Groenewald said that the Committee needed to think about a better way of dealing with annual reports as there was not enough time.

Castle Control Board Annual Report 2010/11 Presentation
Lieutenant-General Justice Nkonyane, Chairperson, Castle Control Board (CCB) [the governing body of the Castle of Good Hope, Cape Town], said that during the period under review the Board had addressed transformation and compliance with National Treasury regulations. Significant progress was made towards achieving the Control Board’s priorities. The CCB attempted to align with Government's medium term strategic framework (MTSF) with specific reference to Outcome 1 (improved quality basic education), and Outcome 6 (effective and responsive economic infrastructure). Highlights included the appointment of Mazars as internal auditors.

The Castle of Good Hope, was not in good shape but a maintenance plan had been developed to address challenges. The development and implementation of policies was a priority. Some policies were derived from the previous AG’s report. He said the participation and support to the World Cup and to the City of Cape Town had been another priority. The negotiations towards self-sustainability, as directed by the Committee were entered into.

 Lieutenant-General Nkonyane said the Control Board was made up of representatives from the Defence Force, regional Chamber of Commerce, Iziko Museums of Cape Town, the Department of Public works, SA Heritage Resources Agency, the Army Support Base Western Cape, the City of Cape Town, SA Tourism Board (had not seconded a name yet), the Minister of Defence and Military Veterans, the Western Cape Provincial Legislature, and a chief executive officer (CEO). Appointing a CEO was a challenge and the Control Board had not yet filled that post.

The CCB strived to make the Castle a centre of global significance, accessible to everybody. This was a vision and whatever the Board did was to try and attain this. The highlights for 2010/11 included appointing internal auditors in an attempt to strengthen the ability in terms of corporate services. The CCB had also linked the performance indicators to the draft strategic plan. It had also assisted the City of Cape Town with vendors during the World Cup

Also the Chief Financial Officer had not been appointed as well due to financial constraints, but there was a Board member doing this function in an acting capacity. The Castle Manager had been appointed by the Army Support Base Western Cape, and was given a directive to remain in control of the Castle with a focus to implement the principles of Batho Pele for improved service delivery.

The Castle management was responsible for organising events. The Board endeavoured to increase the public profile of the Castle across all communities. There was a slight decline to visitor numbers to the Castle and that impacted on the revenue. He said officials were not paid from the revenue generated. He said the Department of Defence financial division had deployed an official to assist and ensure the Castle Board was compliant with the Public Finance Management Act (PFMA).

Maintenance was critical. The Board had focussed on the protection of the Castle in ensuring effective immovable heritage asset management. It continued with the preventative maintenance on wooden windows and doors. Available funds were allocated to facilities that had a direct impact on operational readiness of the South African National Defence Force (SANDF). The Board decided to use its funds to maintain the Castle and R207 000 was allocated for this purpose. The Department of Public Works had funded the appointment of specialist consultants to do a thorough survey on the damaged roof. That work was on going.

The CCB had developed an implementable strategic plan in trying to align with the National Treasury requirements. He said the plan was based on the objectives of the Act. The objectives were to: preserve and protect military heritage, optimise the tourism potential of the Castle, and optimise accessibility of the Castle to the public. The absence of a representative from SA Tourism on the Board was a challenge. Also there were challenges in managing the events and film shoots that took place in the Castle. The Board would this year develop policies that would assist with contract management.

The operational objectives for the Board were improving operational support for management; marketing the Castle; supporting military activity around the Castle precinct; ensuring optimal usage of the Castle; establishing heritage management; seeking support and promotion of tourism; fostering cooperation with stakeholders; branding all events happening at and around the Castle; and ensuring awareness campaigns especially with those who visited the Castle.

Financial report
Adv Dave Mitchell, Acting Chief Financial Officer, said the Castle revenue last year was R2 875 000 and a third of this money was paid to Iziko Museums of Cape Town. The net operating capital for CCB was significantly lower than it was last year. The salaries of the Castle staff were subsidised by the SANDF. There was money generated but the challenge was to get National Treasury to agree that CCB keep it.

The CCB had an independent audit committee, whose focus of the committee had been to manage the internal audit with special attention to internal controls, governance and compliance and performance reporting. It also assisted with risk management.

Financial reporting had been sound and this was confirmed by the audit committee. There were concerns with maintaining the surplus and that the CCB had to appoint a CEO in order to comply with statute. There was a challenge with the international accounting standards that the AG was following.

The CCB was chastised for not submitting quarterly reports on finances, but was thrilled by the unqualified audit report received from the AG. It was inappropriate for national Treasury to seek to have a supply chain management unit in an organisation driven by nine people.

Discussion
Mr Masango congratulated CCB for the clean audit. He said he was worried that CCB had described challenges without giving details on how it hoped to address them. He asked what the Board was doing to overcome the challenges.

Mr Masango wanted to know how CCB would increase revenue, in trying to ensure sustainability. He sought clarity on the statement that the Department of Public Works had paid R247 000 to consultants to survey damages on the roof of the Castle. Why spend money on doing surveys instead of fixing the damage?

Adv Mitchell replied that revenue generation was supplemented with activities like film shoots, and encouraging pupils from schools to visit the Castle. He said making money was a secondary objective to having people visit the Castle. He said corporate functions were the big revenue sources for the Castle. There was a study under-way between the CCB and the Defence Force to see how the way the Castle was used could be optimised. He said none of the Board members were paid by the Castle and no senior staffers received bonuses.

Mr Francois Morkel, Castle General Manager, said that Castle management agreed to hire consultants to do the survey of the roof mainly to determine the exact extent of what was needed in terms of the repairs. A specialist and proper work was needed as the Castle was very old. Information gathered from the consultants was also used for other repair work and to see the scope of work that had to be done.

Mr Maziya also welcomed the report and said it was good for a small institution like the Castle. He sought clarity on the AG’s statement that auditing principles were not adhered to, despite the unqualified audit report for the Castle.

Adv Mitchell replied that the AG and KPMG deserve to be commended for the work they did and the constructive comments. The issue relating to the Board and adherence to the auditing principles involved internal accounting and controls over money. The strategic objectives needed to be particular and specific. The AG’s reporting needed issues as the specific goals that had been identified and needed to be pursued, and reporting on performance towards achieving those. This format of reporting was a new experience for the Board. There was a lot of work in that area and the Board was looking forward to tackling it. The second area was supply and chain management. Although there had not been exact compliance with Treasury Regulations, practice on the ground was value for money and appropriate expenditure. These were small procedural matters to which the Castle staff needed to pay particular attention.

Mr Maziya battled to understand that the management of the Board was made up of 15 people and yet oversaw only nine employees. He wanted to know why there were few numbers of blacks and coloureds in the management team especially that since they were the dominant group in the province. Was it as a result of incompetence or a historical problem? He asked if CCB had a strategy to transform the management. All race groups were represented in the contract workers; why was the same strategy was not applied to full time staff? The AG remarks were worrying because the CCB was not compliant.

 Lieutenant-General Nkonyane replied that the Board was constituted according to an Act of law. He said there was nothing the Board could do about the number of more Board members overseeing fewer employees. The situation was not normal; the Board could address this if it could acquire funding. He said the management structure was dependent on the available funds. Everything hinged on the appointment of a CEO, who could then be able to put in place a proper management structure. The CEO could also be able to maximise the potential of leasing the Castle and that would generate the required revenue. He said the low-key jobs like tour guides were performed by army personnel.

The Board was looking at transformation at the Castle. The Castle was dependent on the SANDF for human resources. The two white curators were people with skills and were paid by the SANDF. The Castle did not have funds to hire, but this was one area that the Board would address in its human resources and equity plan.

Mr Mlambo wanted to know if there were interactions with the Departments of Arts Culture and Tourism in an attempt to get a dedicated marketing officer. He said it was problematic to have an institution that did not know how to market itself.

Ms Mabhedla wanted to know how the Committee would be able to monitor the Board if the Board did not have a strategic plan.

The Board replied that the Castle General Manager was responsible for marketing. The motivation to the Minister as to why the Board required to retain the surplus of a R12 million was that a marketing officer had to be hired. The Board did have a strategic plan but did not meet Treasury standards. It was not approved and was not submitted to the Minister. But CCB was in the process of finalising a strategic plan that would be applicable from December 2012.

 Lieutenant-General Nkonyane said there were discussions with the Department of Arts and Culture regarding upgrades and better use of the Castle. It became apparent that the Department of Arts and Culture wanted to take over the Castle and turn it into a heritage site. The Minister had refused as she felt that the Castle was a defence establishment, and that was where negotiations had ended.

The meeting was adjourned.