Department of Defence on its 2015/2016 Annual Report; Defence Budgetary Review and Recommendations Report

Meeting report

Opening and welcoming remarks:
The Chairperson, after opening the meeting with a moment of silent prayer, welcomed all present and outlined that the Committee will be briefed by the Department of Defence (DoD) on its 2015/2016 Annual Report. He also stated that because some members had other engagements the Budgetary Review Report would be adopted after the committee had discharged the dignitaries from DoD.

Apologies
The Chairperson stated that apologies were received from Mr M Booi (ANC) and Mr N Khoza (EFF) who both had other commitments.

From the DoD, apologies were noted from the Honorable Minister of Defence and Military Veterans and the Secretary for Defence.

Briefing by DoD on its 2015/2016 Annual Report.
Dr Thobekile Gamede, Deputy Director-General: Defence Policy, Strategy and Planning, DoD, stood in for the Secretary for Defence, Dr Sam Gulube, who was out of the country on official duty. She introduced some of dignitaries present with her namely; Mr Siphiwe Sokhela, the Chief Financial Officer and Major General Solly Shoke, Chief of the South African National Defence Force.

The DOD Annual Report presented DOD’s success and impact of Defence on the country, region and continent. The report further detailed the ways that DOD met the ordered commitments set in the strategic objectives, provided capabilities, ensured sound administration and managed DOD despite limited budget allocation. During the presentation the DDG reported DODs success under the following sub-heading (see document);

Key policy achievements of DoD
-The adoption and approval of the 2015 Defence review.

- She reported on DoD’s Selected Performance Indicators (SPI) and stated that the DoD achieved 77 out 0f the 116 SPIs targeted in the 2016 annual performance plan.

Achievement of outcome 3 and 11
She reported that these outcomes contributed to the Strategic Objective as entrenched in the Medium-Term Strategic Framework (MTSF).
-Outcome 3 contributed to the Justice, Crime Prevention and Security (JCPS) Cluster and its output involved the people in South Africa being safe and having a feeling of safety. The sub-outcomes were;
-An effectively defended protected, secured and well managed South African borders (3).
-A secured Cyberspace (4) that resulted in the finalization of National Cyber ware security and
-Reduced corruption in Public and private sectors (7).

-The output of Outcome 11 involved creating a better South Africa and contributing to a better and safer Africa in a better world. The sub-outcomes were;
-Political cohesion in Southern Africa to ensure a peaceful, secure and stable Sothern African region (3) this was evidenced by deployment of SANDF for peace support operations (involved deployment of ten attaches),
-External operations (participation in the UN Peace support in DRC, anti-piracy operations in the Mozambique Channel and Un/AU Hybrid Support operation in the Sudan), on-going provision of forces for two general military assistance (GMA) operations (Team BULISA and Mission THEBE),
-A joint interdepartmental insurgency and multinational military exercise (WAYSIDE I and II and OXIDE) and
-Exercise BLUE ZAMBEZI, AMANI AFRICA II and IBSAMAR as detailed in the document handed out.

Planned the implementation of 2015 defence review milestone 1
This consists of two primary work packages as seen in DoD Annual Performance Plan for 2016.
-Interventions that can be pursued within current defence budget allocations and which will improve organisational efficiency and effectiveness and
- Interventions that need additional funding but will improve operational performance.

Financial performance information
-She reported that, the 2015/16 budget allocation was deemed inadequate in executing DoD Constitutional mandate. She further reported that, this led to adverse implications on;
-Supporting and executing ordered commitments for both internal and external operations,
-Rejuvenating human resource at DoD and
-Sustaining of declining defence capabilities.

Financial performance trends
This indicated that the accounting officer had made it possible to spend 99.96% of the 2015/16 budget allocation however, the under spent portion (0.037%) was due to administration and force employment programmes (see document). She reported that;
-Under expenditure in the administration program was generated mainly within the transfer of payment to; safety and security sector education and training authority
-The force employment programme experienced under expenditure within the Peace Support operations. This was due to delays in procuring mobility packages used for border safeguarding operations.

Noteworthy achievements
-The Minister provided timely Political and strategic direction for DoD by setting priorities for the current financial year (2015/16).
-The Secretary for Defence provided the framework which strengthened the structure between the DoD and National Defense Industry Council. This structure supported local defence industry in its export endeavours and assisted in generating income and uplifting South Africa to be at par with countries such as UK and Canada.

-The DoD supported SMMEs with initiatives that educated and assisted these SMMEs with compliance requirements in doing business with DoD. These initiatives assisted SMMEs with supply change management issues and developed the business competence of SMMEs

Management Performance Assessment Tools
In striving to adhere to regulatory frameworks, efficiently and effectively apply management practices as well as enhancing DoD’s internal controls, Management Performance Assessment Tools (MPATs) were used to improve service delivery and overall performance.
-The DoD achieved an MPAT 2.7 average score during the MPAT 1.5 assessment period and this constituted a year-on-year improvement from an average score of 2.1 during the MPAT 1.4 assessment period (see document).

Defence Force Interventions
-The Chief of the SANDF ensured that forces were prepared and employed in pursuing set missions for instance two additional subunits were added to the original 13 subunits on ground to curb illicit activities across South Africa’s borders. In addition, no further incidence of piracy has been reported in the Mozambique Channel since naval assets were deployed.

As an interim measure towards establishing the African Standby Force (ASF) the SANDF was at the forefront of creating the African Capacity for Immediate Response to Crises (ACIRC).
-To assess the readiness of ASF, DOD hosted exercise AMANI AFRICA II on behalf of AU.

-In supporting MTSF Outcome 11, sub-outcome 3 the SANDF contributed to stability in the continent by deploying 2,211 troops in two UN/AU peace support missions in Sudan and DRC.

-In supporting MTSF Outcome 3, sub-outcome 3 the SANDF contributed by executing border safeguarding operations in South African borders by deploying the 15 subunits. These 15 subunits recorded various operational successes (see document).

Audit outcomes
She reported that;
-The General Defence Account (GDA) received an unqualified audit opinion (UAO) on the financial position of DoD which indicated that the financial statements were presented fairly in all material aspects as at 31st March, 2016.

-Furthermore the UAO on the DoD’s financial position and cash flows for the year ended indicated that they were in accordance with Modified Cash Standard (MCS) prescribed by National Treasury and the requirements of Public Finance Management Act (PFMA).

-Furthermore, the auditors did not raise any material findings on the usefulness and reliability of the reported performance information for pre-determined programs such as Force employment, Air and Landward defense.

-The DoD received a qualified opinion on the Special Defence Account (SDA) however she reported that, DoD would have had a clean project expenditure and related financial assets record on the SDA but for the sensitivity of the environment and circumstances under which the related transactions were incurred and recorded.

Discussion
The Chairperson then gave opportunity to the Committee members to present their observations.

Mr D Gamede (ANC) appreciated the DoD for their presentation and the unqualified audit opinion received on GDA by the Office of the Auditor General. He however stated that, DoD should strive for having a clean audit in all area. He demanded that DoD put down in writing the amount spent on peace keeping. He further asked about challenges encountered in paying service providers within 30 days.

Mr Sokhela replied that the Computer system used by DoD was outdated and malfunctioned at certain times and if this occurred at the end of the month it impacted negatively on the 30 days window period that service providers needed to be paid. Furthermore contentions may occur on invoices as there may be disputes on quantity supplied. In addition the computer system also used a manual filling process to document receipts however; DoD is committed to reducing payment days to 30 days by upgrading the computer system.

Mr Gamede asked how the DoD planned to reduce the personnel budget from 55% to 40% based on a 40:30:30 ratios for personnel budget, operating cost and capital cost.

Mr Sokhela replied that strategic policies were put in place by DoD and will be dealt with in the implementation performance. -All questions on Defence Review would be answered in a comprehensive briefing after recommendations have been made by the DoD work session and the Minister.

Mr Gamede asked what the time line was for rejuvenating the force.

The DoD replied that the timeline will be dealt with in the implementation performance.

Mr Gamede asked how the DoD planned to address the issues of low flying and sea hours as this had reduced personnel morale and led to exiting of highly skilled personnel from the SA Air and Naval forces.

The DoD replied that the target on flying hours were not met because of safety issues on the Aircraft. Furthermore last year’s benchmark was used and this year there were fewer disasters. Nevertheless, targets on Sea hours have been met.

Mr Gamede asked how the DoD planned to incorporate certain procurement and supply change management standards into its budgetary expenditure.

The DoD replied that this would be answered via a written submission.

Mr Gamede addressed the problem of irregular expenditure in procurements and asked the following questions: what causes deviation in procurement, what makes any officer exceed delegated authority, why was the DoD not complying with the PFMA, why were contracts cancelled and if any penalties were attached to such cancellations. Why did material miss-statements occur in the audit report?

The DoD replied that deviation occurs when procurement technicalities are not understood. For instance Armament Corporation of South Africa (ARMSCOR) did not follow PPPFA principles initially because ARMSCOR’s procurement principles were initially different from PPPFA’s principles; however ARMSCOR has complied with the PPPFA standards on procurement. Materials miss-statement occurred because the expenditure and the asset register had not been completed when the audit occurred.

Mr S Marais (DA) appreciated the presentation but observed that the audit report gave a serious indictment on SDA portion. He expressed concerns on why there was a decline in DoD budget objectives on the currently inadequate budget allocation.

Mr Sokhela replied that the SDA account documents are sensitive consequently the qualified opinion received was because the auditors could not see the documents. The implementation of policies in the defence review started in 2016 however, the year under review was a planning year. Furthermore, answers on DoD budget objectives can only be given during the performance review.

Mr Marais asked how the DoD wanted to address the issues of lower Air and Sea force hours because of unavailable Aircraft, Sea vessels and equipment. In addition, he questioned how DoD wanted to address the on-going challenges of filling the critical skills position notably engineers, aircrew, technical personnel and medical professionals.

The DoD replied that the Minister has implemented some strategies to address the issues of unavailable Aircraft and critical skills and progress on this would be addressed during the implementation review.

Mr Marais the asked the DoD to explain in writing why the top level management salary band of the Department is higher than other bands and contributes to 55% of its personnel costs.

The DDG stated that, other comments and questions will be captured and dealt with in the implementation review with the Chairperson's permission.

Mr Marais expressed concern on how Milestone 1 would be achieved as a result of the inadequate funding mechanism and hoped that this project would not become a theoretical exercise. Consequently, he asked how DoD intended to implement the two primary work packages of Milestone 1 in terms of the budgetary review and recommendations report (BRRR), its cost and how the Committee could assist DoD with Milestone 1.

The DoD accepted that it will not be able to deliver on all aspects of Milestone 1 but there are other aspects which can be managed within budget. A funding model is being created by DoD. Work on cost of Milestone 1 is at an advanced stage

Mr Marais asked for the name of the Committee in charge of oversight function of the SDA and when last submissions were last made to this Committee.

The DDG explained that, oversight was not done by the State Security Service (SSS), the Defence Review is a cluster issue, and DoD works with National Treasury, Military Intelligence and SSS. The guidelines given in auditing SDA’s expenditure and its report can be presented in a closed session.

Mr Marais asked how the DoD wanted to address the challenges in financing the Air force in terms of equipments, Aircraft and accessories such as seatbelt, rotors etc. How did reduce funding impact on Land, Air and Naval forces? He appreciated progress made concerning the squadron but asked DoD to justify the need for the procurement of a new Aircraft when some Aircraft are grounded. He expressed concerns on DoD’s alleged report on meeting targets when flying hours were reduced but longer hours were reported on VIP flights. He requested feedback on the past reported policies developed by DoD as the annual 2015/16 report did not follow-up on these developed policies.

The DDG stated that, other comments and questions will be captured and dealt with in a written submission with the Chairperson's permission.

Mr Marais asked how many of the 15 sub-units are fit at a particular time and how many of these sub-units are needed per time.

The DDG replied that all the 15 sub-units are fit and on ground. However, there is also a further reserve of 15 sub-units on ground.

Mr Marais asked what are the plans and programmes on safeguarding the South African borders.

The DDG replied that, other comments and questions will be captured and dealt with in a written submission.

Mr Marais asked the DoD to explain why employee disability days are 20 as these puts a huge burden on personnel costs. He further asked how DoD provides for disabled staff. He also asked for information on disability leave days.

The DDG replied that the amount remunerated on disability leave and personnel involved would be provided in a written document.

Maj General Shoke stated that, there are rules and regulation which guide how disabled personnel are treated and these are rigidly followed. Furthermore, disabled personnel are rehabilitated and some are employed. There are on-going discussions with National Treasury on exit mechanisms of disabled personnel.

Ms N Mnisi (ANC) welcomed the presentation and unqualified audit opinion. She asked how much was spent on peace keeping and how much was allocated to peace keeping in the budget. She asked the DoD for explanations on critical skills shortage and implementation of its strategic policies. She further asked the DoD to state the challenges it faced in implementing these strategic policies.

The DDG replied that the amount spent on peace keeping would be captured in a written submission.

Mr S Esau (DA) complimented the DoD on the format which was used in presenting the report and stated that it was a well informed presentation that eliminated questions. He expressed the Committee’s pleasure on the 15 sub-units that were involved in border patrols but wanted to know what the DoD had done about the small planes that were landing in the airports near the border. He further asked about the roll-out date of the hydro-traffic vessel.

The DoD replied that questions on roll-out date of the hydro-traffic vessel would be addressed during the implementation review.

Mr Esau requested an update on Sudan – asking about the number of forces and equipments remaining and the state of the interventions in Central African Republic.

Maj General Shoke replied that nine personnel were left behind in the Sudan and these personnel were preparing to load SA’s equipment on a ship however; weapons and ammunition would be flown in by Air force.

The DoD added that information on the Central African Republic would be provided in a written submission.

Mr Esau asked for information on the amounts remunerated by the United Nations on interventions in African countries.

Maj General Shoke replied that the UN pays based on resolved invoices sent to the body and when pledges are fulfilled. So far R286 million has been received from the UN. The balance would be paid when pledges are received; however the funds are paid to National Treasury and released to DoD after approval has been received.

Mr Esau requested an update on the Hydrographic and Military Discipline Bills. He specifically asked for information on the cases that were pending and people that needed to be held accountable. He further asked for more information on the disciplinary measures put in place at the SANDF, whether the cases in the SANDF had been dealt with and progress made on officers convicted.

The DoD replied that both bills are both in progress. The Hydrographic Bill incorporates bilateral agreements with the Department of Transport. The DoD is busy with the white paper and the social implementation aspects of the Bill are being worked on by the Defence Commission (DefCom). The military is pursuing the Military Discipline Bill; some questions are still been raised by Ministry of Justice at DefCom level. All information relating to cases and disciplinary measures will be addressed within a written report.

Mr Esau asked for an update on Operation Thusano.

The DoD replied that Operation Thusano is an on-going project and an update will be given during the implementation performance review.

Mr Esau looked at flying and sea licenses and asked what measures were put in place to sustain and maintain standards so that DoD could retain critical personnel.

The DoD replied that the issue of sustaining and maintaining standards by complying with Air and Sea flight hours would be addressed during the implementation review.

Mr Esau expressed concerns about human resource rejuvenation and asked for feedback on the implementation of age reduction to 32 years for reserves.

The DoD replied that the issue of human resource rejuvenation is on-going and would be addressed during the implementation review.

Mr Esau asked what the oversight function of SA’s defence attaches were. He also asked for an analysis of the costs and benefits.

The DDG replied that defence attaches are deployed to perform specific tasks. Oversight functions are performed by Defence Intelligence. Defence intelligence visits the foreign missions to ascertain that standards are maintained. The costs and benefits analysis would be provided in writing.

Mr Esau requested an update on procurement challenges of medical stock levels used by the SANDF personnel. Why are contracts cancelled? How does deviation occur in procurements?

The CFO replied that the DoD is in the process of decentralising procurements from central offices in Pretoria as this had resulted in waste of time. The issue of medical stock levels used by the SANDF personnel is on-going and would be visited during the implementation review.

Mr Esau asked for a progress update on medical technologist as outsourcing costs are high. In addition, he requested for information on partnership issues at the Dockyard.

Major General Shoke replied that the Dockyard needs a full strength of 1000 personnel but only 400 are available presently. He further reported that local personnel repaired a sea vessel (Amadola) in South Africa. Efforts are being made to use skills available in the country to address maintenance issues of some sea vessels. An agreement has been signed between DoD and the firm to commercialize the Naval Dockyard and the processes are being streamlined.

Mr Esau asked about dilapidated buildings.

The DoD replied that an earlier briefing on works formation and cost impacts had been presented.

Mr Esau noted that in the audit report the accounting officer submitted incomplete and incorrect reports. The Committee was not assured that standards were followed in the DoD’s internal audits. The Committee needed to monitor reports on SDA’s expenditure. He therefore asked for the guidelines given in auditing SDA’s expenditure, when it was monitored who does the oversights and when it was vetted by State Security Services (SSS).

The DDG treplied hat the SDA account could be monitored in a closed session due to the sensitivity of the documents.

Mr Marais suggested that the DoD should find ways of incorporating disabled personnel into the country's sporting teams. He requested information on the exit mechanisms of disabled personnel.

Maj General replied that there are on-going discussions with National Treasury on exit mechanisms of disabled personnel.

Mr Esau commented that commercialising Naval Dockyard had safety implications because Donnell had foreign involvement.

The DDG replied that working with Donell on the Naval Dockyard will not compromise SA National Security as DoD will ensure compliance on security. However written information would be provided by the appropriate officer.

Mr Esau requested for an update on National Youth Service (NYS).

The DDG reported that the DoD worked with Department of Rural Department on the NYS by offering a module on discipline. This function is carried out when the latter makes requests.

The Committee resolved that outstanding written answers to questions should be submitted to the Committee within 14 days. All commitments, matters raised and comments should be addressed the next time the dignitaries from DoD meet with the Committee.

The Chairperson thanked and discharged the dignitaries from DoD and continued with the rest of the deliberations as stated in the agenda.

Defence Budgetary Review and Recommendations Report

The Chairperson tabled the Budgetary Review and Recommendations Report for consideration. The Committee looked at the observations and recommendations.

The recommendations included the following:

-DoD to fast track the completion of the Defence Review implementation plan.

-DoD to attend to matters raised by the audit Committee urgently.

-DoD to continue with efforts to fund and rejuvenate Defence reserves’

-DoD to facilitate ways of incorporating disabled personnel into the countries sport team.

-DoD to ensure compliance on security issues raised by the Committee on Dockyard commercialisation with Donnell’s foreign partners.

-DoD to submit a report in writing the amount spent on peace keeping, on certain procurement and supply change management standards of its budgetary expenditure, costs and benefits analysis of SA’s defence attaches deployed to perform specific tasks, information on military court cases and disciplinary methods put in place to against personnel responsible.

-DoD to provide written plans and programs on safeguarding the South African borders, Information on Central African Republic and how it hoped to sustain and maintain standards of compliance with Air and Sea license of personnel (Air and Sea flight hours).

-DoD to provide written submissions on concerns and questions raised on Air Force and Air force equipments.

-DoD commits to paying its credit service providers within the 30 days window period (raise funds for upgrading its computer system).

-DoD to finalise the Military Disciplinary Bill urged DoD to inform the Committee on when the Bill can be expected.

-DoD addresses concerns raised by the Committee on what DoD had done about the small planes that were landing in the airports near the border.

The Report was adopted after some amendments.

Closing
The meeting was adjourned.