NCACC Quarterly Reports; Update on IT system & litigation matter, with Minister

Meeting report

Opening remarks
Chairperson Nchabeleng remarked that Members were familiar with the issues that the National Conventional Arms Control Committee (NCACC) would present. In addition to the quarterly reports briefing, the Committee was expecting an update on the ‘famous’ court case to understand if the entity was able to join in the reversal of the decision. The matter was considered a threat to the entire defence industry. The request for information about the new IT system emanated from concerns raised in discussions with the industry. Users found the manual system of the NCACC frustrating. The new system was expected to simplify the processing of applications.

Dr Wilhelm Janse van Rensburg, Committee Content Advisor, asked if the updated concept note on the proposed study tour could be added to the agenda.

Chairperson Xaba, with the approval of Members, agreed to add the item to the agenda. He invited the Minister of Defence to make her opening remarks in her capacity as a member of the NCACC.

Minister’s opening remarks
Ms Thandi Modise, Minister of Defence and Military Veterans, confirmed that she represented the NCACC as a member and not as the chairperson. She was committed to assisting the Committee deal with business expeditiously and would be available to clarify matters when called upon.

NCACC presentation
Adv Ezra Jele, Secretariat Head, NCACC, was tasked to lead the presentation. He reported that the Deputy Minister of Trade, Industry and Competition (DTIC) had been added as an NCACC member because the DTIC contribution was needed at most meetings. Reporting was expanded to include export values as per the Committee’s request.

2022 Values at a glance:

Export permits authorised;
Quarter 1 – 127 permits valued at R833 million
Quarter 2 – 146 permits valued at R570 million

Import permits authorised;
Quarter 1 – 58 permits valued at R36 million
Quarter 2 – 74 permits valued at R74 million

Audit Outcomes
The Auditor-General adjusted the reporting period of the NCACC to coincide with the calendar year audit period. The entity received a clean audit. Matters raised related mainly to administrative glitches.

IT system
The matter related to the system not being fully digitised and not that the system was operating manually as was being reported. It is envisaged that the current system would facilitate the digitisation of the new system. Both systems were running parallel. The additional costs of R5.5 million, anticipated in the fourth quarter of 2021, had been realised after payment of outstanding invoices.

Litigation matter
The NCACC was taken to court by Open Secrets citing the Chairperson and the Minister as respondents. Part 1 of the case is uncontested due to administrative difficulties. Part 2 was pending because of a dispute. The Court was approached for the case to be handled under Case Management. Adv Bam had been appointed as the case manager. Adv Jele did not have anything further to report as the case was ongoing. He said the same entities had written to the NCACC to request clarification of the Myanmar situation. The organisations were informed that a decision was taken not to export to Myanmar. He was confident that the matter had been responded to fully. The NCACC would be ready to defend the Myanmar matter should it go to court.

(See Presentation)

Discussion
Chairperson Xaba drew attention to the judgement on Part 1 of the case which put the NCACC on favourable terms to the applicants. He wanted to know what the position was in terms of information that the NCACC was expected to deliver to the applicants. In future presentations, he asked if it was possible to specify if imports were on instruction from an organ of state. The question emanated from concerns that items were being imported even though it was available in the domestic market.

Mr S Marais (DA) sought clarity on the export of an unmanned aerial vehicle (UAV) or drone valued at R1 000, to the United Arab Emirates (UAE). The amount must be for a small part as it could not realistically be the value of a drone. He asked if it was possible to obtain statistics from Customs on actual export permits that were approved. He observed a huge difference between applications and approval of permits. He enquired if transactions in the presentation represented 100% of permit applications and permits approved or if a cut-off value had been considered. He supported the Chairperson’s request to specify whether instructions to import were coming from the departments of Police, Defence or the private sector. He wanted to know how regularly the Scrutiny Committee meetings were taking place. He supported the request for an update on the status of the Yemen court case. The default judgment would drag on for a long time and would significantly impair the NCACC and the industry.

Adv Jele explained that the Open Secrets and Lawyers for Human Rights judgment consisted of two parts. The NCACC had been dumped with a cost order because the entity did not want to participate in the Part 1 Joinder. Part 2 on the Review of Permits Application was pending. The NCACC is forced to comply with the cost order to avoid the Chairperson and the Minister being held in contempt of court. The NCACC had complied with the respondent’s request for information. A judge was appointed to deal with the matter through Case Management. The matter must be ventilated and sorted to produce the desired outcome.

Adv Jele said he understood that imports formed part of production input for the state through ARMSCOR. He nevertheless undertook to determine whether it was possible to provide a breakdown of transactions. He requested Members to consider that the approval of an application is based on the fact that the importing country would produce an end-user certificate in favour of South Africa. When the goods arrive at the destination, the receiving entity is required to provide proof of delivery or a certificate. The transaction cycle follows the path of authorisation, approval and arrival, i.e. from the shopfloor to the harbour and ending at the destination. He would find out if customs were willing to share information considering that customs do not fall under the Act that regulates the NCACC. He might have to rely on other parties for assistance. In the event that he is unable to provide the feedback, it would not be through a lack of trying. He would follow up on the value of the UAV exported to the UAE.

Adv Jele informed Members that meetings are held once a month for ten months of the year, December and January excluded. He explained that the cycle works as follows, i.e. an application is sent to the Review Department for evaluation based on a six-week cut-off date and a 14-day response period. The Scrutiny Committee meets every second Thursday and NCACC meetings occur on the last Thursday of each month. The NCACC would not meet unless the Scrutiny Committee met, allowing for a two-week gap to prepare documents. He reported that the NCACC did not have any outstanding meetings.

Mr Marais wanted to know for which period export certificates were valid.

Adv Jele replied that exports must be completed within 45 days after which certificates expire. By law, certificates must be returned and cancelled in the system to prevent duplication thereof or nefarious acts.

Chairperson Nchabeleng asked for the amount and value of ammunition imported from China. He was of the opinion that the capacity to produce our own ammunition existed in the country.

Mr Marais requested detail on import and export transactions to Russia and Ukraine for the reporting period.

Mr D Ryder (DA, Gauteng) said that if demand for exports from new areas has been noted, it should be flagged, citing the risks of increasing tensions in specific regions.

Mr Marais asked if the presentation represented 100% of all ammunition and weapon transactions or if it was restricted to certain categories. He drew attention to the case of exports to the Americas which was done through another arm of government.

Adv Jele replied that no exports took place to Russia, Ukraine, China and Taiwan. He explained the two categories of arms, i.e. weapons of mass destruction and firearms or small arms. SAPS is allowed to approve applications for small arms in quantities below ten. Small arms above quantities of ten and bullets above 20 000 units are subject to NCACC approval. Cases have been reported of applications being split below the nine or 20 000 thresholds to avoid NCACC approval. In such cases, transactions are aggregated and accounted for in total for NCACC approval. Small arms and live ammunition are included when the NCACC reports annually on a multi-lateral level, i.e. SAPS figures are included in the annual report.

Chairperson Xaba remarked that the NCACC had done well and had not disappointed the Committee.

The Minister agreed that Adv Jele had represented the NCACC well.

Adoption of Minutes

The minutes of 25 August 2022 was presented for consideration.

Mr Marais asked if the Defence Force Service Commission (DFSC) had submitted the findings on 1 and 2 Military Hospitals as per the commitment made on 25 August 2022.

A committee staff member replied that the submission had not been received.

Chairperson Xaba requested that the matter be followed up.

The minutes were adopted without amendments.

Discussion on the study tour options
Dr Janse van Rensburg presented an updated draft of the study tour concept paper. Both Defence Committees had not done a study tour since 2006. The rationale for the joint study tour is to focus on matters related to the structure and design of the South African National Defence Force (SANDF). An updated list of countries likely to be visited included Egypt, Brazil, Turkey, Germany and the United Kingdom (UK). The idea was to visit at least two countries of different economic development levels. The Committee previously decided to include Egypt as a destination. A decision has to be made on the second country to be added to the programme. Price comparisons were up for discussion. Prices for flight tickets for the period 1 to 13 December 2022 ranged between R22 000 and R47 000, with Brazil being the most expensive option. It would be advantageous to maximise information gathering by visiting three countries where travel costs fell within the price range. The proposed dates are 1 to 13 December 2022 or before Parliament starts in January 2023.

Chairperson Xaba said the presentation incorporated the discussion of the previous meeting. Two discussion points were highlighted, i.e. the countries that Members wanted to visit and the date of the visit. It would be advantageous to target the December 2022 period. If it does not materialise, then arrangements could be moved to January 2023. The options would be limited if the January 2023 date is chosen as the first option.

Mr Marais complimented the Content Advisor for the detailed work. He agreed that Egypt must be one of the countries to be visited. It would be incredible value for money to visit Turkey as the country was in our sphere in terms of enthusiasm for the defence industry. He was open to including either Germany or the UK but was unsure of Germany’s support for South Africa. He agreed that the December 2022 date would be most advantageous.

Mr Ryder agreed with Mr Marais on the countries to be visited but preferred the visit to take place in January 2023, considering that the NCOP normally has to pass the medium-term budget during the December period. He would however abide by the majority decision.

Mr T Mmutle (ANC) said there was unanimous agreement to visit Egypt. He supported Turkey as the second country. Although Turkey was purchasing from South Africa, it was simultaneously developing its own arms to not become dependent on South Africa. He preferred Germany as a third country to visit based on the positive indicator to rejuvenate their defence force by involving young people. He was sceptical about the December 2022 option. The ANC was preparing for its conference and he did not want to be outside the country for this crucial event.

Chairperson Xaba had no objection to Egypt, Turkey and Germany as countries to visit. The date options remained open. He would be reviewing the NCOP agenda to determine the scale of events.

Mr Marais said it was important to liaise with embassies of the three preferred countries to coordinate the availability of counterparts.

Chairperson Xaba requested Dr Janse van Rensburg to consider that January might be an extension of the holiday season in some countries or the holiday season might start early in December. The Committee would not want to inconvenience its counterparts.

Mr Marais cautioned that the Committee should not take too long to get approval. He learnt from past experience that Parliament’s machinery moves slowly.

Chairperson Xaba reminded Dr Janse van Rensburg to take all variables into account.

Chairperson Nchabeleng thanked Members for the engagement.

The meeting was adjourned.