DOD and DMV 2019 Quarter1 performance; Report back on Committee recommendations in 2019 budget Report; with Deputy Minister

Meeting report

Department of Defence (DOD): First Quarter Report

Maj Gen F M Ramantswana, Chief: Military Policy, Strategy and Planning, South African National Defence Force (SANDF) took the Committee through the presentation and focused on legislative requirements, an analysis of the DOD’s performance indicators, and a strategic overview of quarter one. The Department reported against 78 public performance indicators (PPI) in the 2019/20 financial year, and the 24 PPI, or targets, in the first quarter. 

General Ramantswana said that subsequent to the formal briefing on the state of the Department to the President on 15 January 2019, the Department had been instructed to develop a revised plan to address shortages and challenges in a manner that recognised the national fiscal challenges. The Department continued to contribute towards the development of the Revised Plan to Arrest the Defence Decline (RPADD) through:

• Focussing on the immediate challenges to current operational commitments to be resolved in the short term;
• Interventions that would contribute to the continued viability of the defence and related industries necessary for the enablement of the defence function in the future, and
• Pursuing three corporate options in the RPADD for the consideration of principals.

The funding trajectory of the SANDF had continued to decline in real terms. The stability of the budget allocations to the defence was pivotal to enabling long term viability of the SANDF and the defence industry that supported it. The implementation of the Defence Review of 2015 remained totally dependent on an improved funding trajectory to the Department.

It had planned and budgeted for an average personnel strength of 74 901 for 2019/20 at a cost of R32 billion, resulting in a shortfall of R2.9 billion. The on-going reduction in the compensation of employees (CoE) budget imposed by National Treasury presupposed that the Department ought to reduce its personnel strengths and implement a rejuvenation strategy. However, the budget ceiling did not take account of ordered commitments, current operations and exercises for which trained unformed personnel were required to assure success. The Department would maintain an average human resources strength of 75 500, together with planned reserve force man days of 2 693 048, to execute its mandate over the medium term expenditure framework (MTEF) period.

The Denel Land Systems division was not performing as contracted. The cash flow problems of Denel had a negative impact on a number of projects within the landward and aerospace domains. Serious delays were expected on the projects which had contracts with Denel.

With regard to SANDF operational successes, in the first quarter eight weapons were recovered; 2 629 illegal foreigners were apprehended; 162 criminals were arrested; 48 stolen vehicles were recovered; 3 477kg dagga was confiscated; 818 live-stock were recovered; R8.6 million contraband goods were confiscated; and 929kg precious metals confiscated. In support of national departments, the SANDF operational concept for safety and security support was to employ multi-rolled military capabilities on request. It provided disaster aid and relief assistance.

With regard to mandate achievement, the Department achieved 14 out of 24 targets, representing 58.3% of targets in the first quarter. As at 30 June 2019, its planned expenditure for the first quarter was 24.4% of allocated budget (R50.513 billion), while actual expenditure was 23.2%. With regard to compensation of employees, the National Treasury’s MTEF allocation letter dated 14 December 2018 indicated that budget limits would continue to be set in the 2019Appropriation Bill, so the CoE Vote (ceiling amount) was set at R29.2 billion. The projected expenditure in terms of CoE at the time of presentation was R32.1 billion, and a shortfall of R2.9 billion was projected for 2019/20 financial year. The National Treasurer would be approached during the Adjusted Estimates of National Expenditure (AENE) to increase the CoE ceiling by means of reprioritisation within the DOD’s baseline.

Discussion

The Chairperson sought clarity on how far a discussion had progressed between the National Treasury, the Department and the Presidency with regard to the funding constraints and on the decision taken a long time ago that the DOD should build its own capital works. The limitation had been that the budget for capital works was with the Department of Public Works (DPW), and that had to be transferred to the DOD. What was the implication of this on performance? 

Mr J Maake (ANC) asked who had declined, or refused to lift, the ceiling for the compensation of employees. Members should know why. If the SANDF had 75 000 employees and the budget allocated was for 60 000, how did they expect 15 000 employees to be paid? These people were already employed. If they were paid, of course the Department would face over-expenditure. This expenditure would be classified by the Auditor General as “unauthorised expenditure.” He wanted to understand the thinking of the National Treasury on the refusal to fund employees.

Mr S Marais (DA) said he recognised the challenges the Department was facing, but it seemed that there would be no solutions to them. The Department had been facing the same challenges for a long time. He sought clarity on where money overspent came from; why the Armaments Corporation of South Africa (ARMSCOR) was not mentioned in the presentation; when there would be a rationalisation between ARMSCOR and the research institutions; what could be a working solution to the persistent or recurring challenges faced by Denel; and on the SANDF functions of border safeguarding that had been transferred to the police. Referring to a number of hours flown per year, he asked what expenditure on this was, what the projected costs could be, and whether chartered aircraft were included. Regarding the payment for capital and for financial assets, he commented that nothing had been said about the defence capabilities. Finally, he said that the 2015 Defence Review was not realistic.

The Chairperson welcomed Mr Marais’ inputs and comments, and remarked that responses should focus on financial performance and their implications. General questions would be responded to in the closing remarks. 

Mr N Matiase (EFF) remarked that he worried about the decline in the budget allocated to research and innovation. The situation was worrying simply because the role of research and innovation was very important for the improvement of SA’s sovereign capabilities. If Denel and ARMSCOR were not engaged in research, it compelled everyone to ask questions on how the sovereign capability strategy would be fulfilled. How would military security be achieved? He suggested that both Denel and ARMSCOR should be visited by Members. Referring to border safeguarding, he sought clarity on whether a deliberate decision had been taken not to report on this and, if not, asked for updates on border safeguarding with respect to the west coast line. He remarked that Members should understand the cash flow implications of the compensation of employees in order for the Committee to make interventions. He asked why the SANDF was engaging with the North Atlantic Treaty Organisation (NATO) when they knew its impact on geopolitics, and asked why the intake of 1 986 recruits could not be drawn from reserve force. He said there were no general questions to be responded to  -- these general questions were operational questions that could reveal the capabilities of the SANDF.

DOD’s response

Mr Siphiwe Sokhela, Chief Financial Officer, responded that there had been a meeting of the Ministers of Defence, Public Administration and Finance, at which they had decided there should be a meeting of Directors General (DGs) to agree on short and long term plans. The short term was to lift the ceiling in terms of employment, and the long term was to introduce a rejuvenation plan. In the DGs meeting, there were unfortunately no staff members from the National Treasury. As a result, the National Treasury did not approve the lifting of the ceiling when it was approached in writing. The message from Treasury was that the Department would incur irregular expenditure if the current employees were paid. On the rejuvenation plan, the Department received a letter stating there would be a third cut in the compensation of employees budget. The plan was that there would be a 5%, 6% and 7% cuts over the MTEF. These cuts would obviously have an impact on the operational side. It was made clear that there would further cuts over the next MTEF. The rejuvenation plan would, in that context, not add value to the DOD because it needed to review its human resources policy to be able to develop a rejuvenation plan.

For that reason, the Department had written to the National Treasury and stated that it would not be able to meet the deadline for the rejuvenation plan. There was a proposal for all departments to have a meeting to discuss the MTEF, followed by a meeting of the security cluster. Here, they should have discussed the budget allocations. The meeting was to be fast tracked to find a date on which it could be scheduled. The meeting had not yet taken place. The issue of compensation of employees was critical in all respects. The Department needed to employ professionals. How could this be done if there were no funds? The DPW had been requested to transfer the budget to the DOD, and the transfer had not yet taken place. The departments still had to engage. However, the DPW had to act on the basis of instructions. The National Treasury had to invite these two departments to discuss the transfer. The Department had not transferred funds for goods and services to the compensation of employees. However, Members should know that people were already employed and had to be paid.

The Chairperson said the Department should respond in writing to Members on the impact of the cut in budgets allocated to goods and services, for its transfer to the compensation of employees.

Mr Sokhela referred to the refusal to uplift the compensation of employees ceiling, and said that when they were talking officials to officials, they were of the view that the uplifting of the ceiling could be done under the rejuvenation plan.  Of concern was that the rejuvenation plan could not be implemented.

Gen Ramantswana said that if one looked at risks in the Department, one would find that 80% of risks were relating to, or were caused by, financial constraints. Financial constraints had an impact on research and innovation, job opportunities, and other institutions depending on the Department’s budget. The cut on budget was R5 billion. The solution was to move away from the cuts proposed in the MTEF. Regarding the borders, he indicated in the presentation that they knew what was required to protect the borders -- technology and financial means were required.

Gen Ramantswana said ARMSCOR was a contracting agent which had highly qualified employees who could provide quality assurance. Its research efforts had been affected by the budget cut. On the question of superiority of the army in the region, he said that the issue of research and assessment were a key to sovereign capabilities. On the pool of reserve force available, the young and fit ones would be recruited to the regular force. They would be considered in the intake. On the coastal line, he said that reporting on the deployment was outside of the first quarter report framework. The matter would be reported on in the next quarter.

Further discussion

Dr B Holomisa (UDM) remarked that the issue of the defence budget was frustrating. This had been discussed in Parliament since 2010. Members should draft a memorandum to be submitted to the Cabinet. People were crying because violence was on the increase and the borders were porous. The Cabinet should review its decision on cutting the defence budget. He was of the view that the meeting between ministers had been unnecessary and had been ineffective in nature because ministers were not accounting officers.

Mr T Mmutle (ANC) said his understanding was that despite the challenges, the Department ought to find a way of resolving them. He sought clarity on the under expenditure of R118 million, and remarked that the under-spending meant that they had requested a bigger budget than they needed. Commenting on compensation of employees, he said the Department had to balance its budget, in that there could be over-spending on some programmes and under-spending on others.

Mr Maake said that in order for the Committee to show its seriousness, the Chairperson should make a request in the National Assembly to explain the impact of the budget cut on the SANDF’s operations. This ought to be done urgently, to alert the National Assembly that the country was in crisis. Otherwise, if something went wrong, the people of South Africa would blame the Committee and describe it as a useless entity.

DOD’s response

On the administration under-expenditure, Mr Sokhela responded that the Department had received invoices from the DPW without supporting documents. The under-spending had been due to the invoices that were not honoured. While goods and services fell in the economic classification, administration was a programme of the Department. This implied that there were goods and services that were procured under the administration programme. There had been an overspending of R122.227 million on general support as a result of the payment of completed modules for the implementation of the Allied Codification Publication 1. On questions relating to the state of expenditure, the Department was still busy engaging the National Treasury. The issue of the budget constraints ought to be resolved -- if not, there would be other risks.

Mr M Shelembe (DA) remarked that the issue of overspending on the compensation of employees was not something new, but something that has been happening for a while.

Mr Sokhela felt that expenditure had to be monitored and evaluated from time to time.

Deputy Minister Makwetla said the budget cut had dire consequences. These consequences had to be discussed to find a way of mitigating them, and there would be engagement with the National Treasury and the President. The suggestion of Dr Holomisa to submit a memo to the Cabinet would be considered, depending on the outcome of these engagements. He added that the reserve force was composed mainly of people who had exited from the regular defence force, and therefore could not be recruited.

Portfolio Committee for Defence recommendations: Progress report

Lt Gen (Rtd) Derrick Mgwebi, Acting Director General, Department of Military Veterans (DMV) took the Committee through the progress report on recommendations raised on 3 July 2019 during the interaction with Committee regarding the 2019/20 annual performance plan (APP) and budget allocation.

He said that during the appearance of the DMV before the Committee, Members had made comments and statements, and had enquired about various matters which could not be responded to or addressed during the session. The DMV had made an undertaking to respond in writing to all the outstanding questions. It had responded to the 15 questions. (See attachment).

Discussion

Mr Mmutle sought clarity on the question related to the mandate to investigate how dependents of military veterans could be assisted, once the military veterans had passed on. He said that the DMV should provide a programme on how it would implement the recommendations. On the question dealing with the cooperation between the DMV and the South African Local Government Associations (SALGA), he remarked that the Department should establish a programme and framework for its implementation. He expressed his concern about military veterans who were dying every week while there was no willingness to speed up their assistance to be enjoyed whilst still living.

Mr Mathias said that the progress report on the recommendations provided the Committee with the baseline information. Next year, the Committee should have a programme to meet with military veterans and some of military veterans’ organisations. It should speak to the military veterans in order to get their views and opinions on the interventions they needed.

Mr Maake, referring to the question dealing with the establishment of the DMV’s provincial office, remarked that municipalities should also give provide space and personnel to occupy those offices. On the question dealing with the accessibility of health services, he said he was not satisfied with the response. Military veterans should not be taken to public hospitals, because there were no special benefits in taking them there. They would not be enjoying a special status. Special benefits would be enjoyed if they were to be taken to private hospitals. He added that indigent military veterans who were discharged from hospitals were not taken care of, and asked who looked after them when they were discharged.

Ms A Beukes (ANC) asked what the Department was currently doing about housing military veterans. It looked as if military veterans were forgotten in this regard.

Mr M Shelembe (DA) said that there were municipalities in which one might not find military veterans. Did the Department have records of where military veterans could be found? Had they established a database on military veterans?  He remarked that the SALGA could help in identifying where they could be found.

The Chairperson said that the DMV would report on first quarter together with second quarter. There was no time left for the Department to take the Committee through the report and Members to engage with it.

Members agreed.

DMV’s response

Lt Gen Mgwebi responded that the Department had established a database of military veterans. This also included information on their families or dependents, unless a military veteran was not on the database. The particulars of all those who applied for housing were on database. A dependent was defined as a spouse and a child under 25 years of age.

On the issue of SALGA’s cooperation, there had been engagement at a higher level, and as a result, there was a need to be specific regarding the implementation of executive decisions.

Referring to military veterans and their associations, he commented that military veterans formed various associations. These associations lacked effective structures. The manner in which they conducted themselves was not up to the Department’s expectations. In fact, they faced challenges of funding.

Regarding the accessibility of public hospitals, Lt Gen Mgwebi was of the view that they were no problems in receiving health services in public hospitals. Military veterans had expressed their view of favouring access to military hospitals, and this was what the DMV was advocating. He added that there were no funds to transport military veterans back from home from hospitals. However, if a person was unable to go back home, he/she could be assisted by the Department. In essence, if military veterans were sick, they were transported whenever they could not travel on their own.

Lt Gen Mgwebi responded that the matter of the provincial office had been sitting with the Department for some time. Using the database, the Department could establish where military veterans stayed or lived. A high number of military veterans were in Gauteng, followed by the Western Cape and the Eastern Cape. The Department wanted to map out the skills they possessed so that it could assist in placing them.

Committee Minutes

The minutes of 3 July 2019, 4 July, 25 August and 11 September were considered and adopted without further amendments.

2019 Third Term Programme

The 2019 third term programme was considered and adopted without amendments.

The meeting was adjourned.