SA Navy’s repair and maintenance of Frigates and Submarines; Status Update on Projects BIRO and HOTEL; with Deputy Minister

Meeting report

The Chairperson acknowledged the presence of Deputy Minister Thabang Makwetla on the platform and requested the Committee Secretary, Ms Nandipha Maxhegwana, to record the apology received from Minister Thandi Modise.

Lt Gen F.M Ramantswana, Chief of Staff, SANDF, said he was representing the Acting Secretary of Defence who was attending to a family bereavement.

The Chairperson called on Dr Wilhelm Janse van Rensburg, the Committee Content Researcher, to present the two-page summary of previous discussions pertaining to the agenda items.

Summary of previous discussions
Dr Janse van Rensburg said problems around the achievement of sea hours are highlighted in the declining targets from 2015/16 to 2021/22. The target of 12 000 sea hours per year was adjusted to 10 000 and later to 8 000. The actual sea hours achieved decreased from 10 000 in 2015/16 to 6 800 in 2020, keeping in mind the Covid-years. Although it stabilised in 2021 to 7 000 it still missed the lower target of 8 000 sea hours. The reason for not achieving the targets was mainly due to the lack of progress on maintenance projects. Logistic support capability remained fairly stable for 2018/19 but the most recent allocation reflects an increase for the next two years.

On 15 February 2023, ARMSCOR reported on the status of the major vessels:

Frigates
SAS Amatola is currently docking;
SAS Spioenkop, repairs to be completed within one month of receipt of spares;
SAS Isandlwana is on ad hoc maintenance for repairs on the mast; and
SAS Mendi is operational.

Submarines
SAS Manthatisi is currently docking;
SAS Charlotte Maxeke is in the refit process; and
SAS Queen Modjaji 1 is undergoing preservation and refit planning activities.

No specific information was available on Projects BIRO and HOTEL. The aim of the summary was for Members to compare the information to the presentation from the SA Navy.

SA Navy presentation
Vice Admiral M Lobese, Chief, SA Navy, said the presentation was an update on issues that the SA Navy was asked to provide.

Rear Admiral B.K. Mhlana, Deputy Chief, SA Navy, said the aim of the presentation is to present the plan to refit the Frigates and Submarines and to provide an update of the status on Projects HOTEL and BIRO.

Frigates Status
SAS Amatola was commissioned in 2006, to be decommissioned in 2036. Refit 1 was scheduled to commence in 2012 and was partially completed by 2015. The 2018 start date for Refit 2 was revised to 2021 but no work has been done to date. The mid-life upgrade (MLU) scheduled to start in 2024 had been revised to 2027. The 2030 date for Refit 3 had been revised to 2033.

SAS Isandlwana was commissioned in 2006, to be decommissioned in 2036. Refit 1 and Refit 2 was scheduled to start in 2012 and 2018 respectively. No work has commenced to date. The MLU is scheduled to start in 2024 and Refit 3 in 2030.

SAS Spioenkop was commissioned in 2007, to be decommissioned in 2037. Refit 1 and Refit 2 was scheduled to start in 2013 and 2019 respectively. No work has commenced to date. The MLU is scheduled to start in 2025 and Refit 3 in 2031.

SAS Mendi was commissioned in 2007, to be decommissioned in 2037. Refit 1 and Refit 2 was scheduled to start in 2013 and 2019 respectively. No work has commenced to date. The MLU is scheduled to start in 2025 and Refit 3 in 2031.

Submarines Status
SAS Manthatisi was commissioned in 2006, to be decommissioned in 2038. Refit 1 was partially completed in 2014. The MLU that was due to start in 2022 has not yet commenced. Refit 2 is scheduled for 2030.

SAS Charlotte Maxeke was commissioned in 2007, to be decommissioned in 2039. Refit 1 scheduled for 2015 had not been completed. The MLU is scheduled for 2023 and Refit 2 for 2031.

SAS Queen Modjaji 1 was commissioned in 2008, to be decommissioned in 2040. Refit 1 scheduled for 2016 had not yet commenced. The MLU is scheduled for 2024 and Refit 2 for 2032.

Rear Admiral B.K. Mhlana explained that the SA Navy was unable to do the refits due to the lack of parts and spares required to do preventable maintenance. Only SAS Queen Modjaji 1 was partially operational. The maintenance costs are too high to be funded through the operating budget. Due to poor maintenance, the vessels would not be able to reach their lifespans. The additional funding worth R1.4 billion from National Treasury was ringfenced for work on SAS Charlotte Maxeke and SAS Queen Modjaji 1. The dockyard was lacking the capacity to complete the maintenance work hence the funding provides the opportunity to source the services of a competent contractor.

Project Hotel Status
The key project involves the acquisition of Hydrographic Capability for the SA Navy. The effective date of the contract is December 2017. The initial delivery date of September 2022 was revised to January 2024.

Project Biro Status
The acquisition of Patrol Capability for the SA Navy is key to the project. The effective date of the contract is January 2018. The initial delivery date of February 2022 was revised to February 2026.

(See Presentation)

Discussion
The Chairperson said his takeaway from the presentation regarding Projects BIRO and HOTEL is that they appeared to be on schedule after facing delays due to Force Majeure. The outlook seemed positive that contractors would deliver by the revised dates. The Committee will hold the SA Navy accountable for the delivery dates. He was cautious about the delivery of the repairs and maintenance on the Frigates and Submarines. The SA Navy emphasised that only if a competent contractor with a proven track record is appointed, it would be able to meet the delivery dates. He agreed that there was no time for trial and error and work must start as soon as possible. But he acknowledged that funding to fully fit and ensure that the Frigates and Submarines survive their lifespans was inadequate.

Mr S Marais (DA) commended the SA Navy for the good progress on Projects BIRO and HOTEL. He asked if the second patrol vessel had been put to water. He wanted to know why the refit of patrol vessels in the Naval Base by ARMSCOR was lagging behind the refits done by Damen Shipyard Cape Town contractors. He recalled previous unit costs of R750 million and R500 million to refit and upgrade a Frigate and Submarine respectively. He questioned the escalation of the costs to more than R1 billion per vessel and asked why the cost to refit a Submarine is more than that of a Frigate. He enquired about the extent that SAS Mendi was fully serviceable. He asked how the SA Navy would respond to search and rescue missions in the Southern Oceans or any of our waters. He proposed a visit to the Damen Shipyard in Cape Town. He emphasised the strategic importance of the navy and pledged the commitment of the Committee to ensure that the SA Navy is fully resourced. He sought clarity about the nature of the handover of the Project HOTEL headquarters and whether it was located in Silvermine or Simonstown.

Mr D Ryder (DA, Gauteng) welcomed the positive reviews on the refits. He requested a breakdown of vessels that are serviceable in terms of domestic requirements and channel duties. The financial woes of the Department are closely tied to the staffing structure of the SANDF. He asked if staff numbers are reduced during protracted periods where assets are out of the water and beefed up over time when their services are needed. He sought comfort that taxpayers’ money is not wasted on people who are not performing the tasks that they were trained to do.

Mr T Mmutle (ANC) wanted to understand why a penalty of more than R2 million, related to the BIRO project was levied, given the approval of the Force Majeure to extend the deadline. He asked about the underlying agreements which facilitate the advance payments for Projects BIRO and HOTEL and if payments were done according to the prescripts of the law. He sought assurance that the money was not only going to international companies but that local historically disadvantaged local industries are also considered as beneficiaries of the projects.

The Chairperson asked if Mr Mmutle wanted the SA Navy to respond to his questions considering that ARMSCOR is the process owner of contractual agreements. He enquired about the timelines for refitting the SAS Charlotte Maxeke and if a contractor had been appointed.

Lt Gen Ramantswana appreciated the positive comments about the presentation. He proposed that questions about contractual issues and financial arrangements for Projects HOTEL and BIRO be referred to ARMSCOR who have been managing the contracts on behalf of the SA Navy. He drew attention to previous engagements with the Committee where he explained that when the Frigate and Submarine agreements were signed in 1999, the allocation was based on 80% acquisition and 20% for procurement of spares. In terms of international standards, the 80/20% allocation is an anomaly because 20% was never going to be sufficient to secure the life span of the vessels / platforms. The spare parts that were bought in 2 000, when the building phase started, did not last five years. The problems which started at the time, are evident in the current day knock-on effects. At present, the SA Navy is not able to undertake any maintenance work due to not having the required spare parts. On a recent visit to Pakistan, he observed that their depots are fully stocked with refit spare parts. Prior to 1994, the Defence Force depots were similarly fully stocked due to sufficient funding at the time. Since 1994, the government has not been able to fund the life support of the vessels. The minimum stock levels should not be less than 60%. The lead time for production of spare parts is one year.

On the serviceability of vessels / platforms, Lt Gen Ramantswana replied that none of the Frigates and Submarines are operational because of the defects that the vessels were presenting. The vessels would be operated at risk and lead to a maritime disaster if used in the current state because it is not fit to go to sea. The SA Navy is attempting to keep the SAS Mendi afloat by maintaining the hull integrity. He appreciated the allocation by National Treasury and thanked the Committee for championing the campaign on behalf of the SA Navy. The ARMSCOR Dockyard does not have the capacity to provide services. A Rejuvenation Plan was developed following the 2009 strategic review of operations in the ARMSCOR Dockyard. But ARMSCOR did not capacitate itself and is relying on the SA Navy to fund its operations. The money allocated to ARMSCOR three years ago was used to replace the skills lost due to the retirement of artisans. A group of 62 artisans was recruited which constitutes the Submarine Repair Workgroup. ARMSCOR is insourcing this capacity to refit SAS Charlotte Maxeke and for future refits that would not be dependent on the services of contractors. Contractors had not yet been appointed for the SAS Charlotte Maxeke and SAS Queen Modjaji I. ARMSCOR had been unable to complete the work on the SAS Manthatisi which started in 2014, hence the emphasis on the appointment of a professional and experienced service provider to work with the Submarine Repair Workgroup to finalise the work.

Rear Admiral Mhlana confirmed that the second Inshore Patrol Vehicle (IPV) was in the water but would soon be taken out to do underwater work. He said the costs of the refits would become clear after the bids from identified service providers is received. R300 million was spent on the partial refitting of the Frigate, SAS Amatola between 2015 and 2016. The expectation is to cover significant aspects of the Combat Suite with the funding received from NT. Capacity would have to be sourced externally because the original manufacturers are based outside the country and the system is highly technical. The costs could not be confirmed until the contractor is identified. In terms of Southern Ocean rescues, he replied that it had been done a number of times but that was a long time ago. With three of the four Frigates non-operational, the SA Navy was no longer able to reach the deeper oceans because suitable vessels are needed to reach the unforgiving Southern Oceans. Hence requirement regulations for offshore patrol vehicles are still relevant. Because spare parts are no longer available, it needs to be manufactured and procured through the system, with a lead time of 18 months. He felt it was unfair to expect the army to operate in this manner and for staff to be judged as incompetent when they find themselves in this situation. In 1994, the SA Navy inherited depots with abundant spare parts but when the new ships were acquired, provision was not made for a baseline budget. The SA Navy is expected to manage shipyards with no spares.

Rear Admiral Mhlana confirmed that the Hydrographic Office is based at Silvermine. Hydrographic capability for the SA Navy was introduced with the acquisition of Project HOTEL. Although the oceans are being covered adequately, reliance is placed on the Air Force because the SA Navy lacks response capability. Responding to the staffing matter, he replied that staff members are gainly employed and utilised as simulators on maintenance projects. The SA Navy was working hard to maintain fighting skills but the set-up was not allowing for staff to be released and recalled later when the ships are ready. He assured the Committee that government money is not being wasted and that it takes time to maintain the capability for three-dimensional warfare. On finance matters, he explained that the SA Navy receives briefings during visits to contractors but communication with the contractors is the responsibility of ARMSCOR.

Lt Gen Ramantswana said the concerns about spares availability was not a recently detected matter. In 2002, he pointed out the risk of the 80/20% allocation during a meeting in Germany with the Chief of the Navy at the time. Not enough resources had been allocated to maintain the vessels after it was delivered. In that meeting, he recommended that the political head should be engaged to mitigate the risk. But 21 years later, there is still no solution to the problem. He appreciated the R1.4 billion allocation by NT but feared that it was not enough to provide for the required maritime defence. R8.5 billion was needed to upgrade the Frigates and Submarines and to avert disaster. He pleaded with the Committee to whisper to NT, the risk associated with not funding the SA Navy. R200 million was allocated for product support but this amount was insufficient and unstainable to secure the 30-year lifespan of the vessels / platforms. The IPVs would be in the same position as the Frigates and Submarines if the required funding is not provided.

The Chairperson said the Committee has the interest of the SA Navy at heart and would follow up on the concerns raised. He extended an invitation to the SA Navy to enlighten the Committee about the implications of cutting down on multi-national exercises and possible interventions to ensure the preparedness of the SA Navy. He noted that the 60% minimum stock level referred to by the Chief of Staff is not reflected as a target in the Annual Performance Plan. Stock levels were discussed in general terms with ARMSCOR but it was time to address the matter in specific terms on a micro level. The SANDF has similar problems with stock levels. He deemed it necessary to focus on the lack of a baseline budget for maintenance because without it the new projects BIRO and HOTEL would suffer the same fate. The Committee would be focusing on funding to increase dockyard capacity to undertake some maintenance programmes. He was dissatisfied with the length of time it took to partially refit the SAS Charlotte Maxeke and would follow up on the matter with ARMSCOR. The Committee welcomed the reintroduction of the Repair Work Group and advised that the SA Navy invests in the group of new artisans to build long-term capacity as part of the maintenance programme. He pledged the Committee’s support for the SA Navy and agreed to an oversight visit to the dockyard in Durban to assess the progress of the vessels / platforms.

Mr Mmutle asked if the Chairperson was suggesting that transformation issues should be directed to ARMSCOR.

The Chairperson replied that ARMSCOR is managing all contractual matters, including transformation.

Mr Mmutle said his question about penalties on project BIRO was not responded to.

Lt Gen Ramantswana replied that penalties and all contractual matters should be referred to ARMSCOR who is the contracting party on acquisitions and procurement.

Deputy Minister’s closing remarks
Deputy Minister Makwetla remarked that it was evident from the comments of the Chief of the Navy that a meeting with ARMSCOR was needed to have a proper handle on the work and to ensure that naval systems are made available, even with limited funds. The huge deficit between funding and the needs of the SA Navy was clear but the issue cannot continuously be bemoaned. Discipline was needed in terms of decision-making to optimise opportunities that would give better mileage with limited financial resources. He asked if the challenges with the commercial contracts relating to project HOTEL had been resolved. He suggested that this was one of the issues that ARMSCOR should give feedback on.

The Chairperson thanked the team of the SA Navy and colleagues of the Department of Defence for their time and the Chief of Staff for the frank engagement. He also thanked the Deputy Minister for the support and for dealing with issues on the Ministerial level.

International Study Tour
The Chairperson called on Dr Janse van Rensburg to inform Members about the latest developments regarding the study tour.

Dr Janse van Rensburg said subsequent to the approval of the tour and having obtained the relevant quotes, the visit had to be switched to visiting Germany first and then Turkey. But the ambassador in Turkey advised that a visit at the scheduled time would not be feasible because of Turkish public holidays. Given that only one week had been granted for the study tour, the alternative would be to extend the stay in Germany.

Mr Marais agreed with extending the period in Germany. A visit to the two Denel partners, with a direct relationship to Germany, could be added to the agenda. They would be well prepared to receive the Committee and Members could learn a lot from them.

Mr K Motsamai (EFF) supported the extended visit to Germany. The German army was doing well and learning from them could assist with solving the problems with our army, especially regarding the treatment and housing of Military Veterans.

The Chairperson agreed that the general welfare of past soldiers is a matter that needs to be addressed. He apologised to Ms Legwase for not including her on the study tour. He assumed that she would be going on tour with the Home Affairs Committee and they similarly assumed she would be going on tour with the Defence Committee. It was not possible to include Ms Legwase at this stage because the Speaker insisted that only nine Members would be allowed to go on tour. Arguments in support of increasing the number to 11 had to be advanced before the application was approved. He doubted that a further increase in the number to 12 would be accepted. He requested Mr Mmutle to enquire if the Home Affairs Committee would be able to accommodate Ms Legwase on their tour.

Minutes
The Committee adopted the minutes of 11 May 2023.

Mr Ryder noted that previous minutes reflected both the House in Parliament and the political party of each Member. The minutes before the Committee was only reflecting the name of the political party.

The Chairperson requested the Committee Secretary to check if it was a requirement to indicate both.

Ms A Phetlhe (ANC) noted the incorrect spelling of her surname.

The Committee Secretary corrected the spelling.

The meeting was adjourned.