Report of the Portfolio Committee on Defence on the annual report and financial statements of the Department of Defence for financial year 2007/2008, dated 20 November 2008:
The Portfolio Committee on Defence, having considered the Annual Report and Financial Statements of the Department of Defence (DOD) for 2007/2008, reports as follows:
The Portfolio Committee on Defence has scrutinised the 2007/2008 Annual Report of the Department of Defence. Departmental hearings on the Annual Report of the DOD were held on 18 and 19 November 2008.
2. OVERVIEW OF PROGRAMME PERFORMANCE
The Department indicated that the outputs of the DOD are achieved by means of the following nine programmes:
· Programme 1 – Administration
· Programme 2 – Landward Defence
· Programme 3 – Air Defence
· Programme 4 – Maritime Defence
· Programme 5 – Military Health Support
· Programme 6 – Defence Intelligence
· Programme 7 – Joint Support
· Programme 8 – Force Employment
· Programme 9 – Special Defence Account
The Committee was furthermore informed that, in order to make the cost of the main programmes more visible, the allocations of the Special Defence Account have been made to the respective recipient programmes, although the acquisition of strategic capital equipment remains the responsibility of Chief Defence Matériel.
The Department reported that it successfully executed most of its mission, namely the provision, management, preparation and employment of the defence capabilities. The following general issues relating to the functioning and service delivery of the Department were noted:
The Committee commended the Department on the reporting method that was followed in the Annual Report. Problems and challenges were stated clearly and failure to meet certain targets was explained in every programme.
The key achievements per programme were reported as follows.
2.1 Programme 1: Administration
The purpose of this programme is to conduct the policy development, management and administration of the Department. The following issues, achievements and challenges relating to the programme were reported:
2.1.1 Ministerial Direction
The DOD cooperated with the Portfolio Committee on Defence in its oversight function over the Department, and extensive work was done with the costing of the force design and the migration plans in order to obtain the Credible Force Design.
2.1.2 Departmental Direction
The Committee expressed grave concern about the delay in the presentation of the Defence Update to Parliament. This issue has been raised at various occasions. In the 2006/07 Annual Report it was stated that the Minister of Defence has provided direction on the finalisation of the White Paper on Defence as well as the Defence Review (Defence Update). This process has started in 2004. According to the 2006 Estimates of National Expenditure, the update was supposed to have been completed during 2006. The 2007/08 Annual Report indicated that the DOD is now positioned to take the Defence Update to the Minister in April 2008 and, with his authority, onwards to Cabinet and Parliament. It is recommended that the process of finalising and approval of the Defence Update by the Department and the Executive needs to be fast tracked and Parliament should be informed about the contents of the Update as a matter of urgency.
The Committee furthermore indicated that it is problematic that the Military Bargaining Council (MBC) and Military Arbitration Board (MAB) are currently not functioning, resulting in a breakdown of communication between the DOD as employer and the military unions. The tensions between the DOD and the military unions are very serious and needs to be managed with extreme caution and sensitivity. It is recommended that the Department should investigate alternative structures and/or procedures to replace the current defective grievance structures. The possibility of formalising legislation regulating military unions should be pursued as a matter of urgency.
The Committee also expressed concern about the fact that the Prohibition of Mercenary Activities and the Regulation of Certain Activities in a Country of Armed Conflict Act (Act 27 of 2006) will not be in operation until such time that Regulations are promulgated. This legislation has been signed into law by the President in December 2007, and the delay in the operationalisation of the Act is of grave concern and should be addressed as a matter of urgency. The Department indicated that the Regulations are in the process of being drafted and that it will be completed by the end of FY 2008/09.
2.1.3 SANDF Command and Control
The SANDF successfully executed its ordered commitments, i.e. six peace support operations, six general military assistance missions and three internal employments. Continued progress was also made with the reshaping, restructuring, re-equipping and repositioning of the SANDF.
2.1.4 Government Information Technology
14 Defence Information Communication Technology Architectures (DICTA) and Strategic Studies were completed to provide strategic direction for the management of the Information and Communication Services (ICS) in the DOD. The Defence Enterprise Information Systems (DEIS) Regulatory Framework Solution Project has been activated.
2.1.5 Financial Services
Interventions were initiated within the human resources, procurement, logistics and financial management components to address the lack of internal controls that resulted in the AG’s audit qualifications and emphasis of matter items.
All four frigates have been delivered to the SA Navy; two Agusta A109 light utility helicopters were delivered and accepted; the second submarine was delivered; the new rapid deployment logistical vehicles for the airborne forces and the rapid deployment reconnaissance vehicles for the Special Forces were commissioned; the upgraded Mamba vehicles, new light machine guns and automatic grenade launchers were handed over to the SA Army; and the upgrade of the SA Army Casspir Mk III was successfully completed.
The Committee expressed concern about the inefficient expenditure of the SA Navy’s and Air Force’s acquisition budgets. The Department indicated that this was caused by a delay in the deliverance of some of the Navy and Air Force’s ordered equipment, including surface-to-air missiles, Gripen aircraft and the light utility helicopters. The Committee was, however, assured that this will not have any serious impact on the combat readiness of the two Arms of Service.
2.1.7 Inspection Services
Various internal audits were executed and a large number of SANDF members participated in fraud awareness campaigns.
2.1.8 Military Strategy and Planning Office
The Military Strategy was revised and approved; the overarching Support Concept for the DOD was approved and adopted as part of the Military Strategy; and the SANDF Readiness Forum was established as a sub-committee of the Military Command Council.
2.1.9 Defence Legal Services
The shortage of skilled military legal practitioners and trained interpreters hindered performance. However, the approval of the establishment and funding of a number of interpreters and court orderly/protector posts by the Minister of Defence will bring relief.
2.1.10 Defence Reserve Direction
A total number of 14
Reserve infantry companies and two engineer troops were successfully deployed
internally as well as externally and respectively to the Democratic Republic of
the Congo (DRC) and
A total number of 500 former Army Territorial Reserve (ATR) members were transferred to the Army Conventional Reserves and retrained, and the first small meaningful exit from the MSDS to the Reserves took place in December 2007. However, difficulties were experienced with motivating these members to remain in the Reserves, as they are seeking full-time employment in the SANDF’s regular force.
The risk exist that, prior to 2011, the non-infantry Reserve units and formations of the SA Army, which received limited budgets, will fall below critical mass.
2.1.11 Defence Foreign Relations
A new Defence Mission was opened in
2.1.12 Property Management
All claims for accommodation charges, leases, and municipality services by the National Department of Public Works (NDPW) were paid in full and on time by the DOD. However, 13 percent of the allocated amount for municipality services was not claimed for by NDPW and these funds were reallocated to assist in the financing of the Air Force Base Waterkloof runway.
2.2 Programme 2: Landward Defence
The purpose of this
programme is to provide prepared and supported
landward defence capabilities for the defence and protection of
· The nearing of obsolescence of certain landward defence systems.
· The aging rank/age profile of its members.
These risks and challenges were managed as follows:
· A monetary incentive scheme has been developed for technical personnel and similar schemes are being investigated to retain scarce skills in other musterings.
· Since no additional funding was provided to address the shortage of ammunition, the Army concentrated on utilising simulation. However, this can only partially compensate for training with live ammunition.
· Additional funding was provided by Parliament to specifically address the operational readiness of the Army’s vehicle fleet.
· The conventional capability has been restricted to the minimum to make more funds available for ordered commitments.
· Additional funding was provided by Parliament to increase intakes of MSDS members in order to rejuvenate the Army with young and healthy soldiers.
The Department reported that the SA Army met most of the required force levels. Approximately 4 200 Infantry members were deployed externally within several rotations. In addition, 24 Regular and six Reserve companies were provided for internal deployments, and during Operation Bata, an additional 62 Regular and Reserve platoons were deployed on short notice.
The Corporate SA Army Performance Review System to monitor and manage corporate performance was developed with a view to improve internal control. SA Army Seminar 21 was successfully conducted and explored the future trends, threats and realities impacting on the landward capability.
In terms of re-skilling, skills shortages and the rejuvenation of the Army, the following was reported:
The Department furthermore indicated that the plans for the modernisation of the landward systems have been completed and that the Army is still awaiting approval of funding for its modernisation.
The Committee noted that the unavailability and serviceability of prime mission equipment for the SA Army seems to be a recurring obstacle to the achievement of set targets and mandates within various sub-programmes. The Department admitted that this is a challenge, but indicated that it will be addressed by the upgrading and acquisition of new prime mission equipment for the landward forces in future (as allegedly specified in the Defence Update 2025).
2.3 Programme 3: Air Defence
The purpose of this
programme is to provide prepared and supported air defence capabilities for the defence
and protection of
The Department reported that the SA Air Force’s main risks and challenges are as follows:
· The underfunding of the operating budget continues to have a negative effect on the optimisation of the newly acquired systems and the continual decline of main air systems to conduct external operations.
The deterioration of facilities
remains a major concern. Insufficient funding and dolomite subsidence in the
· Inflation reached extreme levels, with the cost of aviation fuel rising by 96 per cent in six years, and the total aviation inflation being in the region of 15 per cent per annum. Whilst modest escalation adjustments are made to the annual budget allocation, more than two thirds of the operating budget is affected by the high aviation-related escalation.
· With regard to skills and capacity, the shortcomings in service delivery were mainly due to critical shortages of qualified technicians as a result of over 200 resignations in the financial year.
· The loss of pilots and technical ground crew due to resignations also hampers the implementation of the new aircraft systems. Coupled with underfunding, this situation has led to the operating of aircraft systems at levels far below the optimum.
· Static and mobile navigation and surveillance systems are old and have become progressively difficult and expensive to maintain. This has affected aircraft system integrity negatively.
These risks and challenges were managed as follows:
· In an effort to overcome these challenges in the most efficient and economical way, senior management embarked on creating solutions, such as improved accountability, better efficiency and improved career management to effect skills retention.
· While some progress was made with the retention of scarce skills through improving incentives for aircrew and technicians, the challenge remains due to the strong attraction and poaching from the public and private sectors as well as some foreign countries.
· Reserve Force pilots have been appointed to supplement the loss of skilled personnel, but this has only had a limited effect on the overall problem.
The Department indicated that the Air Force met the majority of its force employment flying hours and reported the following achievements and issues relating to the programme:
The Committee expressed concern about the fact that only 42 of the targeted 68 pilots, and only 4 of the targeted 12 navigators, qualified during the year. The Committee furthermore indicated its unease caused by the fact that the scheduled servicing of aircraft is falling behind as priority is given to repairing unserviceable aircraft. The Department reported that the SANDF and Denel are cooperating in this regard to address the backlog.
The Committee also enquired about the decommissioning of the Cheetah programme and the operationalisation of the Gripen system. The Department indicated that the Gripen system will only be fully operational in 2012 and undertook to brief the Committee in more detail on the decommissioning of the Cheetah programme, and the effect thereof on the Air Force’s combat readiness, during the combat readiness workshop scheduled for 25-26 November 2008.
2.4 Programme 4: Maritime Defence
The purpose of this programme is to
provide prepared and supported maritime defence capabilities for the defence
and protection of
The following achievements and issues relating to the programme were reported:
The Committee, in general, noted with concern the loss of skills and the high vacancy rates within the DOD and recommends the following:
2.5 Programme 5: Military Health Support
The purpose of this programme is to provide prepared and supported medical combat support elements and services. The Department indicated that the South African Military Health Services (SAMHS) fulfilled its international obligations and supported all external and internal deployments, and also played a leading role in operation Bata during the labour action in the Public Service.
The SAMHS’s main risks and challenges are as follows:
· The shortage in healthcare practitioners, including those with specialist skills, remains one of the main risks prohibiting the SAMHS from fully achieving its targets as set out in the Strategic Business Plan.
· Hospitals, facilities and equipment are deteriorating rapidly.
· The high rate of medical inflation is putting financial strain on the SAMHS budget.
· The unacceptable high workload of health professionals has a detrimental effect on the outputs and service delivery of the SAMHS as a whole.
These risks and challenges were managed as follows:
· Progress has been made with the Repair and Maintenance Programme (RAMP) at the three military hospitals. Increased funds were aligned in other units and force structure elements to upgrade and repair facilities.
· The high rate of medical inflation was managed through the implementation of the Military Medicine Code Lists; full participation in the National Treasury rate term contracts for pharmaceuticals and medical consumables; and increased utilisation of generic pharmaceuticals and products.
· In order to reduce the high workload of healthcare professionals, the SAMHS endeavoured to shorten and expedite the appointment of healthcare professionals who had been recruited for employment in the DOD. In addition, several healthcare facilities have instituted working hours for their personnel in shifts in order to meet the demands for service delivery. Managers and staff officers are also performing clinical duties at facilities which are experiencing a shortage of personnel.
The Department reported that the SAMHS reviewed its approach to the recruitment and training of healthcare practitioners, and initiated a new drive to increase the benefits to military healthcare practitioners. This resulted in a number of benefits, including a new dispensation for the nursing profession; an increase in training capabilities; and the upgrading of the different healthcare facilities such as military hospitals.
The Committee congratulated the SAMHS on the progress they have made in addressing the various challenges.
2.6 Programme 6: Defence Intelligence
The purpose of this programme is to provide a defence intelligence and counter-intelligence capability. The Department indicated that the programme’s main risks and challenges are as follows:
· The loss of skilled personnel and the staffing of posts with intelligence-qualified personnel remains a challenge.
· The intelligence collection environment is challenged by technological advances that require expensive solutions.
· The poor and deteriorating condition of the Defence Intelligence (DI) Headquarters building will remain a challenge until DI is relocated.
These risks and challenges were managed as follows:
· In order to retain skills, a workgroup had been appointed to investigate the viability of an intelligence dispensation as well as salary disparities between the different intelligence organisations. The planned new dispensation has however not been achieved during the reporting period and the work will continue in the new financial year.
· National Treasury made funds available for the procurement of intelligence-collection technology, but the project was stalled on the instruction of the Minister of Defence.
· Defence Intelligence was involved in the preparation for a Public-Private Partnership (PPP) process to work towards a new headquarters building. The process was however halted and the process for a new headquarters building will start over.
The Department furthermore reported on the following achievements:
Strong cooperative relations were forged with African
countries, and assistance was rendered to the DRC,
· DI was part of the establishment of a Border Integrity Intelligence Centre.
· Collection of information was improved.
· DI was involved with the updating of the African Battle Space analysis.
· Specific language training was initiated.
· DI provided support to SANDF operations and exercises as required.
· Two African female colonels were promoted to brigadier general.
The Committee expressed its concern about the fact that the PPP process for the new DI Headquarters has been halted and urged the Department to attend to this long standing challenge as matter of urgency.
2.7 Programme 7: Joint Support
The purpose of this programme is to provide joint support capabilities and services to the Department. The following achievements and challenges relating to the programme were reported by the Department:
2.7.1 Command and Management Information Systems (CMIS)
CMI met all its force employment requirements, and supported 11 operations and 10 exercises. It also participated in the African Standby Force; the African Union Computer, Command and Control Information Systems; the Inter-State Defence and Security Committee (ISDSC) Telecommunications and Information Systems work group; and the SADC Brigade Planning Element workshops.
The Disaster Recovery Plan for the corporate Information and Communication Technology (ICT) equipment systems was developed and tested, and the migration plan for the CMIS Service Centres to the Air Force, the Navy, DI and the Military Police Agency was completed.
A total number of 136 MSDS members were trained.
2.7.2 Logistic Agency
The Committee expressed concern with regards to the deterioration of facilities and the maintenance backlog. It is recommended that the Department should provide Parliament with an updated report on the state of facilities and the maintenance backlog, as well as plans to eliminate this backlog.
The Committee furthermore conveyed its unease with the slow progress made with regards to the disposal of ammunition. It is recommended that the Department should provide Parliament with a report, indicating the details regarding the disposal of ammunition.
2.7.3 Military Police
The force employment requirements were met, and the backlog of 7 521 cases from the previous year were reduced to 6 788; the first DOD Anti-Crime Conference was held; 86 members of the Military Police were deployed externally; a Nodal Point on Anti-Criminality was established at the Military Police Division Headquarters; the MOD approved the new Divisional structure; and 10 members were transferred to the SAPS, whilst 58 MSDS members were recruited.
The Committee probed the Department about various media reports that have surfaced on the loss of vehicles and equipment in the SANDF. The Department indicated that the allegations are being investigated. It is recommended that the findings of the internal investigation should be reported to Parliament as soon as it has been finalised.
2.8 Programme 8: Force Employment
This programme provides for the employment of defence capabilities, including an operational capability, to successfully conduct all operations, and joint and multinational military exercises.
The Department reported that all primary force employment commitments were met. However, a number of issues are a cause of concern, i.e. the serviceability of equipment, the health of members, the lack of junior leaders, and the inability to sustain flights. The Department indicated that corrective plans are in place to address these challenges.
The Committee took note of the Department’s planned assistance to the South African Police Services during the 2010 World Cup Soccer tournament. It is, however, a concern that no additional funds have been made available to the Department for this purpose. It is recommended that the Department should engage with stakeholders in order to secure additional funding.
3. STATUS OF THE SANDF RESERVES
The Department reported that the implementation of the Reserve Force Strategy that was approved in 2004 received a boost in 2007 at the Reserve Force Symposium when the Strategy was publically evaluated and endorsed. The role of the Reserve has allegedly been confirmed in the Defence Update as providing the majority of the conventional landward defence capability; providing support to the people; supplementing peace support operations; and maintaining a pool of specialist skills.
It was furthermore indicated that service in the Reserves continues to be popular, with the total number of members volunteering approaching 18 000 out of a force design of 70 052 per the last draft of the Defence Update. At the end of 2007, the first significant transfer of 1 800 MSDS members to the Reserves occurred.
The Committee commended the Reserve Force with the progress made during the reporting period and confirmed that it will continue to support the efforts of the Reserves. It is recommended that in future, issues relating to the Reserves should form part of the main body of the Annual Report and should not be an appendix.
4. FINANCIAL PERFORMANCE
4.1 Report of the Audit Committee
The Department reported that the Audit Committee has identified four issues of concern, i.e. significant internal control weaknesses resulting in non-compliance; the levels of skills retained within the DOD; the high vacancy levels and the time it takes to fill vacancies; and the information technology architecture that needs considerable investment.
The Portfolio Committee expressed its concern about the attendance of Audit Committee meetings by members of the Audit Committee. It is recommended that the attendance of members (and more specifically the reasons for non-attendance) should be clearly indicated in the Annual Report. If members of the Audit Committee are unable to regularly attend the meetings, their membership should be reconsidered, and the Secretary for Defence, as the Accounting Officer, should attend all meetings of the Audit Committee.
The Committee furthermore observed that the Report of the Audit Committee has not been signed. It is recommended that the Chairperson of the Audit Committee should in future take care to sign the Report.
4.2 Report of the Accounting Officer
With reference to the Report of the Accounting Officer, the Department indicated that the strategic issues relating to the Department include the rightsizing of the DOD; defence capabilities; DOD infrastructure; redundant and surplus equipment; the Defence Act; the White Paper on Defence and the Defence Review; the health status of the SANDF’s members; asset protection in the DOD; the DOD Shared Value System; the Materiel Life Cycle Management Policy; information systems; alignment of core and support processes with the PFMA imperatives; the Reserve Force; Education, Training and Development Management; and the Defence Related Industry.
With regards to risk management, it was reported that the Risk Management Strategy is part of the total management process and that it is reported on a quarterly basis. Action plans were also developed to mitigate or minimise these risks.
The Committee expressed its concern about the unforeseeable and unavoidable expenditure resulting from the additional requests for peace support operations.
The Committee furthermore indicated that the following issues relating to the report of the Accounting Officer needs to be addressed:
4.3 Report of the Auditor General on the Financial Statements and Performance Information of the Department of Defence and the Special Defence Account
The DOD received a qualified audit report from the AG. This is the sixth consecutive year that the Department receives a qualified audit report. The Committee expressed its concern in this regard and urged the Department to address the issues raised by the AG as a matter of urgency.
The Department reported that the basis for the qualified opinion was as follows:
In all these cases, the Department indicated that comprehensive corrective action plans were introduced. According to these plans, five of the seven qualifications will be cleared by the end of FY 2008/09.
The Committee commended the Special Defence Account on receiving an unqualified AG audit report.
5. SUMMARY OF COMMITTEE RECOMMENDATIONS
The following is a summary of the recommendations with reference to the 2007/2008 Annual Report and Financial Statements of the Department of Defence:
o The attendance of members (and more specifically the reasons for non-attendance) must be clearly indicated in the Annual Report.
o If members of the Audit Committee are unable to regularly attend the meetings, their membership must be reconsidered.
o The Secretary for Defence, as the Accounting Officer, must attend all meetings of the Audit Committee.
· Accounting Officer’s Report: The following issues relating to the report of the Accounting Officer needs to be addressed:
o Explanations relating to virements must be accompanied/supported by the relevant numbers/figures.
o Memoranda of Understanding relating to peace support operations must be audited in order to determine the effect thereof on the Department’s overall budget.
o The Committee takes note of the problems with regards to the Integrated Financial Management System and recommends that the Department must discuss possible mitigating measures in detail with National Treasury.
Although the following issues were not pertinently stated during the departmental hearings on the Annual Report, it should be taken into consideration:
· World Cup Soccer: Whereas the issues relating to the World Cup Soccer are not a primary function of the DOD, the Department should ensure that it is adequately represented at all meetings. The DOD should furthermore ensure that it is ready for any eventuality, as the SANDF will be the last resort for critical intervention.
· Military Veterans: Whilst this report is silent about the categorising of persons, the DOD has a responsibility towards military veterans.