Armscor Amendment Bill & Defence Special Account Amendment Bill: Department briefings & adoption

Meeting report

SECURITY AND CONSTITUTIONAL AFFAIRS SELECT COMMITTEE
7 September 2005
ARMSCOR AMENDMENT BILL AND DEFENCE SPECIAL ACCOUNT AMENDMENT BILL: DEPARTMENT BRIEFINGS AND ADOPTION

Chairperson: Mr K Mokoena (ANC, Limpopo)

Documents handed out:
Department briefing on Armscor Amendment Bill
Department briefing on Defence Special Account Amendment Bill
Armaments Corporation of SA Limited Amendment Bill [B14B – 2005]
Defence Special Account Amendment Bill [B15B – 2005]

SUMMARY
The Department of Defence briefed the Committee on the Armaments Corporation of SA Limited (Armscor) Amendment Bill. This Bill would remove the Chief of the SA National Defence Force (SANDF) from the Armscor board of directors because of a potential conflict of interests. The Committee unanimously passed the Bill without amendments.

The Department of Defence then briefed the Committee on the Defence Special Account Amendment Bill, which would release the Minister of Finance from oversight of the Defence Special Account according to the Public Finance Management Act (PFMA), and bring the Defence Special Account Act in line with current legislation. The Committee unanimously passed the Bill without amendments.

MINUTES

Department briefing on Armaments Corporation of SA Limited Amendment Bill
Mr S Njikela (Deputy Director: Legal Support) presented the background to the Armaments Corporation of SA Limited (Armscor) Amendment Bill [B14B – 2005]. Armscor was a procurement agency for the SA National Defence Force (SANDF). Cabinet had approved the Armscor Bill in 2003 on condition that the Chief of the SANDF was removed from the board of directors of Armscor. The reason for this condition was that the Chief of the SANDF could experience a conflict of interests if, in his capacity as Chief, he determined the SANDF requirements from Armscor and, as an Armscor board member, he determined which companies would supply these requirements.

However, when the Armscor Bill was presented to the Portfolio Committee on Defence, the Portfolio Committee was not convinced of a potential conflict of interests in the Chief of the SANDF’s position as a member of the Armscor board of directors. Consequently, the National Assembly (NA) passed the Bill without the removal of the Chief of the SANDF from this position. When the Bill was referred to the National Council of Provinces, the Minister of Defence raised this matter again. As the NA had already passed the Bill, it was decided that the Armscor Act would be amended once it had been passed into law. The President assented to the Armscor Bill on 20 April 2004.

The proposed amendment of the Bill was the removal of the Chief of the SANDF from Section 6(1)(c) of the Armscor Act. The Minister of Public Service and Administration had also proposed that the Secretary for Defence, as Head of Department and Accounting Officer, should be removed from the Armscor board of directors. He had an obligation, according to the Public Finance Management Act (PFMA), to develop a fair and equitable procurement system. On 21 June, the Minister of Defence instructed that the Secretary for Defence should be removed from the Armscor board. As a result, the Armscor Amendment Bill would delete Section 6(1)(c) in its entirety from the Act.

Discussion
Mr Z Ntuli (ANC, KwaZulu-Natal) enquired whether the Portfolio Committee on Defence was now satisfied with the Armscor Amendment Bill. Mr Njikela replied that once it had debated the Bill, the Portfolio Committee decided not to make a decision on the Bill, but to defer to the decision of the executive.

Mr S Shiceka (ANC, Gauteng) asked whether Armscor was in a unique position as a procurement agency for the SANDF in comparison to other parastatal organisations. Mr Njikela answered that Armscor was in a unique position as it was a direct procurer for the SANDF, whereas other procurers (such as Denel) were linked to government departments (such as the Department for Public Enterprises), but were not direct procurers for these departments.

Mr B Engelbrecht (Director: Budgeting) clarified that during the budget preparation process for procurement, the Department determined the ‘user specifications’ of its requirements, and then sent these to Armscor. The Department was not ‘dictated to’ by Armscor.

The Chairperson proposed that the Committee pass the Bill. The Bill was passed unanimously without amendments.

Department briefing on Defence Special Account Amendment Bill
Mr Engelbrecht briefed the Committee on the Defence Special Account Amendment Bill [B 15B – 2005]. National Treasury had requested the amendment of the Special Defence Account Act, 1974, last amended in 1995, to comply with the PFMA. The main aim of the Bill was to release the Minister of Finance from oversight of the Special Defence Account, as the PFMA clearly stipulated the role of the Accounting Officer in relation to the Special Defence Account. A secondary aim of the Bill was to bring the principal Act in line with current legislation.

The Bill recommended three general amendments. The first was the removal of references to obsolete procedures, for example, the procedure for the Department’s Accounting Officer to enter into commitments for expenditure from the Defence Special Account (Section 1A(1)), which was no longer necessary under the PFMA. Second, the Bill would replace a number of terms: "armaments" would be replaced with "defence materiel", and "Department of State Expenditure" with "National Treasury". Third, references to Acts that had since been substituted by the Public Audit Act, the Public Finance Management Act, the Armscor Act, and the Defence Act, would be updated.

Discussion
Mr Njikela emphasised that National Treasury had proposed the Defence Special Account Amendment Bill in order to bring the Act in line with current legislation.

Mr A Manyosi (ANC, Eastern Cape) asked why the Minister of Finance had suggested amendments to the Act, and the Chairperson enquired whether the Minister of Finance wanted to distance himself from the Special Defence Account so that he would not have to answer questions about ‘the arms deal’.

Mr Engelbrecht responded that the suggestion of amendments to the Act by the Minister of Finance bore no relation to ‘the arms deal’. The Minister of Finance held that there was no need for him to be involved with the Special Defence Account as this role would be fulfilled by the Accounting Officer according to the PFMA. The Special Defence Account constituted a small percentage of the total Department budget, and the involvement of the Minister of Finance in the account was used by the apartheid regime as a means of control.

Mr Shiceka queried why the Bill did not address the matter of pensions for SANDF soldiers. Mr Engelbrecht replied that the pension fund was not part of the Special Defence Account, but was addressed under another Act. Mr Shiceka requested that the Department investigate the matter of special pensions for SANDF soldiers, and the Chairperson added that the investigation should include the grievance system for SANDF soldiers deployed in other African countries.

The Chairperson proposed that the Committee pass the Bill. The Bill was passed unanimously without amendments.

The meeting was adjourned.