PRESENTATION OF THE DOD ANNUAL REPORT FOR FY2006/07 TO THE PORTFOLIO COMMITTEE ON DEFENCE 16 OCTOBER 2007

1. PRESENTATION OF THE DOD ANNUAL REPORT FOR FY2006/07 TO THE PORTFOLIO COMMITTEE ON DEFENCE 16 OCTOBER 2007

2. AIM

3. To present the non-financial and audited financial performance report of the Department of Defence for the financial year ended on 31 March 2007 to the Portfolio Committee on Defence.

4. SCOPE AND APPROACH

5. APPROACH • CONTENTS OF THE REPORT • STRATEGIC OVERVIEW • ANNUAL PERFORMANCE AGAINST PLAN FY2006/07 • DEFENCE RESOURCES • DEFENCE OUTPUTS • FINANCIAL PERFORMANCE FY2006/07 • CONCLUDING REMARKS • QUESTIONS AND ANSWERS

6. APPROACH

7. THE ANNUAL REPORT IS A VERY DETAILED HENCE LENGTHY REPORT ON DEFENCE PERFORMANCE DURING FY2006/07 AND CANNOT BE DISCUSSED IN DETAIL IN THE TIME AVAILABLE. THIS PRESENTATION WILL BE AT THE STRATEGIC LEVEL AND WILL CONSIST OF THREE PARTS: A REPORT ON THE STRATEGIC OUTPUTS, CHALLENGES AND INITIAVES TO IMPROVE PERFORMANCE DURING FY2006/07. FEEDBACK ON PCD QUERIES ON DOD REPORTS. QUESTION AND ANSWER SESSION. CONCLUDING REMARKS.

8. CONTENTS OF DEPARTMENT OF DEFENCE ANNUAL REPORT

9. Chapter 1: Strategic Overview Chapter 2: Defence Administration Chapter 3: Force Employment Chapter 4: Landward Defence Chapter 5: Air Defence Chapter 6: Maritime Defence Chapter 7: Military Health Support Chapter 8: Defence Intelligence Chapter 9: Joint Support Chapter 10: Special Defence Account Chapter 11: Organisational Structure and Human Resources Management Appendix A: Status of the SANDF Reserves B: Defence Diplomacy C: Report on Foreign Aid Assistance

10. STRATEGIC OVERVIEW

11. The DOD derives its constitutional mandate from section 200(2) of the Constitution of the Republic of South Africa, 1996 (Act No 108 of 1996). Giving substance to this constitutional mandate is the Defence Act, 2002 (Act No 42 of 2002), the White Paper on Defence, 1996, Defence Review, 1998 and other national legislation that guide the execution of the defence strategy of the DOD. MANDATE

12. Effective defence for a democratic South Africa. DEFENCE OUTCOME

13. The DOD ensures alignment of its priorities with Government priorities through its planning framework, as well as through its operations. The DOD planning framework is located within the Government's planning framework. The outcomes of the Lekgotla, articulated through the State of the Nation Address and the Budget Vote, are the basis for the the DOD’s short-and medium term activities guided by the Minister's priorities and guidelines. ALIGNMENT WITH CABINET AND CLUSTER PRIORITIES

14. Defending and protecting the sovereignty and territorial integrity of the Republic Supporting the people by maintaining cost-effective defence capabilities in order to be prepared and equipped to participate in operations as ordered and funded by Government. Contributing to global security through promotion of regional and continental security and Government diplomatic initiatives through regional and global defence cooperation and participation in peace missions. Ensuring good governance of the DOD through effective, efficient and economical management, administration and accounting within the regulatory framework and Government policy. MINISTER OF DEFENCE’S OBJECTIVES

15. Ensuring continuous improvement of defence capabilities by means of quality command and control, developing the people and improving the equipment and facilities of the DOD. Implementing the 'One Force' concept by adequately resourcing and utilising both the regular and the reserve components, as well as rejuvenating and rightsizing the human resource composition of the DOD. MINISTER OF DEFENCE’S OBJECTIVES

16. DEFENCE’S FOCUS IN FY2006/07 • Preparing defence capabilities; • Employing defence capabilities to meet operations and commitments ordered by Government; and • The restructuring of the DOD.

17. The successful execution of ordered commitments 4 747 members were deployed in peace support and humanitarian relief operations in Burundi, Comoros, Côte d'Ivoire, the DRC, Ethiopia, Eritrea, Lesotho, Madagascar, Mozambique, and Sudan. Over 1 300 members were deployed daily internally in support of the SAPS (borderline control and rural safeguarding). Support was provided to other departments to combat, inter alia poaching and swine fever. The responsibility for borderline control of the international borders with Namibia, Botswana and Lesotho was handed over to the SAPS. DEFENCE’S KEY ACHIEVEMENTS IN FY2006/07

18. Defence bilateral structural meetings were conducted with 19 countries to enhance bilateral relations and defence-to-defence cooperation. The DOD participated in 15 SADC, ISDSC and other multinational interaction activities. African Aerospace and Defence Exhibition, AAD 2006, was presented in Cape Town from 19 to 24 September 2006. In excess of 2 100 learning programmes were presented by the DOD attended by more than 51 800 learners – confirming that the DOD is a learning organisation. An additional 192 DOD members attended foreign learning opportunities. DEFENCE’S KEY ACHIEVEMENTS IN FY2006/07

19. The impact of legacy systems on efficiency resulting in qualified financial statements, eg the FMS is 23 years old, some of the logistics systems are older than 30 years The delayed implementation of the National Treasury’s initiatives of the Financial Management Improvement Programme (FMIP) and the Integrated Financial Management Information System (IFMS). Balancing the allocated resources with government commitments (including matching the diplomatic “footprint”). Inadequate funding for infrastructure maintenance. DEFENCE’S KEY CHALLENGES IN FY2006/07

20. Ensuring strategic alignment through the updating of the White Paper on Defence, Defence Review (Defence Update 2007). The restructuring of the top structures of the Department to improve direction and management, including the restructuring of the command and management bodies. Further development of the implementation of the“Balanced Scorecard” as a performance management tool. Measures taken to ensure internal, external and allocative efficiency, eg Projects LOQUACIOUS, LEGADIMA, GEJIMA and the DEIS Masterplan. KEY INITIATIVES TO IMPROVE PERFORMANCE IN FY2006/07

21. Increase in the numbers of MSDS and other members (a total of 5 053). Increase in the capacity of the conventional Reserve Force. Implementation of the Works Regiment concept by the SA Army supported by the Service Corps. KEY INITIATIVES TO IMPROVE PERFORMANCE IN FY2006/07

22. ANNUAL PERFORMANCE AGAINST PLAN FY2006/07

23. DEFENCE STRATEGIC DIRECTION

24. HIGHLIGHTS Issued ministerialpriorities for the FY2006/07. The Minister provided strategic direction to the finalisation of the White Paper on Defence, Defence Review (Defence Update 2007). Service and Divisional Chiefs were compelled to continuallly review their State of Readiness in line with the MOD theme” Are we ready”. Identified gaps in terms of State of Readiness had to be addressed as per MOD instruction. Focused attention was directed to the ongoing transformation of the Military Justice System as well as restructuring of the Department for greater effective and efficiency.

25. HIGHLIGHTS … The MOD gave direction to the transformation of the Defence Industry in conjunction with the Minister of Public Enterpises. Contributed to global security by giving political direction to and participating in the peace processes in the DRC, Burundi and Ivory Coast and provision of Military Observers in Sudan, Ethiopia and Eritrea. Contributed to deepening of democacy in Africa through series of initiatives notably supporting election in Comores, Madagascar and Lesotho.

26. DEPARTMENTAL DIRECTION

27. HIGHLIGHTS Guidelines of the Minister of Defence were analysed and translated into clear DOD deliverables. Ensured alignment of DOD priorities, plans and processes with broad Government priorities, trajectory, strategies, plans and programmes. Interrogated and optimised the funding priorities which were presented to National Treasury for consideration during the MTEC hearings.

28. HIGHLIGHTS … Extensive progress has been made in realising the Minister’s directive regarding the transformation of the Department to provide for optimal functionality in terms of internal, external and allocative efficiency. Implemented perfomance improvement mechanisms in order to optimise compliance with Government prescripts and accountability. These included: DOD activities refocused in terms of DOD strategic objectives and performance against plan. Ensuring strategic alignment through the updating of the White Paper on Defence, Defence Review (Defence Update 2007).

29. HIGHLIGHTS … Modernisation of the Landward programme. The restructuring of the top structures of the Department to improve direction and management, including the restructuring of the command and management bodies Further development of the implementation of the“Balanced Scorecard” as a performance management tool. Measures taken to ensure internal, external and allocative efficiency, eg Projects LOQUACIOUS, LEGADIMA and the DEIS Masterplan.

30. CHALLENGES Balancing the allocated resources with government commitments. Impact of the delayed implementation of the IFMS on the integration of the Departmental systems.

31. DEFENCE POLICY

32. HIGHLIGHTS Ongoing Policy advice was given to the Department at different management forums. Bilateral and multilateral defence agreements with other states were drafted, negotiated and concluded . Ten new bilateral agreements were concluded, one was renewed, one Note of Exchange and one letter of Assist were concluded. Spearheaded the DOD structure management, refocusing of Command bodies, as well as the systemic perfomance management through the Balanced Score Card.

33. HIGHLIGHTS … Coordinated the development, consultation and finalisation of the update of the White Paper on Defence (1998) and Defence Review (1996) which was approved by the Minister on 11 December 2006. The Update was also tabled at the DGs National Security Council and is scheduled to serve before Cabinet soon.

34. CHALLENGES Increased demands on the DOD from other departments, DFA in particular. Organisational readiness to ensure successful implementation of the Balanced Score Card. A targeted orientation programme is planned for the current financial year, which is focused on senior management as well as services and divisional planners. Insufficient staff levels.

35. DEFENCE RESOURCES: HUMAN RESOURCES

36. HIGHLIGHTS The establishment of an integrated Human Resources Division. Ongoing improvement in racial and gender representivity. Ongoing rejuvenation of the rank/age profile of soldiers through the MSDS system. Ongoing capacity building of the Conventional Reserves. Review of HR Strategy 2010 commenced during the period.

37. CHALLENGES The Mobility Exit Mechanism has not been fully successful at lower levels. Retention of operational and technical skills. Containment of HR expenditure as a percentage of Total DOD expenditure whilst trying to improve conditions of service. Improvement of the health status of members. Accreditation of DOD learning opportunities and registration of DOD learning providers.

38. Macro Personnel Flow ito Equity (Race) Total = 77858

39. Macro Personnel Flow ito Equity (Race) … Total = 77518

40. Macro Personnel Flow ito Equity (Race)… NOTE. The number of Africans appointed during the financial year increased by 1.96%.

41. Macro Personnel Flow ito Equity (Gender) Total =77 858

42. Macro Personnel Flow ito Equity (Gender) … Total =77 518

43. Macro Personnel Flow ito Equity (Gender) … NOTE. During the financial year there was an outflow of male employees (-1.11%) and an inflow of female employees (0.68%)

44. DEFENCE RESOURCES: MATERIEL RESOURCES

45. HIGHLIGHTS Deliveries of aircraft and vessels (SDP). Disposal of Mirage F1 systems to Gabon. Transfer of the Naval Dockyard to Armscor. The development of a South African Defence-Related industry (SADRI) Strategy in consultation with the Departments of Public Enterprises and Trade and Industries as well as AMD has reached an advanced stage. The Departmental Technology Strategy has been fundamentally revised, including the impact of establishing the Defence Evaluation and Research Institute (DERI) as directed by the Minister of Defence, and is being reviewed in final draft.

46. HIGHLIGHTS … The Defence Materiel Division participated actively in the strategic planning process aimed at reviewing the SCAMP to align it with the materiel requirements captured in the Defence Update and to accommodate supporting technology investments as well as optimal contracting of SADRI. The Defence Materiel Division was directly involved in the restructuring of DENEL, ensuring optimal contract award to DENEL subsidiaries and top management intervention in optimising performance on existing contracted obligations.

47. HIGHLIGHTS … Delivery of a clean audit on the Special Defence Account without any qualifications or emphasis of matter. Roll-out of the e-procure electronic procurement system. Refinement of alternative service delivery processes to enhance the efficiency of outsourced contracting support to the DOD

48. CHALLENGES Inadequate funding for maintenance of all weapons systems. Late delivery of weapons systems (Hawk, LUH, GBADS). Totally inadequate funding for infrastructure maintenance. Clearing outstanding audit queries and qualifications pertaining to deviations from procurement practices and asset management. Creation of structures and required procedures/practices to accept the new duties and powers under the assigned GRC functions of the newly created Def Mat Div.

49. CHALLENGES … Staffing of key posts within the division and retention of competence to ensure matériel management service excellence. Completion of the Armscor restructuring process. Completion of the DERI implementation process and subsequent activation of approved structures and mandate. Completion of the required ammunition disposal function.

50. DEFENCE RESOURCES: INFORMATION