Defence budget: Don’t hold your breath

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Finance minister Trevor Manuel will coming Wednesday deliver what many expect will be his last annual budget. Manuel’s fiscal conservatism is the bane of the new guard left leadership of the ruling African National Congress. His allocation for defence will likely not win him any friends in that quarter either.      
 The Department of Defence (DoD) will be hoping for a substantial increase military spending to build what it considers a credible force design (CFD).

The department`s latest Annual Report says the Defence Update 2025 policy review document that must still be approved by Cabinet sees a need to boost defence budget from the current about R30 billion to R41.3 billion in the 2011/12 financial year.

The military`s present allocation amounts to about 1.2% of Gross Domestic Product that compares well with the International Monetary Fund cap of 2% and the US, which is spending 4%. In more measurable terms, the defence force that plays a major part in realising SA`s foreign policy, receives just five cents out of every rand the government spends.

The bulk of the other 95 cents is spent on health, education and policing, according to subject experts, often to disappointing effect.

The report says the budget increase will allow the SA National Defence Force (SANDF) to “largely attain” a CFD by 2025 and fully realise it by 2031. The CFD will require spending to reach R45 billion in 2017 and R46 billion by 2023 “when it should stabilise”. The Defence Update also provides for the expansion of the SANDF regular force from 70 000 to 88 000 and the reserves to 70 000.

Rationale

Most of the extra funding and personnel will be channelled into the “landward capability” meaning the SA Army, the Special Forces and that slice of their sister services and divisions that act in their support.
“The SANDF`s landward forces will be modernized and renewed, with first prioritisation being the light and motorised forces, airborne forces, intelligence and engineer elements used mainly in the support of international commitments and concomitant air and maritime inter- or intra-theatre lift.”

The last is a reference to the Air Force`s Project Continental, the acquisition of eight Airbus Military A400M transport aircraft and the Navy`s Project Millennium, the purchase of a “strategic support ship” capable of carrying about a dozen helicopters and about 800 soldiers, their equipment and vehicles.
“The second prioritisation will be the conventional and mechanised elements of the SANDF`s landward
capability, such as mechanised infantry, artillery, air defence artillery and armour.”

The annual report adds that the increase in spending and personnel is necessary in light of SA`s “significant role in the promotion of continental peace and security… Whereas the 1998 Defence Review envisaged that external commitments would be limited to the deployment of a single battalion (approximately 1 000 soldiers), force levels deployed in support of international commitments already exceed 4 500 soldiers.”
Other options

Should only limited funding be forthcoming a second option would be to partially attain the CFD.

Under this model, which neither the annual report nor the Update recommends, the SANDF “will have to focus on those landward programmes that are critical for the fulfilment of SA`s international obligations and commitments as ordered by government” such as the SANDF Operational Reserve, the requirements for UN and AU peace missions, humanitarian and disaster assistance and the contributions for the SADC brigade and AU Standby Force.

This option places “emphasis on the SANDF`s motorised infantry battalions, airborne and other rapid entry forces, military engineering capabilities, tactical intelligence, logistics support systems, military health capabilities and other appropriate combat support elements for the abovementioned forces.
“The mechanised elements (armour, mechanised infantry and artillery) in the landward conventional capability would have been retained in survival mode with life extension programmes and little direct renewal of prime mission equipment.”



If no money can be found for the CFD, the SANDF will have to shrink to a size that “is both viable and sustainable over the long term.”
“The SANDF would be partially able to meet ordered commitments. However, significant risks and limitations would exist,” the report warns.
“The best possible output within the budget, with the best balance of forces, would be sought. Certain defence capabilities are reduced and other defence capabilities are completely lost.”

The plan, the reality
Option 1 was possible but not probable at the time the document was drafted (for the sake of argument up to mid 2008). The post-Polokwane return to the left in the ruling party made big increases in social spending more likely than disbursements to defence. That was also before the great economic implosion.
Manuel`s budget surplus of last year is now a fond memory.
Government will be spending more this ear than it will collect in tax, but it is likely that frigates will sprout wings and fly before that translates into a bigger budget for the Erasmuskloof glass castle (i.e. defence headquarters).
A banking advert use to say that compound interest was the “eighth wonder of the world” as it waxed lyrical about the money to be made that way. We have seen these last two years how a bunch of enterprising – and I`m not using the word in its positive context – US “banksters” compounded the planet`s problems by repackaging dud home loan liabilities and selling them on.
Indeed, “Dr Doom”, or to give him his proper name, Nouriel Roubini warns worse lies ahead. He told this year`s muted edition of the World Economic Forum banks face bigger credit losses than they realise (no doubt the 8th wonder of the world at work), that more financial companies will require state takeovers and the world economy will keep shrinking throughout this year. Charming! It brings to mind former Cuban leader Fidel Castro`s condemnation of the market as a “casino”. We`ve all lost big. But we must also not forget the duff rating agencies that gave these packages and banks top marks.   
Indeed as a result of these clever people, among others, half of Africa`s nations can become failed or failing states in the next decade. At least, that`s the view of Ethiopian Prime Minister Meles Zenawi at an African Union summit this week. 
“It`s likely that the coming decade or so will be very dark indeed for Africa,” Meles said. “Our prospects are not bright at all,” he was quoted saying in reports carried by Bloomberg, Reuters and Business Day.
He may well have been speaking about the SANDF`s budget hopes. It is dark days indeed and friends may be few. It is now probable that Option 3 is all that remains on the budget table. T is time to determine what that means.