The Department of Defence’s Special Defence Account (SDA) is facing closure, potentially cutting off a R5 billion annual source of funds for the South African National Defence Force (SANDF).
This is according to Secretary for Defence Dr Sam Gulube. Speaking at the launch of the Broad Based Black Economic Empowerment (BBBEE) Defence Sector Charter launch in Pretoria on 12 April, he said the Department of Defence has been given advanced warning by National Treasury that the SDA will be closed down or collapsed by 2021/22.
Gulube was warning how the defence budget has been shrinking since 2016 with further cuts anticipated over the next three years. “Over the past years it has been reduced by about R9 billion and moving further into the next years it will be further reduce by R7 to R10 billion. We have already been given an early warning by Treasury that come 2021/2022 the Special Defence Account will be closed down or collapsed. By 2021/22 we won’t have R5 billion a year set aside for the SDA.
“We have been asked how we are going to manage our business knowing that we will have to continue working without that Special Defence Account.”
Gulube said at times like this the Department of Defence needs to consult with the defence industry on how to manage acquisitions and the maintenance of capabilities for the South African defence industry if the Special Defence Account no longer exists. However, the closure of the SDA is not guaranteed. “We have been promised that if the economy in South Africa improves then these matters will be revisited. So it is more of an early warning than a statement of fact, depending on how the South African economy performs over the next three years between now and 2021/22.”
In the Budget vote in February this year, Cabinet approved defence budget reductions of R183.2 million in 2019/20, R174.2 million in 2020/21 and R5 billion in 2021/22. The reductions will be effected across all programmes mainly on the special defence account and various goods and services items such as computer services, contractors and travel and subsistence.
According to the 2019 budget document, the Special Defence Account was given funding of R6.2 billion in 2015/16, R5.6 billion in 2016/17 and R6.3 billion in 2017/18. This falls to R5.9 billion in 2018/19, R5.2 billion in 2019/20, R5.5 billion in 2020/21 and just R814 million in 2021/22.
The Secretary for Defence said the declining defence budget was one of the issues negatively affecting the South African defence industry, along with limited economic growth and limited markets, pushing it to pursue exports.
“We have received an early warning on the budget reduction. We need to work together to find different ways to find how the defence industry and Department of Defence can work together to sustain capabilities required by the SANDF. If the defence industry loses certain capabilities required by the defence force, the next time the SANDF wants to acquire those capabilities when the economy has turned around….we’ll have to import which will be more expensive. It’s in our own selfish interest as the defence force to ensure the industry survives. The economy will one day turn around. We hope very soon. I know it won’t be down forever.”