DoD to “save” R8 billion

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The National Treasury has imposed “efficiency savings” of R8 billion on the Department of Defence. The savings come at a time when state revenues are down sharply and government is under pressure to deliver better social service. But the cuts also come as Members of Parliament, defence officials and comentators warn that the budget – even before the efficiency drive – was insufficient and that cost-cuting was damaging the military.   

The Treasury’s Estimates of National Expenditure document released with the national budget last week states that the defence budget was trimmed R23.1 million in FY2008/09 and R499.6 million in the current year that ends March 31. Next year’s budget has been pruned R3.2 billion, that for FY2011/12 will be R2.2 billion less and R2.1 billion will be “saved” in FY2012/13, amounting to a total reduction of R8 billion over a five year period. “Included in the total reduction is a saving of R4.5 billion due to the cancellation of the Airbus A400M aircraft contract” the ENE says.

Significant effort has been gone into implementing cost containment measures throughout the department without compromising existing, new and expanding frontline defence services. “These include: limiting overseas visits and travel; limiting the replacement of sedan vehicles; limiting the transferring of personnel between geographical areas; reducing the procurement of books, pamphlets, newspapers and magazines; curtailing the procurement of office furniture; not renewing non-essential internet subscriptions; and reassessing the allocation for performance incentives.
“Over the MTEF period, the baseline efficiency savings are focused on rephrasing and rescheduling armament acquisition to match a realistic acquisition plan,” in apparent reference to the department’s Strategic Capital Acquisition Master Plan. The ENE does not go into further detail, however. “Efforts are also being made to save even further on administrative expenditure and the procurement of goods and services.”
Expenditure trends

The ENE Vote 21 document adds that between 2006 and 2009, defence expenditure increased from R23.8 billion to R31.3 billion, at an average annual rate of 9.6%. Over the medium term, expenditure is expected to increase to R36.4 billion, at an average annual rate of 5.1%. “Savings from the cancellation of the A400M aircraft contract carry through during the medium term.”

The increase over the latter part of the medium term period is due to salary adjustments for government employees, additional allocations for the South African Defence Force’s new remuneration system, the military skills development system, landward defence modernisation and the establishment of an office for the management of military veterans affairs.

The decrease in spending in the Maritime Defence programme in 2008/09 is due to the finalisation of the frigate and submarine strategic defence procurement projects.
“Landward Defence becomes the dominant programme within the Department of Defence and Military Veterans over the MTEF period as a result of the cancellation of the A400M aircraft contract. The programme uses 30.5% of the department’s total budget. The Air Defence programme takes up 23.1% and the General Support and Administration programmes take up 12% and 10.3% of the total budget.
“Expenditure in the Administration programme is expected to increase by 12.7%, 11.4% and 10.4% in each year of the medium term due to the inclusion of the defence office accommodation portfolio of R1.8 billion in 2010/11 in this programme. The increase in expenditure in the General Support programme is equally large due to the inclusion in the programme of the facilities maintenance and repair programme, the capital works programme, and the upgrade of the Air Force Base Waterkloof runway.
“The higher than average increases in spending in the Landward Defence, Maritime Defence and Military Health Support programmes over the MTEF period are due to the additional allocations received for landward defence renewal, provision for the replacement of operational ambulances, and initiating programmes to acquire a hydrographic vessel and off-shore patrol vessels.
Salaries and MSDS

Expenditure in compensation of employees of R13.4 billion or 43.8% of the total budget in 2010/11 remains the largest expenditure item in the budget. Expenditure on goods and services, and transfer payments amount to 31.4% and 22.2% in 2010/11. “These percentages remain relatively stable over the medium term. R28 million was spent on the use of consultants on large projects in 2008/09 and R24 million will be spent in 2009/10. These consultants were mostly used to assist the department with clearing up audit qualifications, completing organisation and work study reports, supporting the department’s information warfare assistance programme, and completing the defence update and defence strategy for 2010.

The department’s human resource strategy to rejuvenate the South African National Defence Force resulted in 25 811 youths participating in the youth initiative between 2003 and 2009. 7450 are still serving in the military skills development system (MSDS), 12 707 have translated to the regular force and 5 654 have separated from the department, th ENE document adds. Over the MTEF period, the department intends to grow the military skills development system further to aid youth development and rejuvenation by taking on 11 022 military skills development system members.

Compensation of employees in the department’s baseline increased by 9.6% from 2006 (R100 million) to 2009 (R200 million) and is expected to increase further over the medium term to support the military skills development system. Further adjustments of R50 million in 2010/11, R70 million in 2011/12 and R100 million in 2012/13 are expected.

The department’s establishment was 77 516 in 2006/07, 74 843 in 2007/08 and 74 594 in 2008/09. The
establishment as at September 30 2009 was 74 542. Over the MTEF period, funded posts are expected to be 78 094, 79 519 and 81 217 by March 2013.

The department’s human resource budget increased from R9 billion in 2006 to R12.2 billion in 2009, at an average annual rate of 10.6%. Over the medium term, it is expected to increase to R15.7 billion, at an average annual rate of 8.7% due to salary increases and addition personnel.
“The minister has appointed an interim national force defence service commission in 2009 to investigate, advise and make recommendations regarding the service conditions and service benefits of regular force members to attract and retain skills in the department. The department’s new remuneration strategy, which aims to introduce a dispensation that will ensure fair, equitable and competitive remuneration structures for all South African National Defence Force members, has been approved. The 2010 Budget allocates R600 million, R730 million and R850 million over the medium term to implement the provisions of the new remuneration system,” the ENE Vote 21 document adds.
Infrastructure spending

The department is currently funding 36 capital works building projects. The bulk of the funds in FY2008/9 were spent on upgrading military health facilities, installing fire detection and protection systems, making structural changes to buildings to accommodate disabled members, upgrading kitchens, building an urban training facility, and improving security at different buildings throughout the country.

In consultation with the national Department of Public Works, the department continues with the repair and maintenance programme at the military hospitals in Pretoria and Cape Town, the Air Force Base Waterkloof in Pretoria, 4 SA Infantry Battalion in Middelburg, and 35 Engineer Support Regiment in Dunnottar. Over the medium term, the programme is extended to eventually include the repair and maintenance of 33 bases and 52 capital works projects. Over the MTEF period, R908.6 million has been allocated to capital works projects and R2.3 billion to the repair and maintenance programme.

Pic: Finance minister Pravin Gordhan


Budget summary & expenditure estimates

 

 

Audited actual spend

Revised

Upcoming Fin Year: April 1 2010 to March 31 2011 (FY2010/11)

MTEF estimate

 

 

FY2007/8

FY2008/9

FY2009/10

Total

Current payments

Transfers & subsidies

Payments for capital assets

FY2011/12

FY2012/13

Administration

R2.153.9bn

R2.480bn

R2.880bn

R3.247bn

R3.193bn

R 0.034bn

R0.019bn

R3.617bn

R3.991bn

Force Employment

R1.581bn

R1.913bn

R1.924bn

R1.908bn

R1.700bn

R0.145bn

R0.062bn

R1.997bn

R2.086bn

Landward (Army)

R7.128bn

R7.487bn

R8.909bn

R9.982bn

R7.409bn

R2.519bn

R0.054bn

R10.431bn

R11.062bn

Air (SAAF)

R7.314bn

R8.018bn

R8.056bn

R6.059bn

R3.713bn

R2.287bn

R0.057bn

R7.910bn

R8.361bn

Maritime (Navy)

R2.396bn

R1.837bn

R2.011bn

R2.179bn

R1.706bn

R0.421bn

R0.052bn

R2.320bn

R2.574bn

Military Health

R1.877bn

R2.176bn

R2.482bn

R2.770bn

R2.685bn

R0.035bn

R0.049bn

R2.961bn

R3.201bn

Defence Intelligence

R0.461bn

R0.506bn

R0.599bn

R0.631bn

R0.226bn

R0.401bn

R0.003bn

R0.666bn

R0.698bn

General Support

R2.266bn

R3.380bn

R3.461bn

R3.936bn

R2.462bn

R0.985bn

R0.487n

R4.028bn

R4.410bn

Total

R25.180bn

R27.801bn

R30.325bn1

R30.715bn2

R23.099b

R6.830bn

R0.786bn

R33.931bn3

R36.386bn4

Notes:

  1. R32 024bn in the Feb 2009 budget, revised down to R31 325bn in October 2009; now cut again.

  2. R32 389bn in the Feb 2009 MTEF forecast; R36.5 billion – together with state security in the October 2009 Medium Term Budget Policy Statement (implying a state security budget of not more than R5.8 billion).

  3. R34 418bn in the Feb 2009 MTEF forecast; R39.3 billion – together with state security in the October 2009 Medium Term Budget Policy Statement (implying a state security budget of not more than R5.4 billion).

  4. No figure given in the Feb 2009 budget, R41.9 billion – together with state security in the October 2009 Medium Term Budget Policy Statement (implying a state security budget of not more than R5.2 billion).

 

Audited actual spend

Revised

estimate

FY2010/11

estimate

MTEF estimate

 

 

FY2007/8

FY2008/9

FY2009/10

FY2010/11

FY2011/12

FY2012/13

Compensation of employees

R9.735bn

R10.620bn

R12.223bn

R13 450bn

R14.630bn

R15.686bn

Machinery & equipment

R0.395bn

R0.521bn

R0.263bn

R0.281bn

R0.259bn

R0.470bn

Specialised military assets

R-

R-

R0.027bn

R0.019bn

R0.024bn



R0.122bn