Treasury gives DoD more time to account for Special Defence Account

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The National Treasury has given the Department of Defence more time to account for the secret Special Defence Account (SDA).

The Star newspaper reports Minister of Finance Pravin Gordhan last week exempted the military for three years from part of the Public Finance Management Act with regards to publicly accounting on the SDA, “apparently to make sure the spending stays secret.” The three years are from 2010/11 to 2012/13, and involves R13 billion, The Star says.

The SDA was created in 1974 to acquire armament and to fund covert activities. The Department of Defence would not comment to The Star, referring comment to the National Treasury, which said exemption was an accounting issue. Treasury spokesman Jabulani Sikhakhane said the introduction of new accounting practices in 2010 meant the DoD would have to publish separate financial statements for the SDA, but the activities of its funds “are such that they cannot be disclosed”.
“The exemption allows the Department of Defence time to find a more appropriate solution to the problem,” said Sikhakhane.

He insisted the SDA is not a slush fund. “Its funding is appropriated in the Appropriation Act and the SDA is accountable to Parliament for the use of the funds. In addition, the SDA is subject to audit by the Auditor-General,” he said.” But A-G reports on the account have not been tabled in Parliament for the past two years due to delays, said the A-G’s office.

The Star says budget documents indicate how much money goes into the account, “but give only broad indications of what it’s for. It includes, but is not limited to, the spending on the arms deal, the Strategic Defence Procurement Programme. It’s not clear if the full amount is spent each year as, unlike most government accounts, the law allows unspent SDA funds to be rolled over each year.

Defence budgets show that in the seven years from 2008/9 to 2014/15, more than R43 billion was allocated to the account. That includes nearly R19 billion due to go in over the next three years.

The transfers to the account are listed as “acquisition and upgrading of main weapon systems and technology”, except for R421 million for “executing defence intelligence activities”.

In 2008/09, at least 15 percent of the R8bn transferred to the account was for unspecified operating costs, about a third was for the arms deal but nearly half was unspecified other “procurement”, The Star reported.

Opposition Democratic Alliance party defence watchman David Maynier says he has “serious reservations” about the account. He says money is channelled through it for “a wide variety of purposes, including capital acquisition projects that should not, for the most part, be kept secret”.
“My research shows that between 1999 and 2009 nearly R73bn was channelled through the Special Defence Account,” he said, adding that less than two percent of that was for so-called sensitive projects.
“The lack of transparency surrounding the Special Defence Account is one of the reasons I have never supported the defence department budget in Parliament. I think it is time that we take a serious look at either scrapping the Special Defence Account or narrowing the scope of the Special Defence Account. If it is necessary to have a Special Defence Account, then it should only cover ‘sensitive projects’, the disclosure of which would cause serious and irreparable harms to our national security.”

Maynier has previously complained about the SDA. Speaking in May in reply to Lindiwe Sisulu’s budget vote, he said “the truth is that we do not know anything about capital acquisition: Parliament has never been properly briefed on the Defence Force’s capital acquisition projects under the Strategic Capital Acquisition Master Plan (SCAMP).”



He continued that the minister also refuses to reply to parliamentary questions on capital acquisition, arguing that: “The Department is not at liberty to release this information to the public as it may compromise security plans of the SANDF and also generate undue speculation within the country and the industry”. Maynier called this ridiculous. Maynier continued “we do not know anything about the Special Defence Account: Parliament has never been briefed on the Defence Force’s secret account, used, we are told, mainly for spending on weapon systems. This, despite the fact that every year billions of Rand are channelled through the Special Defence Account.”