Defence Department: Defence REPUBLIC OF SOUTH AFRICA 2008_PCD_Bud_Brief1 PRESENTATION TO THE PORTFOLIO COMMITTEE ON DEFENCE

defenceDepartment:DefenceREPUBLIC OF SOUTH AFRICA

2008_PCD_Bud_Brief 1

PRESENTATION TO THE PORTFOLIO COMMITTEE ON

DEFENCE



1. Planning and Budgeting guidelines issued Sep 06.2. Plan and estimate of expenditure evaluation – May/Jun

07.3. MTEC submission with policy proposals to NT – Aug 07.4. MTEC deliberations – Sep 07.5. First letter of allocation – Nov 07.6. Final letter of allocation – Jan 08.7. Expenditure commenced on 1 Apr 08.8. Restructuring should be finalised during FY2008/09 and

will impact on budget allocations per main programme.



9. To obtain the Portfolio Committee on Defence’s support for Defence’s 2008/09 Estimate of Expenditure as incorporated in the 2008 Estimate of National Expenditure and tabled in Parliament by the Minister of Finance on 20 February 2008.



10. Budget allocation trend.

11. MTEC submission and allocations.

12. Vote 19 summary.

13. Vote 19 expenditure trends.

14. Questions & discussions.





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1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Defence as % of GDP Defence as % of Gov Expenditure

4,6%

1.2%

15,5%

4,3%

Budget Allocation Trend





Ser Policy Proposals (Options) 08/09 (Rm)

09/10 (Rm)

10/11 (Rm)

1 General Modernization Capacity

Strategic Airlift 0 0 503

Operational Vehicles 430 225 377

Intelligence Systems 151 155 267

DEIS Master Plan 0 17 85

Ammunition 261 556 583

Works Regiment 50 100 150

Landward Defence 463 927 973

Air Defence 50 765 750

Maritime DefenceSubtotal

501 455

1 8254 570

2 0625 750

2 New SANDF Remuneration Dispensation 1 166 1 234 1 282

3 Defence Infrastructure 420 220 324

4 Military Skills Development System(Annual Intake of 10,000)

777 1 543 2 053

5 Total 3 818 7 567 9 409



MTEF ALLOCATIONS: 2008/09 – 2010/11 (Final Letter of Allocation from NT)VOTE 19: DEFENCE

2008/09 2009/10 2010/11

R'000 R'000 R'000

Departmental Baseline 28,016,354 28,631,770 30,391,452

Additional Funds Allocated to Baseline 632,874 885,333 1,908,121

General Modernisation Capacity (A400M) 0 0 500,000

Military Skills Development System 100,000 200,000 400,000

Defence Infrastructure 0 0 200,000

Compensation of Personnel (Resolution 1 of 2007) 239,378 282,870 297,013

Accommodation Charges 80,620 120,919 164,889

Compensation of Personnel (Inflation Adjustment) 87,449 148,090 186,076

Non-personnel Inflation Adjustment 125,427 133,454 160,143

Adjustment to Baseline -416,073 343,464 -99,100

Baseline Efficiency Saving -23,169 -50,000 -99,100

Foreign Exchange Rate Adjustment (SDPs) -392,904 393,464 0

Defence 2008 MTEF Allocations 28,233,155 29,860,567 32,200,473

Defence 2008 MTEF Allocations



Baseline Efficiency Savings

2008/09 2009/10 2010/11Administration 1,355 2,924 5,796Landward Defence 6,881 14,850 29,432Air Defence 3,802 8,204 16,260Maritime Defence 2,023 4,366 8,653Military Health Support 2,581 5,570 11,041Defence Intelligence 672 1,451 2,876General Support 3,756 8,106 16,066Force Employment 2,099 4,529 8,976

TOTAL 23,169 50,000 99,100

Amount (R'000)Main Programme

All efficiency savings are within the economic classification "goods andservices" and are focussed on reducing expenditure on supporting servicessuch as telephone expenses, subsistence and travel allowances, subsidisedmotor vehicle schemes, data lines, etc





2007/08 2008/09 2009/10 2010/11R'000 R'000 R'000 R'000

Current Payments 16,102,917 12.10% 18,050,911 19,847,218 21,580,235Compensation of Employees 9,726,700 9.88% 10,687,269 11,522,998 12,549,547Goods and Services 6,376,217 15.49% 7,363,642 8,324,220 9,030,688

Transfers and Subsidies 9,653,980 1.10% 9,760,579 9,393,221 9,953,916Provinces / Municipalities 0 0 0 0Departmental Agencies / Accounts 9,087,651 0.19% 9,104,979 8,716,017 9,250,470Public Corporations / Private Enterprises 467,427 13.52% 530,624 561,564 587,157Non Profit Institutions 3,432 15.27% 3,956 4,025 4,202Households 95,470 26.76% 121,020 111,615 112,087

Payment for Capital Assets 391,804 7.62% 421,665 620,128 666,322Buildings / Fixed Structures 75,032 49.46% 112,143 252,277 248,650Machinery / Equipment 308,712 -0.20% 308,107 367,036 416,954Cultivated Assets 0 60 66 69Software / Intangible Assets 8,060 -83.19% 1,355 749 649

TOTAL 26,148,701 7.97% 28,233,155 29,860,567 32,200,473

Economic Classification Growth

2008 Baseline Allocation per Economic Classification



2007/08 2008/09 2009/10 2010/11

R'000 R'000 R'000 R'000

Administration 2,111,200 14.96% 2,426,930 2,741,808 3,022,963

Landward Defence 6,435,829 5.54% 6,792,237 7,729,488 8,503,142

Air Defence 8,000,932 12.57% 9,006,514 8,349,125 8,912,754

Maritime Defence 2,351,994 -23.06% 1,809,630 2,009,108 2,005,189

Military Health Support 1,846,274 14.78% 2,119,145 2,446,585 2,609,049

Defence Intelligence 402,193 26.77% 509,850 579,687 608,462

General Support 3,364,895 16.91% 3,933,746 4,237,268 4,687,027

Force Employment 1,635,385 -0.02% 1,635,103 1,767,498 1,851,887

TOTAL 26,148,702 7.97% 28,233,155 29,860,567 32,200,473

Main Programme Growth

2008 Baseline Allocation per Main Programme



15. 7% average annual growth over MTEF period16. 04/05 Rb 20,2 to Rb 26,1 in 07/08 to Rb 32,2 in 10/11.17. Additional funding Rm 217 (08/09), Rm1,228 (09/10) and Rm

1,809 (10/11)a. General modernisation capability – A400Mb. MSDSc. Defence infrastructure adjustmentsd. Foreign exchange rate adjustmentse. Accommodation charges adjustmentsf. Inflation adjustmentsg. Salary adjustments

18. Efficiency savings of Rm23 (08/09), Rm50 (09/10) and Rm99 (10/11)19. Discontinuation of Programme 9 with effect from 1 April 2008.


Revenue Estimates

Estimate Actual (29 Apr 08

Sale of goods and services 332,176 0.09% 332,469 339,118 359,465Sale of scrap, waste and other used goods 128,103 -88.94% 14,173 12,147 12,633Fines, penalties and forfeits 2,564 0.00% 2,564 2,564 2,718Interest, dividends and rent on land 398 0.00% 398 417 443Sale of capital assets 0 #DIV/0! 115,456 120,047 124,877Financial transactions in assets and liabilities 40,293 0.00% 40,293 41,098 43,565TOTAL 503,534 0 0.36% 505,353 515,391 543,701

2010/11 (R'000)Source of Revenue

2008/09 (R'000)

2009/10 (R'000)Growth

2007/08 (R'000)





20. Administration Programme has doubled due to devolution of funds from NDPW (Property Management).

21. Property Management – 18% average growth over MTEF.

22. Departmental Direction – 11,5% average increase due to staffing of NCACC inspectorate.

23. Defence Foreign Relations increase due to increased representation abroad – Military Attaché offices in Tunisia, Vietnam, Pakistan and PRC.



24. 10,9% annual average increase over MTEFa. MSDSb. Operational vehicle fleet modernisation

25. 36,1% increase in General Traininga. Works Regimentb. MSDS training

26. Large increases in Infantry, Support and Operational Intelligence is due to provisions for the new generation infantry fighting vehicle, mobile intelligence processing system, mass field feeding system and operational supply support product system

27. 165,8% increase in Payment for Capital Assets is due to replacement of vehicles, diesel engines, hand tool sets, parachutes and small craft (Prog 9).



28. 9,5% annual average growth over MTEF.

29. Transport & Maritime increase of 46% due to strategic airlift capability programme set to peak in 2010/11. (Previously within Programme 9)

30. Air Combat high points in 2005/06 & 2008/09 due to delivery milestones of Hawk and Gripen programmes.

31. Increases in Training, Command & Control and Operational Support & Intelligence sub-programmes over MTEF are due to upgrade of Astra training aircraft, replacement of fire fighting vehicles and upgrade of radar and ground navigation systems.



32. 9,4% annual average decrease due to commissioning of the four frigates and three submarines. (Previously Programme 9).

33. Increase of 24,4% in Maritime Training is due to increased number of members going through the military skills development system.



34. 11,9% annual average growth over 2007 MTEF period35. 33,5% increase in Strategic Direction

a. Increased staff levels b. Inspection of subordinate offices

36. 11,6% increase in Special/Tertiary Health Service a. Remuneration of health professionalsb. Anti-retroviral rollout

37. 17,7% increase in Military Health Supporta. Chemical/Biological defensive capability for 2010 FIFA World

Cupb. Military Health force preparation exercises

38. Large average annual increase of 33% in Military Health Training Capability:

a. Increased MSDS intakeb. Training of MSDS members in emergency care for 2010.

39. Increase of 12,5% in Product Support Capability to alleviate pharmaceutical shortages.



40. Average annual increase of 19,6% in Operations is due to the intended investment in a strategic collection capability.

41. This is also the reason for the increase in transfers and subsidies (Prog 9).



42. 11,6% average annual growth over MTEF43. Increase of 18,2% in Joint Logistic Services over MTEF

is due to increased maintenance and repair of Defence Infrastructure.44. Increase of 10,8% in CMI Services over MTEF is due to

upgrading and improving defence information and communication systems, SITA-D tariff increases and computer license fees.45. Increase of 23,5% in Technology Development is

mainly due to the transportable platform mounted power supply, tactical electronic warfare system and the new static electronic warfare system projects that are advancing to the development and acquisition phases. (Prog 9).



46. 6,1% average annual growth over MTEF due to increases in Regional Security (Peace Support). 47. Special Operations increase with 11,2% on average

over MTEF.a. Personnel retention (incentive scheme)b. Acquisition of specialised equipment

48. Decrease in Support to the People is due to the gradual withdrawal of support to the SAPS.49. Increase of 19,9% in payments for capital assets is

due to procurement of trucks, trailers, vehicles, excavating equipment, material handling equipment, communication equipment and training aids for use during peace support operations.


Revenue Management:

Progress and Trends50. Budget and accounting subsystems SCOA compliant.

51. Significant improvement on accounting for revenue.

52. Result:

a. Provision of meaningful management information.

b. More accurate revenue estimates.

c. Improved accountability.

d. Improved control over collection.

53. Revenue management policy - May 2008.

54. Review of revenue tariffs - May 2008.

55. Impact of new PFM Bill – retention of specific revenue.

56. Training in process.



57. Defence, through its Strategic Business Plan and Budget, is supporting Government’s Plan of Action.

58. Defence’s budget composition reflects cluster priorities.59. The Capital renewal of Landward Defence and Military

Health Service remains under funded.60. Restructuring of the DOD will result in changes to budget

allocations from 2009/10 onwards.



Documents

Defence Department: Defence REPUBLIC OF SOUTH AFRICA 2008_PCD_Bud_Brief1 PRESENTATION TO THE PORTFOLIO COMMITTEE ON DEFENCE