PRESENTATION OF THE DOD

1
PRESENTATION OF THE DOD ANNUAL REPORT FOR
FY2006/07 TO THE PORTFOLIO COMMITTEE ON
DEFENCE 16 OCTOBER 2007
2
AIM
3
To present the non-financial and audited
financial performance report of the Department
of Defence for the financial year ended on 31
March 2007 to the Portfolio Committee on Defence.
4
SCOPE AND APPROACH
5

• APPROACH
• CONTENTS OF THE REPORT
• STRATEGIC OVERVIEW
• ANNUAL PERFORMANCE AGAINST PLAN FY2006/07
• DEFENCE RESOURCES
• DEFENCE OUTPUTS
• FINANCIAL PERFORMANCE FY2006/07
• CONCLUDING REMARKS
• QUESTIONS AND ANSWERS

6
APPROACH
7

• THE ANNUAL REPORT IS A VERY DETAILED HENCE
  LENGTHY REPORT ON DEFENCE PERFORMANCE DURING
  FY2006/07 AND CANNOT BE DISCUSSED IN DETAIL IN
  THE TIME AVAILABLE.
• THIS PRESENTATION WILL BE AT THE STRATEGIC LEVEL
  AND WILL CONSIST OF THREE PARTS
• A REPORT ON THE STRATEGIC OUTPUTS, CHALLENGES AND
  INITIAVES TO IMPROVE PERFORMANCE DURING
  FY2006/07.
• FEEDBACK ON PCD QUERIES ON DOD REPORTS.
• QUESTION AND ANSWER SESSION.
• CONCLUDING REMARKS.

8
CONTENTS OF DEPARTMENT OF DEFENCE ANNUAL REPORT
9
Chapter 1 Strategic Overview Chapter 2 Defence
Administration Chapter 3 Force Employment
Chapter 4 Landward Defence Chapter 5 Air
Defence Chapter 6 Maritime Defence Chapter 7
Military Health Support Chapter 8 Defence
Intelligence Chapter 9 Joint Support Chapter
10 Special Defence Account Chapter 11
Organisational Structure and Human Resources
Management Appendix A Status of the SANDF
Reserves B Defence Diplomacy
C Report on Foreign Aid Assistance
10
STRATEGIC OVERVIEW
11
MANDATE

• The DOD derives its constitutional mandate from
  section 200(2) of the Constitution of the
  Republic of South Africa, 1996 (Act No 108 of
  1996).
• Giving substance to this constitutional mandate
  is the Defence Act, 2002 (Act No 42 of 2002), the
  White Paper on Defence, 1996, Defence Review,
  1998 and other national legislation that guide
  the execution of the defence strategy of the DOD.

12
DEFENCE OUTCOME

• Effective defence for a democratic South Africa.

13
ALIGNMENT WITH CABINET AND CLUSTER PRIORITIES

• The DOD ensures alignment of its priorities with
  Government priorities through its planning
  framework, as well as through its operations.
• The DOD planning framework is located within the
  Government's planning framework. The outcomes of
  the Lekgotla, articulated through the State of
  the Nation Address and the Budget Vote, are the
  basis for the the DODs short-and medium term
  activities guided by the Minister's priorities
  and guidelines.

14
MINISTER OF DEFENCES OBJECTIVES

• Defending and protecting the sovereignty and
  territorial integrity of the Republic
• Supporting the people by maintaining
  cost-effective defence capabilities in order to
  be prepared and equipped to participate in
  operations as ordered and funded by Government.
• Contributing to global security through promotion
  of regional and continental security and
  Government diplomatic initiatives through
  regional and global defence cooperation and
  participation in peace missions.
• Ensuring good governance of the DOD through
  effective, efficient and economical management,
  administration and accounting within the
  regulatory framework and Government policy.

15
MINISTER OF DEFENCES OBJECTIVES

• Ensuring continuous improvement of defence
  capabilities by means of quality command and
  control, developing the people and improving the
  equipment and facilities of the DOD.
• Implementing the 'One Force' concept by
  adequately resourcing and utilising both the
  regular and the reserve components, as well as
  rejuvenating and rightsizing the human resource
  composition of the DOD.

16
DEFENCES FOCUS IN FY2006/07

• Preparing defence capabilities
• Employing defence capabilities to meet operations
  and commitments ordered by Government and
• The restructuring of the DOD.

17
DEFENCES KEY ACHIEVEMENTS IN FY2006/07

• The successful execution of ordered commitments
• 4 747 members were deployed in peace support and
  humanitarian relief operations in Burundi,
  Comoros, Côte d'Ivoire, the DRC, Ethiopia,
  Eritrea, Lesotho, Madagascar, Mozambique, and
  Sudan.
• Over 1 300 members were deployed daily internally
  in support of the SAPS (borderline control and
  rural safeguarding).
• Support was provided to other departments to
  combat, inter alia poaching and swine fever.
• The responsibility for borderline control of the
  international borders with Namibia, Botswana and
  Lesotho was handed over to the SAPS.

18
DEFENCES KEY ACHIEVEMENTS IN FY2006/07

• Defence bilateral structural meetings were
  conducted with 19 countries to enhance bilateral
  relations and defence-to-defence cooperation.
• The DOD participated in 15 SADC, ISDSC and other
  multinational interaction activities.
• African Aerospace and Defence Exhibition, AAD
  2006, was presented in Cape Town from 19 to 24
  September 2006.
• In excess of 2 100 learning programmes were
  presented by the DOD attended by more than 51 800
  learners confirming that the DOD is a learning
  organisation. An additional 192 DOD members
  attended foreign learning opportunities.

19
DEFENCES KEY CHALLENGES IN FY2006/07

• The impact of legacy systems on efficiency
  resulting in qualified financial statements, eg
  the FMS is 23 years old, some of the logistics
  systems are older than 30 years
• The delayed implementation of the National
  Treasurys initiatives of the Financial
  Management Improvement Programme (FMIP) and the
  Integrated Financial Management Information
  System (IFMS).
• Balancing the allocated resources with
  government commitments (including matching the
  diplomatic footprint).
• Inadequate funding for infrastructure maintenance.

20
KEY INITIATIVES TO IMPROVE PERFORMANCE IN
FY2006/07

• Ensuring strategic alignment through the updating
  of the White Paper on Defence, Defence Review
  (Defence Update 2007).
• The restructuring of the top structures of the
  Department to improve direction and management,
  including the restructuring of the command and
  management bodies.
• Further development of the implementation of
  theBalanced Scorecard as a performance
  management tool.
• Measures taken to ensure internal, external and
  allocative efficiency, eg Projects LOQUACIOUS,
  LEGADIMA, GEJIMA and the DEIS Masterplan.

21
KEY INITIATIVES TO IMPROVE PERFORMANCE IN
FY2006/07

• Increase in the numbers of MSDS and other members
  (a total of 5 053).
• Increase in the capacity of the conventional
  Reserve Force.
• Implementation of the Works Regiment concept by
  the SA Army supported by the Service Corps.

22

ANNUAL PERFORMANCE AGAINST PLAN FY2006/07
23

DEFENCE STRATEGIC DIRECTION
24

• HIGHLIGHTS
• Issued ministerial priorities for the FY2006/07.
• The Minister provided strategic direction to the
  finalisation of the White Paper on Defence,
  Defence Review (Defence Update 2007).
• Service and Divisional Chiefs were compelled to
  continuallly review their State of Readiness in
  line with the MOD theme Are we ready.
• Identified gaps in terms of State of Readiness
  had to be addressed as per MOD instruction.
• Focused attention was directed to the ongoing
  transformation of the Military Justice System as
  well as restructuring of the Department for
  greater effective and efficiency.

25

• HIGHLIGHTS
• The MOD gave direction to the transformation of
  the Defence Industry in conjunction with the
  Minister of Public Enterpises.
• Contributed to global security by giving
  political direction to and participating in the
  peace processes in the DRC, Burundi and Ivory
  Coast and provision of Military Observers in
  Sudan, Ethiopia and Eritrea.
• Contributed to deepening of democacy in Africa
  through series of initiatives notably supporting
  election in Comores, Madagascar and Lesotho.

26

DEPARTMENTAL DIRECTION
27

• HIGHLIGHTS
• Guidelines of the Minister of Defence were
  analysed and translated into clear DOD
  deliverables.
• Ensured alignment of DOD priorities, plans and
  processes with broad Government priorities,
  trajectory, strategies, plans and programmes.
• Interrogated and optimised the funding
  priorities which were presented to National
  Treasury for consideration during the MTEC
  hearings.

28

• HIGHLIGHTS
• Extensive progress has been made in realising the
  Ministers directive regarding the
  transformation of the Department to provide for
  optimal functionality in terms of internal,
  external and allocative efficiency.
• Implemented perfomance improvement mechanisms in
  order to optimise compliance with Government
  prescripts and accountability. These included
• DOD activities refocused in terms of DOD
  strategic objectives and performance against
  plan.
• Ensuring strategic alignment through the updating
  of the White Paper on Defence, Defence Review
  (Defence Update 2007).

29

• HIGHLIGHTS
• Modernisation of the Landward programme.
• The restructuring of the top structures of the
  Department to improve direction and management,
  including the restructuring of the command and
  management bodies
• Further development of the implementation of
  theBalanced Scorecard as a performance
  management tool.
• Measures taken to ensure internal, external and
  allocative efficiency, eg Projects LOQUACIOUS,
  LEGADIMA and the DEIS Masterplan.

30

• CHALLENGES
• Balancing the allocated resources with
  government commitments.
• Impact of the delayed implementation of the IFMS
  on the integration of the Departmental systems.

31

DEFENCE POLICY
32

• HIGHLIGHTS
• Ongoing Policy advice was given to the Department
  at different management forums.
• Bilateral and multilateral defence agreements
  with other states were drafted, negotiated and
  concluded . Ten new bilateral agreements were
  concluded, one was renewed, one Note of Exchange
  and one letter of Assist were concluded.
• Spearheaded the DOD structure management,
  refocusing of Command bodies, as well as the
  systemic perfomance management through the
  Balanced Score Card.

33

• HIGHLIGHTS
• Coordinated the development, consultation and
  finalisation of the update of the White Paper on
  Defence (1998) and Defence Review (1996) which
  was approved by the Minister on 11 December 2006.
  The Update was also tabled at the DGs National
  Security Council and is scheduled to serve before
  Cabinet soon.

34

• CHALLENGES
• Increased demands on the DOD from other
  departments, DFA in particular.
• Organisational readiness to ensure successful
  implementation of the Balanced Score Card. A
  targeted orientation programme is planned for the
  current financial year, which is focused on
  senior management as well as services and
  divisional planners.
• Insufficient staff levels.

35

DEFENCE RESOURCES HUMAN RESOURCES
36

• HIGHLIGHTS
• The establishment of an integrated Human
  Resources Division.
• Ongoing improvement in racial and gender
  representivity.
• Ongoing rejuvenation of the rank/age profile of
  soldiers through the MSDS system.
• Ongoing capacity building of the Conventional
  Reserves.
• Review of HR Strategy 2010 commenced during the
  period.

37

• CHALLENGES
• The Mobility Exit Mechanism has not been fully
  successful at lower levels.
• Retention of operational and technical skills.
• Containment of HR expenditure as a percentage of
  Total DOD expenditure whilst trying to improve
  conditions of service.
• Improvement of the health status of members.
• Accreditation of DOD learning opportunities and
  registration of DOD learning providers.

38
Macro Personnel Flow ito Equity (Race)
Total 77858
39
Macro Personnel Flow ito Equity (Race)
Total 77518
40
Macro Personnel Flow ito Equity (Race)
NOTE. The number of Africans appointed during the
financial year increased by 1.96.
41
Macro Personnel Flow ito Equity (Gender)
Total 77 858
42
Macro Personnel Flow ito Equity (Gender)
Total 77 518
43
Macro Personnel Flow ito Equity (Gender)
NOTE. During the financial year there was an
outflow of male employees (-1.11) and an inflow
of female employees (0.68)
44
DEFENCE RESOURCES MATERIEL RESOURCES
45

• HIGHLIGHTS
• Deliveries of aircraft and vessels (SDP).
• Disposal of Mirage F1 systems to Gabon.
• Transfer of the Naval Dockyard to Armscor.
• The development of a South African
  Defence-Related industry (SADRI) Strategy in
  consultation with the Departments of Public
  Enterprises and Trade and Industries as well as
  AMD has reached an advanced stage.
• The Departmental Technology Strategy has been
  fundamentally revised, including the impact of
  establishing the Defence Evaluation and Research
  Institute (DERI) as directed by the Minister of
  Defence, and is being reviewed in final draft.

46

• HIGHLIGHTS
• The Defence Materiel Division participated
  actively in the strategic planning process aimed
  at reviewing the SCAMP to align it with the
  materiel requirements captured in the Defence
  Update and to accommodate supporting technology
  investments as well as optimal contracting of
  SADRI.
• The Defence Materiel Division was directly
  involved in the restructuring of DENEL, ensuring
  optimal contract award to DENEL subsidiaries and
  top management intervention in optimising
  performance on existing contracted obligations.

47

• HIGHLIGHTS
• Delivery of a clean audit on the Special Defence
  Account without any qualifications or emphasis of
  matter.
• Roll-out of the e-procure electronic procurement
  system.
• Refinement of alternative service delivery
  processes to enhance the efficiency of outsourced
  contracting support to the DOD

48

• CHALLENGES
• Inadequate funding for maintenance of all weapons
  systems.
• Late delivery of weapons systems (Hawk, LUH,
  GBADS).
• Totally inadequate funding for infrastructure
  maintenance.
• Clearing outstanding audit queries and
  qualifications pertaining to deviations from
  procurement practices and asset management.
• Creation of structures and required
  procedures/practices to accept the new duties and
  powers under the assigned GRC functions of the
  newly created Def Mat Div.

49

• CHALLENGES
• Staffing of key posts within the division and
  retention of competence to ensure matériel
  management service excellence.
• Completion of the Armscor restructuring process.
• Completion of the DERI implementation process and
  subsequent activation of approved structures and
  mandate.
• Completion of the required ammunition disposal
  function.

50
DEFENCE RESOURCES INFORMATION
51

• HIGHLIGHTS
• Well-defined and executable ICS Policy
  Development and Maintenance Plan.
• Departmental Enterprise Information Systems
  (DEIS) formalised and approved
• Review plan for the DEIS regulatory framework
  completed
• CHALLENGES
• The alignment of the DEIS Master plan with the
  Integrated Financial Management System (IFMS)
  development and the operationalisation thereof.

52
DEFENCE RESOURCES FINANCIAL RESOURCES
53

• HIGHLIGHTS
• 99,64 of Appropriation spent.
• Commencement of the restructuring of the FMD to
  service CSANDF.
• CHALLENGES
• Retention and acquisition of skills.
• Delayed roll-out of IFMS (2010) resulting in
  non-compliance.
• Physical security at cash points (currently being
  addressed).

54
DEFENCE OUTPUTS FORCE EMPLOYMENT
55

• HIGHLIGHTS
• Successful participation in 14 external and two
  internal operations (over 6 000 members
  deployed).
• Successful participation in five Joint and nine
  multinational exercises.
• CHALLENGES
• Capabilities required for Peace Support
  Operations are constrained by the mismatch
  between allocated resources and government
  ordered commitments.

56
External Force Employment Achievements 2006/07
Operation Members Deployed Achievement
Op MISTRAL, DRC 1 214 Continuous replanning to adjust to the changing situation of the mission. The repatriation of the Ferry and Well Drill units. One successful rotation was completed in October/November 2006
Op FIBRE. Burundi 1 319 Op terminated in Dec 06. Change-over from UN to AU mission. Op CORDITE
Op PRISTINE. Cote dIvoire 45 Complement prepared, but not deployed from Jul 05 until termination in Dec 06. Op terminated owing to reasons associated with peace - process in Cote dIvoire
Op ESPRESSO. Ethiopia/ Eritrea 6 Staff officers/mil observers according to UN/AU requirements
Op TEUTONIC I. DRC 47 Two Brassage Centres established, assistance with integration of 147 000 former belligerents. African Renaissance funds used for post - conflict reconstruction
57
External Force Employment Achievements 2006/07
Operation Members Deployed Achievement
Op TEUTONIC II, DRC 63 Two training facilities constructed. Mission concluded in Sep 06
Op TEUTONIC III, DRC 2 Senior members deployed to coordinate SANDF assistance to the Congolese Defence Force
Op TRITON, Comoros 318 AU appointed South Africa as lead nation in AU mission in the Comoros. Mission commended and received recognition from AU Peace and Security Council
Op CORDITE. The Sudan 648 AU requested increased force levels, from 2 companies to battalion strength being deployed. Two successful rotations were completed. Sustainment flights were and remain a problem due to Sudanese authorities not giving over-flight and landing clearances
58
External Force Employment Achievements 2006/07
Operation Members Deployed Achievement
Operations SOLITAIRE I, II, III and IV. DRC 26 A total of 2 165 tons of ballot material were distributed. 200 observers from DFA were successfully deployed and supported by the DOD
Op CURRICULUM. Burundi 1 110 Protected the Burundi leader element returning from exile. New mission with a temporary time frame and anticipated to end in 2008.
Op MARINER. Madagascar 30 29 November to 12 December 2006. All objectives with regards to transportation and general assistance were achieved. The mission was commended and received recognition from the international community.
59
External Force Employment Achievements 2006/07
Operation Members Deployed Achievement
Op INDAWO. Lesotho 27 15 February 2007 to 20 February 2007. All ballot papers for the Lesotho election were successfully distributed and collected by the SA Air Force. The SANDF used its own air capabilities for the deployment.
Op LITCHI II. Mozambique 80 6 March 2007 and remains current. A total of 630 tonnes of food and 2.5 million litres of purified water were distributed. Three SA Air Force aircraft as well as water purification plants were deployed.
Op BAPISA. Mozambique 53 From 26 March 2007. The successes of the operation will be made visible in the FY2007/08 report
60
Internal Force Employment Achievements 2006/07
Operation Members Deployed Achievement
Op INTEXO Borderline control 1 111 daily Borderline control was executed along the Zimbabwe, Mozambique, Swaziland and Lesotho borders. Successes include 46 weapons found 15 676 kg marijuana confiscated and 727 criminals arrested. Force decreasing on continuous basis in accordance with the agreed SANDF Exit and SAPS Entry Strategy between the SANDF and the SAPS.
Op STIPPER, Rural safeguarding 197 ATR The target was fully met in compliance with SAPS requirements. Successes include 170 weapons found 2 657 kg marijuana confiscated and 2 742 criminals arrested.
61
Internal Force Employment Achievements 2006/07.
Operation Members Deployed Achievement
Op HUMAN. Support to Government 84 mostly Reserves The Dept of Agriculture was assisted in the containment of classical swine fever in the Eastern Cape, KwaZulu - Natal and the Free State. A total of 13 352 pigs were killed. Supported the Marine and Coastal Management by conducting coastal patrols to curb abalone poaching, and routine fishery patrols. A total of 40 abalone poachers were arrested. The SA Air Force patrolled the maritime coast of the RSA (Operation NEPTUNE- RSA West Coast and Operation ORCA at the RSA East Coast).
62
Joint Exercises 2006/07
Exercise Achievement
SA Special Forces Exercises Three exercises to rehearse contingencies were executed as planned
SANDF Communication Exercise This exercise was integrated with other planned exercises to ensure effective communication skills and radio procedures
Ex MATHOLE. Command post exercise (CPX) to test rapid reaction capability and develop SANDF doctrine and procedures in peacekeeping. Prepare forces training exercise in 2007 The exercise was cancelled due to the non-availability of force structure elements. Focus on planning and preparing of forces for Exercise NDLOVU planned for 2009
63
Joint Exercises 2006/07
Exercise Achievement
Ex OXIDE. (GERANIUM). Enhance preparedness of the SANDF to render support to the Dept of Transport in search and rescue, in conjunction with French forces based in La Reunion as per MOU The exercise was cancelled due to unavailability of French forces. The last exercise was conducted in May 2005.
Ex EMEX. To render support to the National Nuclear Regulator in dealing with a nuclear incident at Koeberg nuclear plant as required by legislation The exercise at the Koeberg nuclear plant in March 2006 was attended by military observers. Different scenarios were simulated whereby contingencies were confirmed and rehearsed.
64
Joint Exercises 2006/07
Exercise Achievement
EXERCISE AFFIX. To render support to the Airports Company of South Africa in dealing with aircraft disasters at South African airports, as required by legislation. The exercise at O.R. Tambo Airport In Johannesburg in March 2006 was attended by military observers. Different scenarios were simulated and contingencies were confirmed and rehearsed
65
Multi-National Exercises 2006/07
Exercise Achievement
Ex AIR BORNE AFRICA. Airborne forces competition This exercise was cancelled, as no host nation for the exercise could be found
Ex BELL BUOY. Military (naval) control of merchant shipping in times of emergency (Indian Ocean) The maritime exercise was conducted with the Navies of Uruguayan, Brazilian and Argentinean. All the objectives for the exercise were met. The exercise took place in Brazil in Sept 2006.
Ex TRANSOCEANIC. Military (naval) control of merchant shipping in times emergency in participation with South American countries (South Atlantic Ocean) Exercise TRANSOCEANIC took place from 14 to 25 Aug 06 in South Africa. Participating countries were Brazil, Argentina, Uruguay and SA. SA Navy Reserve teams stationed at the six main ports of SA participated in this exercise.
66
Multinational Exercises 2006/07
Exercise Achievement
Exercise COMBINED ENDEAVOUR. Partnership for Peace Communications and Information Systems technical demonstration The multinational interoperability exercise took place during March, May, Sep, Nov 2006, Jan and March 2007. The exercise was executed in Georgia, Germany, the Netherlands, Armenia, Slovakia, Ukraine and Germany. 24 members of the CMIS Div were involved in the planning and execution of the exercise.
Exercise AFRICA ENDEAVOUR. African communications and information systems interoperability exercise CMIS Div conducted the African interoperability exercise in Jul 2006 at Wonderboom Military Base. Planning was done in Nov 2006 and Jan 2007 to host the second Exercise AFRICA ENDEAVOUR in the RSA in Jul 2007. The United States European Command (USEUCOM) invited most of SADC to participate. The aim is to establish SADCBRIG interoperability
67
Multinational Exercises 2006/07
Exercise Achievement
EXERCISE ATLASUR. Maritime exercises between SA Navy and South American countries to enhance multinational conventional naval warfare capabilities in the South Atlantic Ocean The maritime exercise took place in Uruguay from 28 Oct to 7 Nov 2006. The SA Navy as well as Uruguayan, Brazilian and Argentinean navies participated.
Exercise BLUE RUVUMA. Humanitarian relief exercise based on a flood disaster scenario in one of the SADC member states The SAAF conducted the exercise in Tanzania supported by other services and divisions. The exercise took place from 9 to 13 Oct 2006.
68
DEFENCE OUTPUTS LANDWARD DEFENCE
69

• HIGHLIGHTS
• 4 638 Infantry conventional Reserves were
  utilised for external and internal deployments,
  administration and guards.
• 1 000 volunteers from Army Territorial Reserves
  transferred to Army Conventional Reserve
  (rejuvenation programme).
• Two Reserve companys and combat support elements
  deployed externally.
• Rejuvenation of SA Army (MSDS). 2 421 from Jan
  2005 intake appointed in Core Service System. Jan
  2006 intake 3 000 trained in first cycle. Jan
  2005 MSDS intake completed force preparation
  cycle with Exercises SEBOKA and YOUNG EAGLE

70

• CHALLENGES
• Mismatch between allocated funds and ordered
  commitments
• Revitalisation of SA Armys Technical Service
  Corps capability
• State of readiness is compromised by shortage of
  ammunition and general commodities
• Attrition of skilled technical personnel to the
  private sector.

71
DEFENCE OUTPUTS AIR DEFENCE
72

• HIGHLIGHTS
• 37 160 hours were flown of which 9 788 hours were
  in direct support of Joint Operations.
• Support to Italian and Brazilian air forces,
  trained VIP protectors for Pakistan.
• Air Force Reserves delivered 52 496 man-days,
  flew 2 737 hours.
• Exercise BLUE RUVUMA, Exercise NEW HORIZON (NH)
  5, Air Capability Demonstrations.
• HR transformation - increased numbers of black
  candidates for training.

73

• HIGHLIGHTS
• Two pupil pilot courses completed 33
  learners, 30 males, three females while 67 were
  black
• MSDS altogether 613 learners trained
• Vigorous initiaitives to retain scarce skills
  implemented

74

• CHALLENGES
• Significant levels of under-funding of operating
  budget
• Impact of late release of the Hawk Jet Trainer
  caused disruptions to the planned training and
  conversion schedule
• Deterioration of operational infrastructure and
  facilities

75
DEFENCE OUTPUTS MARITIME DEFENCE
76

• HIGHLIGHTS
• Four frigates and two of three new submarines are
  in service
• Involvement in SADC maritime matters, trained
  over 40 learners from various African countries
• Maritime Reaction Squadron established
• Increased representivity in combat domains
• Progress in rejuvenating the SA Navy as
  demonstrated by 480 MSDS recruits joining the
  Naval Reserves
• Public Private Partnership for Sea Safety
  Training Centre Transaction Advisor appointed

77

• CHALLENGES
• Current funding level - maintained only
  facilities required for force preparation.
• Loss of technical skills and expertise diving
  and technical domains in spite of measures to
  retain.
• Continuing deterioration of facilities.

78
DEFENCE OUTPUTS MILITARY HEALTH SERVICES
79

• HIGHLIGHTS
• Force preparation consolidated through Exercise
  LANCET.
• Intergration of the Health support systems with
  the requirements of the Strategic Defence
  Packages.
• Optimised alignment between Strategy and Plan
  roll-out.
• Renewal and maintenance of health facilities
  prioritised and commenced with at the three
  military hospitals.
• Race and gender demographic configuration of the
  SAMHS realigned.
• Interdepartmental training cooperation reinforced
  through the training of MSDS and other health
  care workers (Dept of Health).
• Military Psychological Institute (MPI) made
  significant strides in developing developing
  health readiness measurement instrument for
  military needs.

80

• CHALLENGES
• Availability and retention of health care
  practitioners.
• SAMHS facilities and renewal of main medical
  equipment.

81
DEFENCE OUTPUTS DEFENCE INTELLIGENCE
82

• HIGHLIGHTS
• Positive feedback from national clients - DI
  supports national intiatives on African
  continent, level of assessment national
  benchmark.
• Support provided to SANDF operations/exercises as
  required
• Training agreements with SAPS.
• CHALLENGES
• Recruitment and retention of personnel.
• Relocation of the division to a suitable
  facility.

83
DEFENCE OUTPUTS JOINT SUPPORT
84

• HIGHLIGHTS
• Commenced implementation of DEIS Master Plan
• Commencement of projects to upgrading of main ITC
  equipment.
• Good progress with migration of fragmented
  logistics information systems to OSIS and CALMIS.
• 2 000 tons unserviceable ammunition destroyed.
• Five of seven demolition ranges qualified.

85

• HIGHLIGHTS
• Ammunition disposal support to Mozambique (1 200
  tons).
• Four staff members of the Military Academy were
  appointed as Professors by University of
  Stellenbosch. 
• Full accrediation status was accorded to Warrant
  Officers Academy as a learning provider by SAQA.
• DPWs lack of capacity to maintain the facilities
  at an acceptable level resulting in
  non-compliance with the SAQA Act as learning
  providers that need to comply with specific
  provisions of the OSH Act, 1985.

86

• HIGHLIGHTS
• Expansion of the Military Police Agency
  ceremonial motorcycle fleet, soft - skin vehicles
  and radio communication equipment
• Joint training with of military police the SAPS
  and traffic deptartments.
• Improved representivity at middle management
  level.
• Rejuvenation of the Military Police HR component
  by therecruitment of 56 MSDS members.

87

• CHALLENGES
• Loss of expertise ICT domain greater reliance
  on contracted services provided by SITA.
• ICT obsolescence
• Maintenance backlog of facilities concern about
  DPW services
• Asset accounting management system not fully
  compliant with GRAP.
• The implementation of the NSF Pension
  dispensation ito the approved Legislation and
  GEPF Pension Fund Rules
• Migration of HR Satelite Centres back to Services
  and Divisions

88

• CHALLENGES
• Backlog in disposal of redundant and
  unserviceable ammunition.
• Loss of specialised logistic skills.

89
ANNUAL FINANCIAL STATEMENTSFINANCIAL YEAR
2006/2007
90
AIM OF THE PRESENTATION

• To present the
• Financial performance of the DOD for the
  Financial Year 2006/2007
• Financial position of the DOD at the end of the
  Financial Year 2006/2007

91
SCOPE

• Appropriation Statement
• Statement of Financial Performance
• Statement of Financial Position
• Notes to the Financial Statements
• Special Defence Account
• Challenges
• Highlights

92
APPROPRIATION STATEMENT
93

• Final
  Appropriation Expenditure 2006/07
  2006/07
• Rm Rm
• Administration 1 811,901 1 753,818
• Landward Defence 3 991,322 3 989,521
• Air Defence 2 513,893 2 513,893
• Maritime Defence 1 311,840 1 311,840
• Military Health Support 1 704,107 1
  704,107
• Defence Intelligence 147,494 147,494
• Joint Support 2 671,544 2 646,108
• Command and Control 1 470,065 1 470,065
• Special Defence Account 8 280,738 8 280,738
• TOTAL 23 902,904 23 817,584

94

• 2006/07
• Rm
• Final appropriation 23 902,904
• Less Actual expenditure 23 828,824
• Variance 74,080
• Plus Fruitless and wasteful expenditure
  0,494
• Plus Local and foreign aid assistance
  11,240
• Surplus 85,814
• Variance reasons Property Man Portfolio
  Rm58,083
• Committed capital works Rm24,924
• Unspent transfer payment Rm 0,512
• Unspent Rm 2,295
• Unspent as of Vote 0,36

95
Statement of Financial Performance (Income
Statement)

• REVENUE
• 2006/07 2005/06
• Rm Rm
• Annual Appropriation 23 902,904 22 670,482
• Departmental revenue 492,792
  729,136
• Local and foreign aid -
  38,750
• TOTAL REVENUE 24 395,696 23 438,368
• EXPENDITURE
• Current expenditure 14 511,711 12 563,888
• Transfers and subsidies 8 882,837 9
  715,847
• Expenditure for capital assets 434,276
  412,621
• Revenue to be paid back 492,792
  729,136
• Less Local and foreign aid 11,240 -
• TOTAL EXPENDITURE 24 310,376 22 692 356

96
Statement of Financial Position (Balance Sheet)

• 
  2006/07 2005/06
• Assets Rm Rm
• Current assets
• Unauthorised expenditure 20,625 495,824
• Fruitless and wasteful expenditure 0,959
  0,472
• Cash and cash equivalents 67,330 51,599
• Loans 12,362 12,362
• Prepayments and advances 176,471 144,659
• Receivables 688,693 103,317
• TOTAL ASSETS 966,440 808,233
• Liabilities
• Current liabilities
• Voted funds to be surrendered 85,814
  5,653
• Departmental revenue to be surrendered 37,919
  54,099
• Bank overdraft 690,987 646,665
• Payables 42,347 28,115
• Local and foreign aid unutilised -
  11,240

97
Notes to Financial Statements

• Departmental Revenue
• 2006/07 2005/06
• Rm Rm
• Sales of goods and services 175,512 232,844
• Fines, penalties and forfeits 2,272
  2,448
• Interest, dividends and rent on land 0,813
  0,337
• Financial transactions in assets and
  liabilities 314,195 493,507
• TOTAL REVENUE 492,792 729,136

98

• Local and Foreign Aid Assistance received in cash
• Received in 2005/2006 Rm38,750
• Less Utilised in 2005/2006 Rm27,510
• Sub total Rm11,240
• Less Utilised in 2006/2007 Rm11,240
• Local and foreign aid unutilised Rm 0

99

• Losses
• 2006/07 2005/06
• Rm Rm
• Losses through criminal conduct 0,006
  0,392
• Other material losses written off 14,812
  32,090
• Debts written off 1,631 67,292
• Forex losses 1,508 0,334
• TOTAL 17,957 100,108

100

• Unauthorised expenditure
• Balance at yearend 2005/2006 Rm495,824
• Less Transfer to receivables for recovery (not
  approved) Rm467,704
• Approved Rm 7,495
• Unauthorised expenditure awaiting authorisation
  Rm 20,625

101

• Fruitless and wasteful expenditure
• Balance at year-end 2005/2006 Rm0,472
• Fruitless and wasteful expenditure Rm0,494
• Less Amounts condoned Rm0,007
• Fruitless and wasteful expenditure
• awaiting condonement Rm0,959

102

• Cash and cash equivalents
• 2006/07 2005/06
• Rm Rm
• Cash on hand 39,941 32,961
• Cash with commercial banks 27,389 18,638
• TOTAL 67,330 51,599
• Prepayments and advances
• 2006/07 2005/06
• Rm Rm
• Travel and subsistence 49,846 45,588
• Prepayments 126,625 99,071
• TOTAL 176,471 144 659

103

• Receivables
• 2006/07 2005/06
• Rm Rm
• Staff debtors 46,652 39,389
• Other debtors 630,405 57,938
• Claims recoverable 11,636 5,990
• TOTAL 688,693 103,317
• Loans
• 2006/07 2005/06
• Rm Rm
• Public Corporations 12,362 12,362
• This represents a loan to the South African
  Forces Institute (SAFI) for the purpose of
  bridging finance

104

• Contingent liabilities
• 2006/07 2005/06
• Rm Rm
• MVA guarantees - 0,246 Housing loan
  guarantees 115,290 123,026
• Claims against the department 1 301,853 1
  002,321
• Other departments 89,525 29,412
• Environmental rehabilitation 7,170
  7,100
• TOTAL 1 513,838 1 145,874

105
Disclosure Notes to Financial Statements

• 2006/07 2005/06
• Rm Rm
• Commitments 1 632,353 1 359,847
• Accruals 272,966 155,100
• Irregular Expenditure 0,481 0,955

106
SPECIAL DEFENCE ACCOUNT
Balance Sheet

• 2006/07 2005/06
• Rm Rm
• Advances 12,049 8,842
• Trade and other receivables 117,066
  87,392
• Cash and cash equivalents 3 898,893 3 706,650
• Investments 16,930 15,653
• TOTAL ASSETS 4 044,938 3 818,537
• Reserves 3 441,586 2 763,145
• Creditors 605,202 1 055,392
• TOTAL EQUITY LIABILITIES 4 044,938 3 818,537

107
Income Statement

• REVENUE
• 2006/07 2005/06
• Rm Rm
• Transfer received 8 280,738 9 258 839
• Other revenue 97,720 202 637
• Interest received 0,010 0,008
• TOTAL REVENUE 8 378,468 9 461,484
• Less Expenditure 7 700,027 7 870,012
• NET PROFIT FOR THE PERIOD 678,441 1 591,472

108
Notes to the Financial Statements

• OTHER REVENUE
• 2006/07 2005/06
• Rm Rm
• Sales of strategic equipment 168,222 53,482
• Forex on the SDPP 51,366 192,636
• Other 3,555 12,698
• Subtotal 223,143 258,816
• Less Payable to the Revenue Fund 125,423
  56,179
• TOTAL OTHER REVENUE 97,720 202,637

109

• EXPENDITURE
• 2006/07 2005/06
• Rm Rm
• Major projects 6 512,874 6 727,245
• Other projects 359,167 385,732
• Operating projects 590,809 656,936
• Other 237,177 100,099
• TOTAL EXPENDITURE 7 700 027 7 870 012

110

• 2006/07 2005/06
• Rm Rm
• Estimated future expenditure 17 494,992 18
  686,150
• by Armscor
• Contingent Liability 252,872 23,957

111
CHALLENGES
112

• AUDIT QUALIFICATIONS
• Tangible and intangible capital assets
• Irregular expenditure
• Travel and subsistence
• Prepayment and advances
• Accruals
• Lease commitments
• Regional Services Council levies
• Contingent liabilities

113

• AUDIT QUALIFICATIONS
• Misclassification of expenditure
• Receivables
• Departmental revenue to be surrendered to Revenue
  Fund
• Commitments
• Clearing accounts
• Fruitless and wasteful expenditure
• Rank review audit

114

• AUDIT QUALIFICATIONS
• Comparatives
• Local and foreign aid
• Unauthorised expenditure
• Systems

115
HIGH LIGHTS
116

• Insignificant under-spending
• Development of financial statements
• Submitted on time
• Competency levels of team
• Improvement of awareness among stakeholders

117
CONCLUDING REMARKS
118

• During the period under review the DOD has
  managed to maintain the balance between
• Ensuring that appropriate defence capabilities
  are provided in order to honour ordered
  commitments within available resources.
• Ensuring that sound corporate governance is
  enhanced and institutionalised.
• Promoting accelerated service delivery, while
  creatively managing the retention of scarce
  skills.
• Finding creative means of developing sustainable
  and reliable accounting systems for its
  resources.

119
QUESTIONS
120
Siyabonga