1 Defence Department of Defence Information Brief to the Portfolio Committee on Defence Department of Defence’s 2007/08 MTEF budget (Vote 20). Presented by Mr B.J. Engelbrecht Director Budgeting
Dec 17, 2015
1DefenceDepartment of Defence
Information Brief to the Portfolio Committee on Defence
Department of Defence’s 2007/08 MTEF budget
(Vote 20).
Presented by Mr B.J. EngelbrechtDirector Budgeting
2DefenceDepartment of Defence
INTRODUCTION
• Planning and Budgeting guidelines – Sep 05
• Plan and budget scrutiny – May/Jun 06
• MTEC submission with Policy proposals to NT – Aug 06
• MTEC deliberations – Sep 06
• Final letter of allocation – Feb 07.
3DefenceDepartment of Defence
AIM
To present Defence’s 2007/08 budget as incorporated in the 2007 Estimate of National Expenditure and tabled by the Minister of Finance on 21 February 2007 to members of the Portfolio Committee on Defence.
4DefenceDepartment of Defence
SCOPE
• Aim.
• Historical trends.
• MTEC Submission and outcome.
• Vote 20 Budget allocations and trends.
• Probable changes to structure.
• Conclusion.
• Questions/Discussions.
5DefenceDepartment of Defence
6DefenceDepartment of Defence
Defence and GDP
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Defence as % of GDP % GDP Growth
7DefenceDepartment of Defence
DOD Budget Analysis
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Defence as % of GDP Defence as % of Gov Expenditure
•Declined from 15,5% of GE (1989) to projected 4,4% in 2009
•Declined from 4,4% of GDP (1989) to projected 1,2% in 2009
8DefenceDepartment of Defence
DOD HR BUDGET
•Budget principle – (HR Commitment)
•19% (89) → 58% (98) → 35% (02) → projected 40% (09)
•Changes to accounting policy – impact
•MSDS policy impact
•Impact of incentive schemes
•Perception
0%
10%
20%
30%
40%
50%
60%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Personnel Budget Operating Budget Armament Acquisition Budget
Integration
Strategic Defence Procurement Programme
9DefenceDepartment of Defence
10DefenceDepartment of Defence
MTEC SUBMISSIONSer Policy Proposals (Options) 07/08
(Rm)08/09 (Rm)
09/10 (Rm)
1 General Modernization Capacity
Strategic Airlift Capability
48 984 1 868
Intelligence Systems
126 167 129
Op Vehicles
Total
345
519
432
1 583
500
2 497
2 ICS Renewal (Deficit last year) (New Requirement)
466150
37375
208295
3 Infrastructure (Facilities) (SAMHS - OECP)
341186
280
1940
4 MSDS (Army) (SAMHS – OECP)
31799
21499
20299
5 Landing Ships 0 0 0
6 Works Regiment Concept 0 0 0
7 Total 1 612 1 999 3 287
11DefenceDepartment of Defence
2007/08 2008/09 2009/10
2006 MTEF ALLOCATIONS
Departmental baseline
CHANGES TO BASELINE
Salary Adjustments
Military Skills Development
Remuneration of Health Professionals
Health Support
General modernisation capacity
Strategic Airlift Capability
Intelligence Capability
Operational Vehicle Fleet
Strategic Munitions
Foreign exchange rate adjustments
24 665 776
24 665 776
1 256 479
10 000
50 000
14 000
300 000
48 000
100 000
152 000
-
882 479
25 733 754
25 733 754
2 282 600
21 000
100 000
45 000
1 000 000
984 000
8 000
8 000
-
1 116 600
25 925 770
25 925 770
2 706 000
79 000
300 000
77 000
2 000 000
1 896 000
50 000
54 000
250 000
-
2007 MTEF ALLOCATIONS 25 922 255 28 016 354 28 631 770
VOTE 20: DEFENCEMTEF ALLOCATIONS: 2007/08 – 2009/10 (Final Letter of Allocation from NT)
12DefenceDepartment of Defence
13DefenceDepartment of Defence
2007 MTEF Baseline Allocation per Economic Classification
Economic Classification2006/07R'000
Growth2007/08R'000
2008/09R'000
2009/10R'000
Current Payments 14,912,947 6.82% 15,930,305 17,222,080 19,016,672 Compensation of Employees 9,085,985 4.27% 9,474,247 9,952,787 10,525,924 Goods and Services 5,826,962 10.80% 6,456,058 7,269,293 8,490,748Transfers and Subsidies 8,691,707 10.53% 9,607,151 10,370,172 9,167,376 Provinces/Municipalities 3,699 0 0 0 Departmental Agencies/Accounts 8,288,671 8.82% 9,019,934 9,779,878 8,565,999 Public Corporation/Private Enterprises 396,286 23.22% 488,314 512,393 537,276 Non Profit Institutions 3,051 12.49% 3,432 3,576 3,726 Households 0 95,471 74,325 60,375Payment for Capital Assets 271,650 41.65% 384,799 424,102 447,722 Buildings/Fixed Structures 47,497 64.45% 78,109 81,656 85,739 Machinery/Equipment 222,598 37.39% 305,830 341,639 361,145 Software/Intangible Assets 1,555 -44.69% 860 807 838TOTAL 23,876,304 8.57% 25,922,255 28,016,354 28,631,770
14DefenceDepartment of Defence
Main Programme2006/07R'000
Growth2007/08R'000
2008/09R'000
2009/10R'000
Administration 1,759,512 9.95% 1,934,669 2,054,175 2,345,774
Landward Defence 4,061,047 3.80% 4,215,453 4,507,860 4,851,545
Air Defence 2,504,488 5.86% 2,651,180 2,871,355 3,175,552
Maritime Defence 1,319,173 5.24% 1,388,315 1,488,024 1,671,187
Military Health Support 1,683,822 8.75% 1,831,201 2,000,621 2,278,324
Defence Intelligence 143,662 12.83% 162,101 164,594 181,915
Joint Support 2,713,717 20.01% 3,256,665 3,612,147 3,845,067
Force Employment 1,410,145 4.32% 1,471,128 1,546,515 1,725,310
Special Defence Account 8,280,738 8.83% 9,011,543 9,771,063 8,557,096
TOTAL 23,876,304 8.57% 25,922,255 28,016,354 28,631,770
2007 MTEF Baseline Allocation per Main Programme
15DefenceDepartment of Defence
Budget Overview• Annual growth over MTEF
• 11,9% (excl SDP)• 6,2% (incl SDP)
• 03/04 Rb 20,5 to Rb 25,9 in 07/08 to Rb 28,6 in 09/10.• Additional funding Rb 1, 26 (07/08), Rb 2,3 (08/09) and
Rb 2,7 (09/10)• General modernisation capability• MSDS• Foreign exchange rate adjustments• Remuneration of Health professionals• Strategic Munitions (09/10)• Salary Adjustments
16DefenceDepartment of Defence
Programme 1: Administration
• Admin has doubled due to devolution of funds from NDPW.
• Property Management – 12,3% average growth over MTEF.
• Departmental Direction – 27,8% increase due to relocation of NCACC inspectorate.
• DFR increase due to increased representation abroad.
17DefenceDepartment of Defence
Programme 2: Landward Defence
• 6,1% annual average increase over MTEF• MSDS• Op Veh fleet modernisation
• 41,6% increase in General Training• Expansion of conventional reserves training• MSDS member intake
• 12,6% and 11,4% increase in Artillery & Air Defence Artillery respectively is due to the commissioning of new generation art equipment.
18DefenceDepartment of Defence
Programme 3: Air Defence • 8,2% annual average growth over MTEF.• Base Support Capability – 31,32% of programme –
increase with 6,5% over MTEF for integrating new training and fighter aircraft• Systems integrity• Infrastructure• Training
• Increase in Strategic and Operational Direction sub-programmes over MTEF are due to acceptance and integration of light utility helicopters and Hawk training aircraft.
19DefenceDepartment of Defence
Programme 4: Maritime Defence
• 8,2% annual average growth over MTEF.• Decrease of 52,6% in Combat Capability and increase of
118,8% in Logistic Capability are because all items with log correlation are placed under Logistic Capability subprogramme.
• Increase of 15,3% in the Base Support Capability• Increased M & R of vehicles purchased in 2005/06• Increased use of contract workers in messes.
20DefenceDepartment of Defence
Programme 5: Military Health Support• 10,6% annual average growth over MTEF• 14,3% increase in Strategic Direction (06 to 07)
• Increased staff levels • World Military Golf Championships (CISM)
• 23,1% increase in Specialist/Tertiary sub-programme (06 to 07)• Skills allowance• Dignitary ward at 1 Mil & 2 Mil• Increased costs of referred patients• Ambulance & support vehicles
• MTEF increase of 19,6% and 10,8% in the Specialist/Tertiary & Training sub-programmes respectively• Increased MSDS intake• Trg of MSDS members in emergency care for 2010.
• Decrease of 11,6% in Product Support - internal relocation to Area & Spec/Tertiary to alleviate drug shortages.
21DefenceDepartment of Defence
Programme 6: Defence Intelligence
• 623,2% increase in Strategic Direction is due the centralisation of personnel related expenditure.
• Decrease of 22,7% in Operations is due to certain commodities relocated to the Support Services subprogramme.
• The 13,9% increase in Support Services is due to increased emphasis on recruitment, training and infrastructure rejuvenation at training units.
22DefenceDepartment of Defence
Programme 7: Joint Support• 12% average annual growth over MTEF• Increase of 21,3% in the Joint Logistic Services over MTEF
is due to Infrastructure investment• 2007/08 Rm 80, 2008/09 Rm 230
• Increase of 11,3% in CMI Services over MTEF is due to information and communication technology enhancements• 2006/07 Rm 50, 2007/08 Rm 118, 2008/09 Rm 200
• Increase of 17,3% in Joint Training is due to additional allocation for • SA War College• Warrant Officers’ Academy• Training of MSDS officers at the SA Military Academy
23DefenceDepartment of Defence
Programme 8: Force Employment
• 7% average annual growth over MTEF period• Special Operations increase with 13,7% on average
over MTEF period.• Personnel retention (Incentive scheme)• Acquisition of specialised equipment
• Decrease in Support to the People is due to the gradual withdrawl of support to the SAPS.
• Regional Security• Increase in OP MISTRAL due to replacement of
equipment.• OP FIBRE closes in July 2007 – replacement of
equipment over MTEF• Increases in Strategic & Operational Direction are due
to the effort to ensure fully staffed capabilities in the operations environment.
24DefenceDepartment of Defence
Programme 9: Special Defence Account• 1,1% growth over MTEF period (impact of SDPs)• The Procurement Services sub-programme grow
on average with 21,1% annually over the MTEF mainly due to the strategic airlift capability:• Rm 577 in 07/08 • Rb 1,5 in 08/09 • Rb 1,9 in 09/10
• 25,1% average increase in the Intelligence related sub-programme:• Rm 221 in 07/08• Rm 255 in 08/09• Rm 307 in 09/10
25DefenceDepartment of Defence
26DefenceDepartment of Defence
OBLIGA-TION
(Rm)
ACTUAL PERFOR-MANCE 2006-12-31 (Rm)
PERF VS OBLIGA-TION %
CUMULATIVE PLANNED
PERFORMANCE 2007-03-31
(Rm)
CUMUL. ACTUAL vs PLANNED %
CLAIMS UNDER
CONSIDE-RATION
(Rm)
1,194 1,102 92.33% 1,194 92.33% 39
27DefenceDepartment of Defence
OBLIGATION (Rm)
ACTUAL PERFORMANCE
2006-12-31 (Rm)
PERF VS OBLIG %
CUMULATIVE PLANNED
PERFORMANCE 2007-03-31
(Rm)
CUMUL. ACTUAL vs PLANNED %
CLAIMS UNDER CONSIDE-
RATION (Rm)
553 142 25.75%
188 75.66% 6
28DefenceDepartment of Defence
OBLIGATION (Rm)
ACTUAL PERFORMANCE
2006-12-31 (Rm)
PERF VS OBLIG %
CUMULATIVE PLANNED
PERFORMANCE 2007-03-31 (Rm)
CUMUL. ACTUAL vs PLANNED %
CLAIMS UNDER CONSIDE-
RATION (Rm)
4,252 2,95369.44
% 3,616 81.66% 1,595
24
29DefenceDepartment of Defence
OBLIGATION (Rm)
ACTUAL PERFORMANCE 2006-12-31 (Rm)
PERF VS OBLIG %
CUMULATIVE PLANNED
PERFORMANCE 2007-03-31 (Rm)
CUMUL. ACTUAL vs PLANNED %
CLAIMS UNDER CONSIDE-RATION
(Rm)
5,050 3,434 67.99% 3,130 109.71% 42
30DefenceDepartment of Defence
OBLIGATION (Rm)
ACTUAL PERFORMANCE 2006-12-31
(Rm)
PERF VS OBLIG %
CUMULATIVE PLANNED
PERFORMANCE 2007-03-31
(Rm)
CUMUL. ACTUAL vs PLANNED
%
CLAIMS UNDER
CONSIDE-RATION (Rm)
2,941 1,811 61.57% 1,979 91.48% 41
31DefenceDepartment of Defence
OBLIGATION (Rm)
ACTUAL PERFORMANCE
2006-12-31 (Rm)
PERF VS OBLIG %
CUMULATIVE PLANNED
PERFORMANCE 2007-03-31 (Rm)
CUMUL. ACTUAL vs PLANNED %
CLAIMS UNDER CONSIDE-RATION
(Rm)
1,121 708 63.15% 747 94.83% 23
32DefenceDepartment of Defence
Defence Industrial Participation31 December 2006
PROJECT OBLIGATION (Rm)
ACTUAL PERFORMANCE 2006-12-31
(Rm)
PERF VS OBLIG %
CUMULATIVE PLANNED
PERFORMANCE 2007-03-31
(Rm)
CUMUL. ACTUAL
vs PLANNE
D %
CLAIMS UNDER
CONSIDE-RATION
(Rm)
CORVETTE 2,941 1,811 61.57% 1,979 91.48% 41
SUBMARINE 1,121 708 63.15% 747 94.83% 23
LUH 1,194 1,102 92.33% 1,194 92.33% 39
HAWK 4,252 2,953 69.44% 3,616 81.66% 1,595
GRIPEN
5,050 3,434 67.99% 3,130109.71
% 42
MARITIME HELICOPTER
553 142 25.75% 188 75.66% 6
TOTAL (ZAR) 15,111 10,149 67.17% 10,853 93.51% 1,747
33DefenceDepartment of Defence
Possible changes to programmes• C HR (Administration Programme) which will include the following elements.
• Joint Training• Service Corps• HR Support Centres• EO & AA• Elements of CPP
• Admin: The roll-down of some elements of FMD to the services• J Sup:
• Roll-down of certain CMI elements to the services.• Certain Log elements to be moved to the services
• Total programme review underway• Consolidation of Research and Development focus.• Transfer Payments:
• Establish Defence Evaluation and Research Institute.• Transfer of Naval Dockyard to Armscor.
34DefenceDepartment of Defence
CONCLUSIONDefence is supporting Government’s Plan of
Action as alluded to in the Strategic Business Plan.• Defence’s budget composition reflects cluster priorities.• Capital renewal of Landward Defence and Military Health Service prime mission equipment remains mainly unfunded.• Defence has the ability to expend additional funding through capital investment in the replacement of prime mission equipment subject to defence related industry capability and capacity.
35DefenceDepartment of Defence
36DefenceDepartment of Defence
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