dod annual report for the fy 2006/07 confidential1 presentation of the dod annual report for the...

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DOD ANNUAL REPORT FOR THE FY 2006/07

PRESENTATION OF THE DOD

ANNUAL REPORT FOR THE FY2006/07

TO THE SELECT COMMITTEE ON SECURITY AND

CONSTITUTIONAL AFFAIRS

20 NOVEMBER 2007

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AIMAIM

• To present to the Portfolio Committee on Defence( PCD), the non-financial and audited financial performance report on the work of the Department of Defence for the financial year ended on 31 March 2007, in compliance with section 40(1)d of the PFMA,1999 ( Act No. 1 of 1999)

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It is requested that the Portfolio Committee on Defence

approves the DOD Annual Report for the FY2006/07.

DECISION REQUIREDDECISION REQUIRED

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SCOPE & APPROACHSCOPE & APPROACH

•INTRODUCTION

•OUTLOOK OF THE REPORT

•PROGRESS MADE

•ANNUAL PERFORMANCE AGAINST THE PLAN FY2006/07

•TIMELINES

•CONCLUDING REMARKS

•QUESTIONS AND ANSWERS

•FINANCIAL PERFORMANCE INFORMATION FY2006/07

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Introductory Statement

The year under review has marked an important chapter in the history of the Department of Defence. It has seen the affirmation of our commitment to the vision of ensuring a better life for all and an entry into the Age of Hope.

This commitment has been realised through those activities which best equip the Department to pursue its strategic intent and, in so doing, support the consolidation of democracy in the country, the region and the continent.

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INTRODUCTION

The DOD has demonstrated its commitment to ensuring effective Defence for a democratic South Africa through enhancement and maintenance of the strategic defence packages which include:

• Strengthening of maritime capabilities through the commissioning of three MEKO Class frigates, the SAS ISANDLWANA,SAS SPIOENKOP, SAS MENDI, and one Type-209 submarine, the SAS MANTHATISI

• Strengthening of air capabilities marked by the arrival of sixteen Hawk MK 120 lead-in fighter trainers and sixteen Augusta Westland A-log light utility helicopters

Contribution to strengthening the African Agenda as demonstrated by participation in the following:

• Election processes in the Comoros, the DRC, Lesotho and Madagascar• Peace support and post-conflict reconstruction operations in Burundi,Ethiopia,

Eritrea, the Sudan and Côte d’Ivoire.

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INTRODUCTIONContribution to security - related objectives of the AU as epitomized by increased

participation in bi and multilateral agreements as well as the establishment of the African Standby Force for the SADC region.

Contribution to NEPAD through participation in redefining the Defence industry sector strategy and widening of participation within this regulated industry

Embracing the Skills Revolution Agenda and Accelerated Shared Growth Initiative through:

• increased participation within the MSDS and the Youth Foundation Programme • strengthening the DOD’s contribution towards social responsibility through the

Works Regiment and re-skilling of ex - combatants through the National Skills Fund

Commitment to gender mainstreaming has been demonstrated through the increased female appointment to higher ranks.

Compliance with corporate governance prescripts on sustainable planning, and accountability reporting

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OUTLOOK OF THE REPORTOUTLOOK OF THE REPORTThe Draft DOD Annual Report covers the following :Chapter 1: Strategic OverviewChapter 2: Defence AdministrationChapter 3: Force Employment Chapter 4: Landward DefenceChapter 5: Air DefenceChapter 6: Maritime DefenceChapter 7: Military Health SupportChapter 8: Defence IntelligenceChapter 9: Joint SupportChapter 10: Special Defence AccountChapter 11: Organisational Structure and

Human Resources ManagementAppendices A:Status of the SANDF reserves

B:Defence Diplomacy C:Report on foreign aid assistance

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CHAPTER 2: PROGRAMME 1: DEFENCE ADMINISTRATION

Subprogramme : Political DirectionSubprogramme : Political Direction

HighlightsThe Minister of Defence provided political direction to the DOD ensuring that required defence commitments were met and appropriate defence capabilities were provided within the allocated budget.

• Issued ministerial priorities for the FY2006/07•The Minister‘s worksession was held during the period under review.•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.•Focussed attention was directed to the ongoing transformation of the Military Justice System as well as restructuring of the Department for greater effective and efficiency.•The MOD gave direction to the transformation of the Defence Industry in conjunction with the Mninister 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 Mil Obs in Sudan, Ethiopia and Eritrea.•Contributed to deepening of democacy in Africa through series of initiatives notably supporting election in Comores, Madagascar and Lesotho

Output detail – Table 2.1

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Subprogramme : Departmental DirectionSubprogramme : Departmental Direction

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•Implemented perfomance improvement mechanisms in order to optimise compliance with Government prescripts and accountability.•DOD activities refocused in terms of DOD strategic objectives and performance against plan.•Extensive progress has been made in realising the Minister’s directive regarding the transformation of the Department to provide for optimal functionality in terms of internal, external and allocative efficiency

Output detail – Table 2.2Challenges

Balancing the allocated resources with government commitmentsImpact of the delayed implementation of the IFMS on the integration of the Departmental systems

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Highlights• Departmental Enterprise Information Systems (DEIS) formalised and approved• Review plan for the DEIS regulatory framework completed

Output details – Table 2.3• Most objectives and targets met as planned

Performance and Service Delivery Improvement- Table 2.4

Challenges

The DOD CMIS Policy Development and Maintenance Plan is under continuous revision.

Subprogramme GITOSubprogramme GITO

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Subprogramme Policy and PlanningSubprogramme Policy and PlanningHighlights•The subprogramme managed to render policy advice to the Department, as well as drafted, negotiated and concluded bilateral and multilateral defence agreements with other states. •Ensured that all statutory documents are consulatively developed , approved and timeously submitted to the appropriate oversight functionaries and organs of state•Provision of research and analytic support to defence policy and planning actvities was rendered in line with domestic and international law•Spearheaded the DOD structure management, refocusing of Command bodies, as well as the systemic perfomance management through the Balanced Score Card•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

Output details – Table 2.6Performance and service delivery improvement are shown in Table 2.7

Challenges•There is lack of clarity on nodal points in respect of functions that relate to cluster and multilateral commitments. •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.

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Subprogramme Financial ServicesSubprogramme Financial Services

Highlights•The provision of a cost-effective financial management service to the Minister of Defence, Secretary for Defence and the Chief of the SANDF •Development and incorporation training module on section 45 of the PFMA, 1999 to ensure compliance with the evolving regulatory framework• Provision of a professional financial management service

Output details – Table 2.8Performance and service delivery improvement are shown in Table 2.9

Challenges•The old financial management information system resulting in the DOD’s current inability to achieve unqualified financial statements unless exemptions from reporting requirements are authorised by National Treasury. •The delayed implementation of the National Treasury’s initiatives of the Financial Management Improvement Programme (FMIP) and the Integrated Financial Management Information System (IFMS).

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Subprogramme Acquisition ServicesSubprogramme Acquisition ServicesHighlights

•First two aircafts were delivered to Gabon.• A minimum of 14 000 orders were processed amounting to more than R1. 867 billion. •Four (4) Public Private Partnerships involving different arms of Services, were considered during the period under review•Public Public Partnership with Armscor for the transfer of the Naval Dockyard was finalised and the handing over is planned for September 2007. •Within the Alternative Service Delivery (ASD) 28 approvals were processed out of 30 requests for outsourcing received, thus translating to 93,3 % throughput.•A total of 11 fully certified A-09 Light Utility Helicopters were delivered to the SA Air Force during this period.

•Production of all four maritime helicopters has been completed.

•The first production Hawk aircraft was delivered to 85 Combat Flying School at Air Force Base Makhado.

•Delivery of the first Gripen Aircraft to Test Flight Development Centre (TFDC).

•The Mirage F1 package was successfully sold and a 5-year purchase contract was signed.

•Sixteen Hawk aircraft were delivered to AFB Makhado.

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Highlights

• Four audits conducted by the Auditor General, as well as the office of IG DOD, on Procurement Service Centres (PSC) and the reports received were favourable.

• Arrival of the first submarine, SAS’MANTHATISI, in April 2006 and acceptance of the second submarine in Germany in March 2007.

• Commisioning of frigate SAS ISANDLWANA in September 2006 and handing over SAS MENDI in February 2007

Output details – Table 2.10 improvement are shown in Table 2.11Challenges and interventions• Delay in the establishment of the Defence Matériel Division results in lack of structure and

capacity to address policy imperatives.• Ground-based Air Defence System (GBADS). Non-performance by the main contractor (Denel)remains a serious problem. The

consequences are:-a delay of some three years in contractual deliveries; and - a major deviation from planned cash flow, which is managed through redirection of funds in

the short term.

Subprogramme Acquisition Services( contd)Subprogramme Acquisition Services( contd)

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HIGHLIGHTS– The Defence Inspectorate Division hosted the consultative conference from 3 to 7

July 2006 wherein the SADC Defence Inspectors General Forum which will be an arm of the Association of Defence Auditors Conference (ADAC) was established

Output detail – Table 2.12• Performance and Service delivery improvement are shown in table 2.13

Challenges • Full implementation of the audit tool system, whose phased roll out is currently

aggressively pursued in collaboration with SITA.

Subprogramme Inspection ServicesSubprogramme Inspection Services

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HIGHLIGHTS– Mission Readiness Training. Programmes conducted in order to raise

members awareness of human rights and equity issues.

– Gender Audit. A reliable database is now available on women in terms of their military and academic qualifications.

– 2nd National Conference on Women in Defence. EOCD hosted the Second National Conference on Women in Defence, at the Kopanong Hotel Conference Centre from 24 to 26 May 2006.

– SADC Women‘s Peace Table. EOCD also hosted this seminar in Tshwane from 27 to 29 November 2006. Ten countries participated. Best practices on the promotion of gender equity in the regional armed forces were shared.

Output detail – Table 2.14• Most objectives and targets were met as planned• Performance and service delivery improvement are shown in Table 2.15

Challenges • While the set target of 53,7 % of Blacks in Senior Management has been achieved,

gender transformation remains a challenge. Remedial strategies are being implemented.

Subprogramme EO and AASubprogramme EO and AA

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Command and Control (C SANDF)Highlights• Details in Chapters 2 to 8 • Output details – Table 2.5• Readiness of military capabilities maintained which is in accordance with employment

requirements• Operations were conducted successfullyChallenges• Mismatch between resource allocation from the Government and the expected DOD readiness

levels explained in Chapters 2 to 8• Military capabilities required for Peace Support Operations are approaching sub-critical levels

Corporate Staff Division

Corporate Staff Office

• Output details – Table 2.16

Strategy Plan Office (SPO) • Output details – Table 2.17• Crisis Communication Centre migrating to CJ Ops/CDI• Improved provision of management information to the DOD command cadre as a result of strategic

planning and reporting enabler “GEJIMA”

Programme 1: Defence Administration (SANDF)Programme 1: Defence Administration (SANDF)

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Defence Legal Services DivisionHighlights• Output details – Table 2.19• Establishment of amalgamated Defence Legal Services Division• Participation in 20 exercises, 24 and 26 shorter deployments• Recruited 14( mainly Reserves) as military legal practitioners into RegularsChallenges operations • Lack of skilled military legal practitioners, trained interpreters• Non-availability of members of Courts of Military Appeal – snr military practitioners not always

available on scheduled dates as determined by the chairperson of the Court of Military Appeal

Religious Services Highlights• Output details – Table 2.20• Moral Regeneration Conference on 28 Jan to 1 Feb 07 – Dep Pres keynote speaker• Involvement with SADC wrt religious matters/HIV/AIDS CHATSEC programme• Support to deployed members and families• 7 Chaplains deployed• 4 Reserve Chaplains’ workshops held in various regions

Programme 1: Defence Administration SANDF (Continued)


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Defence Corporate Communication

Highlights• Output details – Table 2.21• Favourable media coverage received on the rejuvenation and re-equipping of the South African National

Defence Force (SANDF) • Research indicating increased public support for the role of the DOD in peace support operations in the

region.Challenge. Lack of competent communication functionaries. Reserve Force OfficeHighlights• Output details – Table 2.23• Increasingly successful participation of the Reserve component in external deployments of SANDF• Increasing institutionalisation of the Reserve Force component through internal and external marketing

initiativesChallenge. Military Skills Development System (MSDS) not operating as an optimal feeder for the Reserve

component in accordance with the design strategy.

Defence Foreign Relations

Highlights • Output details – Table 2.25• Increasing consolidation of the DOD presence regionally and internationallyChallenge. Organisational structure is not yet fully aligned outputs



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DOD ANNUAL REPORT FOR THE FY 2006/07Chapter 3: Programme (8) Force Employment Chapter 3: Programme (8) Force Employment

CHAPTER 3: PROGRAMME (8): FORCE EMPLOYMENT

Highlights• Output details – Tables 3.1 to 3.4• All primary force employment commitments have been met• To enhance and maintain comprehensive Defence capabilities

– Detail in tables on joint and multinational exercises: 3.2 & 3.3• Supporting People of South Africa

– Details in Table 3.1• Promote Peace, Security and Stability in the Region and Continent - Detail in Table 3.1

Challenges– Capabilities required for Peace Support Operations are constrained by the mismatch

between allocated resources and government ordered commitments.

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External Force Employment Achievements 2006/07

Chapter 3: Programme 8: Force Employment (continued)


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 d’Ivoire

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 d’Ivoire

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

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

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External Force Employment Achievements 2006/07 (continued)




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 MARINERMadagascar

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.

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

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DOD ANNUAL REPORT FOR THE FY 2006/07Chapter 3: Programme 8: Force Employment

(continued)Chapter 3: Programme 8: Force Employment

(continued)


Achievement

Op INTEXO Borderline control

1 111 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.

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).

Internal Force Employment Achievements 2006/07

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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

Ex MATHOLESANDF joint Peace - keeping Operations exercise (field training exercise) to test and evaluate doctrine on peace support operations

The exercise was cancelled due to non-availability of force structure elements. The focus will be placed on planning and preparing of forces for Exercise NDLOVU planned for 2009

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.

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

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Multi-national Exercises 2006/07




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.

Ex INTEROP EAST and WEST. Naval exercise with Africa countries on the east and west coast of Africa to build trust capacity and capability in the navies in the SADC regions

INTEROP EAST was conducted as part of Exercise BOURBON from 28 Oct to 14 Nov 2006. Due to the operational commitments of the SA Navy the force structures were changed at very short notice. No helicopters were deployed as originally planned due to the SA Navy’s Operational Commitments. INTEROP WEST took place in 2006. SAS AMATOLA visited four African countries; Nigeria, Cameroon, Gabon and Sao Tome. Participated in the Nigerian Navy Presidential Fleet Review to mark their 50th anniversary.

Exercise BOURBON. Combined search and rescue exercise between the DOD, DTA and Environmental Affairs as well as French forces in La Reunion

This exercise was conducted as part of Exercise INTEROP EAST. The exercise took place at Reunion from 29 Sep to 14 Nov 2006 with the French Indian Ocean Navy. The objectives of the exercise were achieved. The same vessels were utilised in both exercises.

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Multinational Exercises 2006/07




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

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.

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Highlights• Output details – Tables 4.1 to 4.3• SA Army Future Vision – SA Army Strategic Profile which defines the desired effets and capabilities was completed • Successfully provided forces for 11 external and 3 internal operations• 4 638 Infantry conventional Reserves were utilised for external and internal deployments, administration and guards. • As a contribution to the rejuvination of the Army Conventional Reserves,transferred more than 1 000 volunteers from Army

Territorial Reserves to Army Conventional Reserve • Provided 2 Reserve coys and combat support elements for external deployment• 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 prep cycle with Exercises SEBOKA and YOUNG EAGLE • Training

– Infantry: 131/129 learning opportunities 6719/7073 learners– General Jnr Leader: 15/18 learning opportunities 1 466/1 825 learners

Challenges• Mismatch between allocated funds and ordered commitments• Revitalisation of SA Army’s 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.

CHAPTER 4: PROGRAMME 2: LANDWARD DEFENCECHAPTER 4: PROGRAMME 2: LANDWARD DEFENCE

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Highlights • Output details – Tables 5.1 to 5.2• 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, • 2 pupil pilot courses completed : 33 learners, 30 males, 3 females while 67% were black• MSDS – altogether 613 learners trained• Vigorous initiaitives to retain scarce skills implemented.• Training

– Air Space Controllers: 16/9 learning opportunities - 99/65 learners– Pilots: 2/2 33/34 learners– Flying Instructors: 2/2 learning opportunities – 16/12 learners

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.

CHAPTER 5: PROGRAMME 3: AIR DEFENCECHAPTER 5: PROGRAMME 3: AIR DEFENCE

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Highlights• Output details – Tables 6.1 to 6.2• 1 frigate and 2 strike craft – exercises in East/West Africa• Exercise TRANSOCEANIC, ATLASUR, DIVE EX 06 , INTEROP EAST/WEST• Four frigates and 2 of 3 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

Training– Functional and warfare: 135/169 learning opportunities 1 847/2 185 learners – Technical: 74/74 learning opportunities 646/835 learners – 216 technically trained

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.

CHAPTER 6: PROGRAMME 4: MARITIME DEFENCECHAPTER 6: PROGRAMME 4: MARITIME DEFENCE

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Highlights• Output details – Tables 7.1 to 7.3• Supported all operations and exercises • 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• Training:

– Nursing diploma: 237/280 diploma students (Year 1 to 4). – 40 learners completed diploma in Dec 2006 – Military Health Training 190/250 learning opportunities 2 989/4 047 learners – Military Training. 3/2 MSDS intakes 2 974 /1 945 learners.

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

CHAPTER 7: PROGRAMME 5: MILITARY HEALTH SERVICE

CHAPTER 7: PROGRAMME 5: MILITARY HEALTH SERVICE

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Highlights• Output details – Table 8.1• 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• Training. Functional intelligence courses and skills programmes addressing the analysis, collection and

counter-intelligence domains 17/18 216/90 learners

Challenge. Recruitment and retention of personnel

CHAPTER 8: PROGRAMME 6: DEFENCE INTELLIGENCECHAPTER 8: PROGRAMME 6: DEFENCE INTELLIGENCE

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CMIS Division Highlights• Output details – Tables 9.2 to 9.3• Supported 12 operations and 3 exercises• Received additional Rm50 to initiate implementation of DEIS Master Plan • Participation in joint/multinational exercises, Exercise Combined ENDEAVOUR• Upgrading of main equipment – projects • Reserve man-days 43 133 increased to meet division’s needs• Training

– 309/184 learning opportunities - 1 774 /2 159 learners Challenges• Loss of expertise – ICT domain greater reliance on contracted services provided by SITA• ICT obsolescence• Lack of personal and signals equipment, serviceability of vehicles• National moratorium on destruction of records – Dept of Arts and Culture manages submission to Cabinet

CHAPTER 9: PROGRAMME 7: JOINT SUPPORTCHAPTER 9: PROGRAMME 7: JOINT SUPPORT

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DOD Logistic Agency

Highlights • Output details – Table 9.6• Good progress with migration of fragmented log info systems to OSIS• 1 000 tons unserviceable ammo demolished, 5 of 7 demolition ranges qualified• Good progress with capturing of assets in register• Successful purchasing of materie’l handling equipment• Environmental issues incorporated during operations. Env practitioners deployed• Transfer of Technical Service Corps function/units to SA Army started• Training of 761 MSDS recruits in all logistic - related fields• Trg 187/191 learning programmes 98% learning opportunities has been achieved, 3 043 learners (104%)Challenges• Maintenance backlog of facilities concern about DPW services• Asset accounting management system not fully compliant with GRAP• Backlog in disposal of redundant and unserviceable ammunition• Renewal and transformation of Reserves, lack of specialist logistic personnel • Training Institutions – non-alignment with SAQA, lack of competent ETD practitioners, deteriorating facilities• DOD Air Supply Unit – deteriorating facilities and lack of equipment• Land reform and restitution, delays in finalising: Regional Land Claims Commissioner’s priorities in conflict with DOD’s.

Unexploded ordnance at Hell’s Gate/Madimbo corridor• National Codification Bureau not fully established – Dec 08• Lack of a single DOD Log management info system

CHAPTER 9: PROGRAMME 7: JOINT SUPPORT (Continued)


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Human Resources Support Centre Highlights• Ouput detail – Table 9.8• Processed 78 783 applications for career opportunities in DOD• Exit Administration of 5 393 members who left service of DOD• Updated more than 7 000 records on miliary veterans database• Processing of 1 469 applications for the recognition of previous NSF service for pension purposes• Ceremonial support for all SANDF Ceremonial activities • Implementation of Operation Clean Audit for the FY 05/06 AG reportChallenge• 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



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Joint Training Highlights • Output detail – Table 9.9• Batho Pele compulsory Frontline training Programme roll out : 383 DOD employees trained • A high level of readiness was mantained• Mil Acad - 4 staff members appointed as Professors by University of Stellenbosch• Full accrediation status accorded to Warrant Officer’s Academy as a learning provider• Youth Foundation – 240 learners with 98% pass rate. 180 learners employed in DOD• Trg Institutions presented 304 programmes for 1 688 learners, 30 learners not found competent Challenges• Establishment of SANDF Trg Institute (Project BRILLIANT) slow due to number of stakeholders to

take appropriate action. It is envisaged that this Institute will improve the human capital development and support as a hub.

• DPW’s lack of capacity to maintain the facilities at an acceptable level as these are learning environment that need to comply with specific provisions of the OSH Act, 1985



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Military Police Agency

Highlights

• Output details – Table 9.10• 56 Military Police members deployed at any given time• Expansion of ceremonial motorcycle fleet, soft - skin vehicles and radio communication equipment• Joint training with SAPS and traffic depts• Improved representivity at middle management level• 56 MSDS members recruitedChallenges

• Implementation of the new Military Police Agency Organisational Structure



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Service Corps Highlights• Output details – Table 9.11• Total training to 1 622 learners including 107 learners from Mozambique • Center for Advanced Training (CAT), trained to 225 of the 250 planned learners.• Reskilling, placement and training of more than 95 military veterans. ABET to 261 veterans Conversion training

for SANDF members to transfer to SAPS• Reskilling assistance to 130 SANDF members – MEM (968 registered but not all reported)

Challenges • CAT not yet accredited by SAQA• Implementation of the Works Regiment concept in conjunction with the SA Army

British Peace Support Training Team

• Output detail – Table 9.13• Support to J Ops Div /J Trg• Mission ready training to all rotating forces• UK funding of fitting out of class room facility at Mob Centre and PMTC [MOU]

Property Management

• Output detail Table 9.14

• Devolution of PWD’s budget for payment of accommodation charges, leases and municipal services



CONFIDENTIAL 39


Subprogramme Special Defence Account

Highlights• General Defence Account (GDA) funds were spent according to corporate

priorities to ensure cost - effective solutions to requirements

Output details – Table 10.11 to 10.12

Performance and service delivery improvement are shown in Table 10.3

Challenges• 97,9% of the target was achieved due to outstanding invoices that will be

addressed during the next financial year.• The new submarine project has underspent on project management due to

invoices not being submitted to the project team.

CONFIDENTIAL 40


Chapter 11: Organisation and Human Resource Management

• Chapter Content

– Organisational Structure

– Service Delivery Improvement

– Personnel Expenditure and Personnel Statistics (Table Format)

– HIV / Aids and Health Promotions

– Labour Relations

• Graphs on HR Evolution ito Personnel Expenditure, Appointments, Attritions, Promotions and Equity

CONFIDENTIAL 41

DOD ANNUAL REPORT FOR THE FY 2006/07Personnel Expenditure as a % of Total Expenditure

2006/07 FYPersonnel as % of Total Expenditure

Personnel Expenditure

39%

Rest of Expenditure

61%

Personnel expenditure is 39% of the total DOD expenditure

Personnel Expenditure per Programme

Landward Defence

80.10Air Defence

55.60

Maritime Defence

61.10

Defence Intelligence

85.70

Joint Support50.00

Force Employment

48.10

Admini- stration

33.80

Military Health

Support63.80

80.10% of the DOD’s personnel expenditure is utilised by Landward Defence

CONFIDENTIAL 42


Macro Personnel Evolution by Salary Band for 2006/07 FY

Total = 77858 Total = 77518Appointments/Attritions

50535393

Appointments Attrition

Number of Employees - 31 March 2007

Levels 3-5; 37%

Prof's Levels 13-16; 0%

Levels 1-2; 9%

Levels 9-12; 11%

SMS Levels 13-16; 0%

Levels 6-8; 32%

MSDS; 11%

The DOD’s personnel strength from 77858 to 77518. The turnover rate during the financial year was -0.4%

Number of Employees - 1 April 2006

Levels 3-5; 37%

Prof's Levels 13-16; 0%

Levels 1-2; 10%

MSDS; 11%

Levels 6-8; 31%

Levels 9-12; 11%

SMS Levels 13-16; 0%

CONFIDENTIAL 43

DOD ANNUAL REPORT FOR THE FY 2006/07Macro Personnel Flow ito Appointments, Promotions and Attritions by Salary Band

Appointments per Salary Band = 5053

Levels 1-2; 1.0%

Levels 3-5; 2.1%

Levels 6-8; 5.2%

MSDS; 88.9%

Levels 9-12; 2.7%

Levels 13-16; 0.1%

Attritions per Salary Band = 5393

Levels 6-8; 29.1%

MSDS; 17.5%

Levels 13-16; 0.6%

Levels 9-12; 15.8%

Levels 3-5; 30.4%

Levels 1-2; 6.7%

Promotions by Salary Band = 9882

MSDS; 5.2%

Levels 1-2; 0.0%

Levels 9-12; 13.3%

Levels 3-5; 37.3%

Levels 6-8; 44.0%

Levels 13-16; 0.3%

Attritions per Exit ReasonContract

Expiry1 023

Resignation1 104

Death780

Transfer to Dept's

830

Discharged Incapacity

0

MEM / EISP1 008

Retirement312

Dismissal Ill Health

142Dismissal

Operational Required

0 Dismissal Misconduct

194

MSDS recruitment constitutes 88.9% of the appointments made during the financial year whilst the highest attrition rate was experienced from levels 3 – 8. Resignations and MEM/EISP was the main reasons for attrition.The most promotions were done for levels 3 -8.

CONFIDENTIAL 44

DOD ANNUAL REPORT FOR THE FY 2006/07Macro Personnel Evolution by Critical Occupation

for 2006/07 FYNumber of Employees - 1 April 2006

Technical51.8%

Engineer1.3%

Medical Professional

10.2%Nursing11.5%

Aircrew4.5%

Combat Navy3.3%

Air Space Control

3.6%

Artillery8.1%

Anti-Aircraft5.6%

Appointments/Attritions

759

1361

Appointments Attrition


Artillery7.2%

Aircrew4.6%

Air Space Control

3.4%

Nursing11.1%

Combat Navy1.9%


8.9%

Engineer1.5%

Technical56.1%

Anti-Aircraft5.4%

Total = 13595 Total = 13509

In terms of critical occupations personnel strength was reduced from 13595 to 13509. The turnover rate for scarce skills during the financial year was -0.6%

CONFIDENTIAL 45

DOD ANNUAL REPORT FOR THE FY 2006/07Macro Personnel Flow ito Appointments,

Promotions and Attritions by Critical OccupationAppointments per Critical Occupation = 759


35.7%

Engineer2.2%

Technical33.2%

Air Space Control10.5%

Nursing12.6%

Artillery0.1%

Anti-Aircraft0.1%

Combat Navy0.0%

Aircrew5.4%

Attritions per Critical Occupation = 1361

Nursing9.0% Aircrew

3.1%Combat Navy

3.5%Anti-Aircraft

4.0%

Artillery7.7%

Technical43.7%

Engineer1.2%


24.2%

Air Space Control

3.5%

Promotions by Critical Occupation = 2838

Technical49%

Nursing9%

Engineer2%


5%

Aircrew5%

Anti-Aircraft6%

Artillery14%

Air Space Control

4%

Combat Navy6%

The highest attrition was experienced in the Medical Professional and Technical environments. The most promotions were done in the Technical skills environment.

CONFIDENTIAL 46


Macro Personnel Flow ito Equity (Race)Number of Employees - 1 April 2006

64.82%12.74%

1.25%

21.19%

African

Coloured

Asian

White

Evolution within FY

1 304-57

-51

-1 536

African Coloured Asian White


12.72%

1.19%

19.31%

66.78%

African

Coloured

Asian

White

Total = 77858 Total = 77518

There has been an increase in the appointments of Africans during the financial year by 1.96%

CONFIDENTIAL 47


Macro Personnel Flow ito Equity (Gender)Number of Employees - 1 April 2006

77.16%

22.84%

MaleFemale

Evolution within FY

-871 531

Male Female


23.62%

76.38%

MaleFemale

Total = 77858 Total = 77518

During the financial year there was an outflow of male employees (-1.11%) and an inflow of female employees (0.68%)

CONFIDENTIAL 48


Equity Evolution (Race) ito AppointmentsNumber of Black Employees Appointed

MSDS89.9%

Unskilled1.0%

Semi-Skilled2.1%

Skilled Technical

4.4%

SMS0.1%

Prof Qualified2.5%

Appointments per Race

475894%

2956%

Black Employees

White Employees

Number of White Employees AppointedUnskilled

1.4%Semi-Skilled

2.0%

Skilled Technical

17.3%

Prof Qualified6.8%

MSDS72.5%

SMS0.0%

Total = 5053 Total = 5053

During the financial year 94% of appointments consisted out of Black employees and the remainder (6%) was constituted of White employees. MSDS appointments constituted the largest percentage in all the race groups.

CONFIDENTIAL 49


Equity Evolution (Gender) ito Appointments

Number of Male Employees Appointed

MSDS93.1%

SMS0.1%

Prof Qualified2.1% Skilled

Technical2.4%

Semi-Skilled1.6%

Unskilled0.7%

Appointments per Gender

322564%

182836%

Males Females

Number of Female Employees Appointed

Prof Qualified3.8%

Skilled Technical

10.0%

Semi-Skilled3.0%

Unskilled1.6%

MSDS81.5%

SMS0.1%

Total - 5053 Total - 5053

During the financial year 64% of appointments were male employees and 36% female employees. MSDS appointments constituted the largest percentage.

CONFIDENTIAL 50


Equity Evolution (Race) ito PromotionsNumber of Black Employees Promoted

Semi-Skilled40.7%

SMS0.2%

MSDS5.6%

Prof Qualified10.4%

Skilled Technical

43.2%

Promotions per Race

820683%

167617%

Black Employees White Employees

Number of White Employees Promoted

Skilled Technical

48.1%

Semi-Skilled20.9%

MSDS3.0%

Prof Qualified27.3%

SMS0.7%


During the financial year 82% of promotions were Black employees and the 17% White employees. Within Black employees most promotions were done in the Semi-Skilled and Skilled Technical environments. Within White Employees most promotions were done in the Skilled Technical and Professional Qualified environments.

CONFIDENTIAL 51


Equity Evolution (Gender) ito PromotionsNumber of Male Employees Promoted

MSDS4.7%

Prof Qualified13.2%

SMS0.3%

Semi-Skilled38.4%

Skilled Technical

43.3%

Promotions per Gender

747776%

240524%

Male Employees Female Employees

Number of Female Employees Promoted

Prof Qualified13.4%

MSDS6.4%Semi-Skilled

33.8%

Skilled Technical

46.0%

SMS0.2%


During the financial year 76% male employees and 24% female employees were promoted. Most promotions were done within the Semi-Skilled and Skilled Technical environments.

CONFIDENTIAL 52


Equity Evolution (Race) ito AttritionNumber of Black Employees Exited

Semi-Skilled41.9%

Skilled Technical

19.9%

Prof Qualified5.2%

SMS0.3%

MSDS22.6%

Unskilled10.1%

Attritions per Race

356466%

182934%

Black Employees White Employees

Number of White Employees Exited

Prof Qualified36.3%

MSDS7.7%

Unskilled0.1%

Semi-Skilled7.8%

Skilled Technical

47.1%

SMS1.1%

Total = 5393 Total = 5393

Most of Black employees that exited was in the Semi-Skilled, MSDS and Skilled Technical environments whilst most White employees that exited the system was from the Skilled Technical and Prof Qualified environments.

CONFIDENTIAL 53


Equity Evolution (Gender) ito AttritionNumber of Male Employees Exited

Skilled Technical

26.8%Semi-Skilled35.9%

Unskilled6.2%

MSDS14.9%

SMS0.6%

Prof Qualified15.5%

Attritions per Gender

409776%

129624%

Male Employees Female Employees

Number of Female Employees Exited

Semi-Skilled12.7%

Unskilled8.2%

MSDS25.8%

Prof Qualified16.5%

Skilled Technical

36.4%

SMS0.3%


The most attritions by male employees took place within the Semi-Skilled, Skilled Technical and Prof Qualified environments whilst most attritions be female employees to place within the Skilled Technical, MSDS and Prof Qualified environments.


ANNUAL FINANCIAL STATEMENTS

FINANCIAL YEAR 2006/2007

Presented by the Acting Chief Financial Officer

CONFIDENTIAL 55


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

CONFIDENTIAL 56


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

CONFIDENTIAL 57


APPROPRIATION STATEMENT Final

Appropriation Expenditure 2006/07 2006/07

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

CONFIDENTIAL 58


APPROPRIATION STATEMENT2006/07 Rm

Final appropriation 23 902,904Less: Actual expenditure 23 828,824Variance 74,080Plus: Fruitless and wasteful expenditure 0,494 Plus: Local and foreign aid assistance 11,240Surplus 85,814

Variance reasons : Property Man Portfolio = Rm58,083Committed capital works = Rm24,924Unspent transfer payment = Rm 0,512Unspent = Rm

2,295

Unspent as % of Vote = 0,36%

CONFIDENTIAL 59


Statement of Financial Performance (Income Statement)

• REVENUE 2006/07 2005/06

Rm RmAnnual Appropriation 23 902,904 22 670,482Departmental revenue 492,792 729,136Local and foreign aid - 38,750TOTAL REVENUE 24 395,696 23 438,368

• EXPENDITURE Current expenditure 14 511,711 12 563,888Transfers and subsidies 8 882,837 9 715,847Expenditure for capital assets 434,276 412,621Revenue to be paid back 492,792 729,136Less: Local and foreign aid 11,240 -TOTAL EXPENDITURE 24 310,376 22 692 356

CONFIDENTIAL 60

DOD ANNUAL REPORT FOR THE FY 2006/07 Statement of Financial Position (Balance Sheet)

2006/07 2005/06

Assets Rm RmCurrent assetsUnauthorised expenditure 20,625 495,824Fruitless and wasteful expenditure 0,959 0,472Cash and cash equivalents 67,330 51,599Loans 12,362 12,362Prepayments and advances 176,471 144,659Receivables 688,693 103,317

TOTAL ASSETS 966,440 808,233

LiabilitiesCurrent liabilities

Voted funds to be surrendered 85,814 5,653Departmental revenue to be surrendered 37,919 54,099Bank overdraft 690,987 646,665Payables 42,347 28,115Local and foreign aid unutilised - 11,240

TOTAL LIAIBILITIES 857,067 745,772

NET ASSETS 109,373 62,461• Represented by:

– Recoverable revenue 109,373 62,461

CONFIDENTIAL 61


Notes to Financial Statements• Departmental Revenue

2006/07 2005/06

Rm Rm

Sales of goods and services 175,512232,844

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

CONFIDENTIAL 62


Notes to Financial Statements (cont)• Local and Foreign Aid Assistance received in cash

Received in 2005/2006 Rm38,750Less: Utilised in 2005/2006 Rm27,510

Sub total Rm11,240Less: Utilised in 2006/2007 Rm11,240

Local and foreign aid unutilised Rm 0

CONFIDENTIAL 63


Notes to Financial Statements (cont)• Losses

2006/07 2005/06 Rm Rm

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

CONFIDENTIAL 64


Notes to Financial Statements (cont)• 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

CONFIDENTIAL 65


Notes to Financial Statements (cont)• Fruitless and wasteful expenditure

Balance at year-end 2005/2006Rm0,472

Fruitless and wasteful expenditure Rm0,494

Less: Amounts condoned Rm0,007Fruitless and wasteful expenditure awaiting condonement Rm0,959

CONFIDENTIAL 66


Notes to Financial Statements (cont)• Cash and cash equivalents

2006/072005/06

Rm RmCash on hand 39,941 32,961Cash with commercial banks 27,389 18,638TOTAL 67,330 51,599

• Prepayments and advances2006/07

2005/06 Rm Rm

Travel and subsistence 49,846 45,588Prepayments 126,625

99,071TOTAL 176,471

144 659

CONFIDENTIAL 67


Notes to Financial Statements (cont)• Receivables

2006/07 2005/06 Rm Rm

Staff debtors 46,652 39,389Other debtors 630,405 57,938Claims recoverable 11,636 5,990TOTAL 688,693 103,317

• Loans2006/07 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

CONFIDENTIAL 68


Notes to Financial Statements (cont)• Contingent liabilities

2006/07 2005/06 Rm Rm

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

CONFIDENTIAL 69


2006/07 2005/06

Rm Rm

• Commitments 1 632,353 1 359,847

• Accruals 272,966 155,100

• Irregular Expenditure 0,481 0,955

Disclosure notes to Financial Statements

CONFIDENTIAL 70


SPECIAL DEFENCE ACCOUNT

2006/07 2005/06 Rm Rm

Advances 12,049 8,842Trade and other receivables 117,066 87,392Cash and cash equivalents 3 898,893 3 706,650Investments 16,930 15,653TOTAL ASSETS 4 044,938 3 818,537

Reserves 3 441,586 2 763,145

Creditors 605,202 1 055,392TOTAL EQUITY & LIABILITIES 4 044,938 3 818,537

Balance Sheet

CONFIDENTIAL 71



REVENUE

2006/07 2005/06Rm Rm

Transfer received 8 280,738 9 258 839Other revenue 97,720 202 637Interest received 0,010 0,008TOTAL 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

Income Statement

CONFIDENTIAL 72



OTHER REVENUE

2006/07 2005/06 Rm Rm

Sales of strategic equipment 168,222 53,482

Forex on the SDPP 51,366 192,636Other 3,555 12,698Subtotal 223,143 258,816

Less : Payable to the Revenue Fund 125,423 56,179

TOTAL OTHER REVENUE 97,720 202,637

Notes to the Financial Statements

CONFIDENTIAL 73



EXPENDITURE

2006/07 2005/06 Rm Rm

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


CONFIDENTIAL 74



2006/07 2005/06

Rm Rm

• Estimated future expenditure 17 494,992 18 686,150

by Armscor

• Contingent Liability 252,872 23,957


CONFIDENTIAL 75


CHALLENGES17 QUALIFICATIONS

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

CONFIDENTIAL 76


CHALLENGES

17 QUALIFICATIONS (continued)

• Departmental revenue to be surrendered to Revenue Fund

• Commitments• Clearing accounts• Fruitless and wasteful expenditure• Rank review audit• Comparatives• Local and foreign aid

CONFIDENTIAL 77


OTHER CHALLENGES

• Unauthorised expenditure• Systems

CONFIDENTIAL 78


HIGH LIGHTS

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

CONFIDENTIAL 79


Concluding RemarksOverview

• During the period under review the DOD has managed to maintain a balance in so far as :

- 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 within a highly competitive labour market.

-Finding creative means of developing sustainable and reliable accounting systems for its resources.

CONFIDENTIAL 80


Concluding RemarksGoing forward

• The DOD remains committed to protecting the integrity of the territory, its people and borders through diplomacy

• Fasttrack the establishment of African Standby Force for the SADC region, a strategy to resiliently promote the philosophy of collective defence as a means to resolve conflict within the SADC region

• Within the available resources, address the challenges presented by the South Africa’s assumption of the non- permanent seat in the Security Council in pursuit of further strengthening compliance with international law.

• Prioritise the modernisation of the landward defence capabilities as part of its affirmation of core business while creatively dealing with the misalignment between the defence policy and resource allocation through securing Cabinet approval of the Update of the White Paper ( 1996) and the Defence Review ( 1998) and the aggressive implementation thereof.

CONFIDENTIAL 81


Concluding RemarksGoing forward

• The DOD will resiliently embrace the Government’s concerted effort of deepening the Africa Agenda, leapfrogging strengthening the Africa Diaspora to realise the vision of a United State of Africa

• The DOD will continue to raise its public image as an organ of state that” serves, belongs and cares” and as such an employer of choice

CONFIDENTIAL 82


QUESTIONS

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