1. By Mr A. Visser Chief Director Strategic Management 15 March 2005 PRESENTATION TO PORTFOLIO COMMITTEE ON DEFENCE DOD STRATEGIC BUSINESS PLAN FY2005/06 DOD

2. AIM To brief the PCD/JSCD on the DOD Strategic Business Plan for FY05/06 before it is tabled in Parliament in April 2005 DOD

3. SCOPE Timelines Background DOD Programmes Risks per Programme Options for Funding Discussion DOD

4. TIMELINES DOD

5. Cycles vs. Financial Years Legend: 0 = Year of Expenditure 0-1= One Year prior to Year of Expenditure 0-2 = Two Years prior to Year of Expenditure 0+1 = One Year after Year of Expenditure

6. PLANNING CYCLE - EXAMPLES 0-2 [2003] 0-1 [2004] 0 [2005] 0+1 [2006] Environmental Analysis Worksessions: –MinDef W/session (Guidelines – DOD W/session – DefSec & SANDF w/session Planning & Budgeting Seminar (September) Jan Lekgotla, SONA & Budget Speech May DPBEC (Plans & Budgets) MTEC & MinComBud Medium-term Budget Policy Statement (MTBPS) Allocation & Adjust plans Table Plan in Parliament Execute Plan Quarterly Reports Annual Report (FY2004/05) Prepare Plan for FY2006/07) Prepare Guidelines for FY2007/8 Annual Report (2005/06)

7. BACKGROUND The earliest draft DOD Strategic Business Plan FY05/06 was presented to the Portfolio Committee on Defence on 01 Feb 05. Plan was presented to and approved by the Defence Staff Council (DSC) on 23 Feb 05. DOD Budget presented to Portfolio Committee on Defence on 08 Mar 05 Plan will be tabled in Parliament on 08 Apr 05. Programme Structure remains generally the same, except Force Employment (formerly called Command & Control - Joint Ops) DOD

8. Background… Focus: –Conclusion of the First Decade of Democracy –First Year of Second Decade of Democracy –Progress on Strategic Defence Package (SDP) weapon systems Overview by the SecDef & CSANDF separate. Reference to Parys Resolutions (Strategic Decisions), including new DOD Vision & Defence Update Minister of Defence’s Strategic Guidelines Defence Strategy is still in process Plan is in process of being printed DOD

9. DOD PROGRAMMES DOD Rm Defence Administration 681 Landward Defence 3 575 Air Defence 2 395 Maritime Defence 1 212 Military Health Service 1 578 Defence Intelligence 149 Joint Support 2 490 Force Employment 1 364 Special Defence Account 9 015 Total 22 459

10. RISKS PER PROGRAMME PROGRAMMERISKSMITIGATING ACTIONS DEFENCE ADMIN Funding for the servicing of MOUs Funding for IT-based internal control systems (HR, finance and procurement) Reprioritisation FORCE EMPLOYMENT Operational risk – gap between funding of force-providing services and ordered commitments. Reprioritisation LANDWARD DEFENCE Capabilities for external ops & joint/combined trg requirements – due to health status and ageing HR profile of serving members. Provision for the renewal of SA Army prime mission equipment Deteriorating facilities MSDS intakes & reprioritisation

11. RISKS PER PROGRAMME PROGRAMMERISKSMITIGATING ACTIONS AIR DEFENCE- Deteriorating main equipment, weapon systems & ground- support infrastructure - Decline of suitably qualified and experienced personnel - Loss of local industry expertise - Delay in the delivery of Agusta helicopters Implementation of SAAF Strategic Transformation Plan Towards Vision 2012; SAAF HR Strategy; & penalties on supplier for late delivery MARITIME DEFENCE Costs associated with acceptance and qualification of SDP vessels MSDS intakes, additional funding that has been provided by Treasury and Risk Abatement Plan

12. RISKS PER PROGRAMME PROGRAMMERISKSMITIGATING ACTIONS MILITARY HEALTH SERVICE - Deterioration of hospital buildings, facilities and equipment - High medical inflation rate - Compliance with legislation in respect of depots and warehousing Limited additional funding provided by NT and reprioritisation DEFENCE INTELLIGENCE - Deteriorating Defence Intelligence HQ building - Outdated IT-systems, esp in collection - Outflow of skilled and experienced personnel Reprioritisation

13. RISKS PER PROGRAMME PROGRAMMERISKSMITIGATING ACTIONS JOINT SUPPORT - Maintenance and repair of facilities, vehicles and equipment - Unsafe and unstable ammunition due to lack of disposal plant - IT-based internal control systems (PERSOL, FMS, etc) need upgrade Reprioritisation and limited funding from NT SPECIAL DEFENCE ACCOUNT - Adequacy of funding levels and local industrial capabilities - Ageing of SA Army prime mission equipment -

14. FUNDING OF RISKS FY2005/06 DOD

15. BACKGROUND 316 Risks listed in SBPs 76 Identified as DOD risks 37Identified as critical 14 Options based on 37 risks developed Options prioritised and top 4 selected Presented to MTEC Partially funded by NT DOD

16. NATIONAL TREASURY FUNDING Option05/0606/0707/08 ReqAlloBalReqAlloBalReqAlloBal Ammunition Disposal105550104050 0 Maintenance of Facilities 2751026544050390620250370 Integration of SDPs472621402218311318 Health Legislation152201321461213413914125 Peace Support Operations 300

17. IMPLICATIONS Ammunition Disposal – Lack of safety of depots and personnel due to unstable ammunition. Maintenance of Facilities - Non-compliance with Occupational Health and Safety Act, which may result in closure of facilities. Integration of SDPs – SDP vessels not fully accepted to design specifications. Health Legislation – Cannot comply with pharmaceutical regulations and building of depots. DOD

18. OPTIONS NOT FUNDED DFR – MA Alignment (RM28) SAAF – Inkwazi (RM20) Spec Forces – Recruiting and equipping (RM6) SA Army – MSDS (RM107) SA Army – Ammo stock levels (RM93 or RM332) SA Navy – Compliance with stat prescripts (RM80) SAAF – Air base infrastructure (RM157) MLS – Pers retention (RM8) SAAF – YPT runway (RM25) DOD

19. REQUIREMENTS: MTEF 2005/06 Additional RM183, RM254 and RM288 provided by NT. Four options developed RequirementFY2005/06 (Rm) FY2006/07 (Rm) FY2007/08 (Rm) SITA 373941 DIDTETA 123 BPST 400 Special Forces Recruiting and Equipping 666 Inkwazi 202122 IT Investment 808488 Pharmaceuticals 404244 Scarce Skills & Rural Allowance 953840 SA Army (Ammunition) 444649 SAAF (Air Base Infrastructure) 161718 SA Navy (Statutory Requirements) 404244 E-Procure 622 Total389339357

20. ALLOCATIONS 05/06 RequirementFY2005/06 (Rm) FY2006/07 (Rm) FY2007/08 (Rm) SITA 373941 DIDTETA 123 BPST 400 Special Forces Recruiting and Equipping 666 Inkwazi 202122 IT Investment 808488 Pharmaceuticals 404244 Scarce Skills & Rural Allowance 953840 SA Army 153344 SAAF 161718 SAN 153040 E-Procure 622 Total 335314348

21. INTERNAL FUNDING DOD SourceFY2005/06FY2006/07FY2007/08 Capital60 Merit Bonus9200 National Treasury183254288 Total335314348

22. OPTION 1 - AMMUNITION DISPOSAL Additional Funding of Rm5 to be utilised as follows: Registration of project for Disposal Plant Disposal of critically unstable ammo iaw approved disposal plan Preparation of dilapidated demolition ranges and capabilities The ammunition will be disposed of through conventional methods at approved demolition ranges. However, in the continued absence of a dedicated Disposal Plant the serious risks at Jan Kemp Dorp and De Aar still remain

23. OPTION 2 - FACILITIES Additional Funding of Rm10 to be utilised as follows: Priorities were indicated to National Department of Public Works (NDPW) NDPW will propose options to DOD in April 2005 DOD will then instruct NDPW on utilisation of funds The following risks still remain: Lack of operational readiness and service delivery Possible closure of units due to Occupational Health and Safety Act Low morale due to unsafe and unsatisfactory working conditions

24. OPTION 3 - INTEGRATION OF SDPs (SA Navy) Additional Funding of Rm26 to be utilised as follows: Corvettes Support contracts Rm1 Qualification and acceptance trials Rm10 Running costs Rm5,5 Facility upgrades Rm3,5 Submarines Additional spares and support equipment Rm2,5 Support contracts Rm3,5 TotalRm26 Balance of risks to be managed through Risk Abatement Plan

25. RISK ABATEMENT PLAN Operational units at lower levels of readiness Disposal sale of OTQ (RM 50) to operating budget Strict discipline with ammo and fuel usage Non-replacement of missiles fired Re-phasing of activities

26. OPTION 4 - HEALTH LEGISLATION Additional Funding of Rm20 to be utilised as follows: Changes to the Medical Health Depot to comply with the Pharmacy Act – Rm10 Changes to pharmacies to comply with the Pharmacy Act – Rm10 The following risks still remain: Depot not fully compliant with legislation Shortage of ambulances and vehicles required for clinical care Non-replacement of main medical equipment (Sonars, X-rays, scanners, etc) Security at facilities These risks will be mitigated to some extent through internal reprioritisation

27. SUMMARY Alignment with Government Priorities (Ten-Year Review and SONA) Maintenance of the SANDF core capabilities Strategic Defence Packages (Integration into SANDF) Peace Support Operations(Support Govt Initiatives and ASF) Departmental Risks(37 risks -14 Options - 4 funded by NT) Strategic Decisions (Parys Resolutions) DOD

28. DISCUSSION DOD