Armscor chairperson Fani Titi and CEO Sipho Thomo have both lamented the corporation's embattled financial position in its latest annual report, tabled in Parliament on Thursday.

Titi said in his chairperson's report on the 2002/03 financial year that strategic defence packages (armament acquisitions) have added a heavy burden to Armscor's budget.

The corporation's responsibilities in terms of the acquisitions had increased tremendously.

While it had to dedicate teams of workers specifically for this, there was no concomitant increase in real terms in its budget allocation from the Department of Defence, he said.

This budget constraint had made it difficult for Armscor to achieve many of its set goals.

"For example, Armscor finds it difficult to renew or replenish its staff; and its transformation, in the sense of reflecting the demographics of the country in the organisation, becomes extremely difficult.

"Furthermore, the transfer of skills to a younger generation is also not taking place at the desired tempo."

In the reporting period, the transfer payment from the department of R209,5-million resulted in a deficit of R25,5-million in the core operations of acquisition and procurement.

However, Armscor was discussing its long-term budgetary requirements with the department and the ministry, and these discussions have been encouraging, Titi said.

In his report, Thomo said it was clear South Africa's defence budget -- at 1,56% of GDP -- was inadequate, compared with Botswana (5%), Namibia (2,7%), the United States (3,3%) and Australia (2,1%).

This situation had resulted in inadequate transfer payment to Armscor for rendering acquisition-related services.

Consequently, the corporation's salary increases were not market-related, resulting in a number of resignations and the erosion of technical capabilities.

Armscor had to declare a moratorium on appointing new staff, and some staff were forced to take on additional responsibilities because of the acquisitions.

The lack of resources had also seriously hampered transformation of the corporation, Thomo said.

With acknowledgements to Sapa and the Mail & Guardian.