A striped Mamba MRAP at the SA Army Combat Training Centre, Lohatlha, September 2009 

 

Unavoidable costs, mostly for salaries, are taking up ever-more of South Africa's shrinking defence budget, leaving no funds for training, maintenance or to acquire much needed equipment. That's the word from defence analyst Helmoed-Römer Heitman after the release, last week of a new set of figures illustrating the problem.

According to a Ministry of Defence written answer to a Parliamentary question, the SA Navy is spending 60% of its budget on personnel, the SA Air Force 35.71% and the Military Health Service 64.5%. The answer did not provide details on the SA Army, despite this being requested.

The MoD said the “SA Navy’s total allocation to run the Maritime Defence Program, over which the Chief of the Navy has the responsibility and accountability, for FY 2010/11, is R1 932 639 338.” The spending percentage breakdown is as follows:

• Personnel: R1, 154,267,038 = 60% of the allocation.

• Operating: R778, 375,074 = 40% of the allocation.

The answer adds funds allocated for maritime defence-related projects for FY 2010/11 is R192 591 000. “The Chief of the Navy has no jurisdiction over these funds in the execution of the Maritime Defence Program. However, when these funds are pooled together for executing all matters maritime within the DOD, the total is R2 125 230 338. The percentage breakdown is then as follows:

• Personnel: R1 154 267 038 = 54% of total allocation.

• Operating: R778 375 074 = 37% of total allocation.

• Capital: R192 591 000 = 9% of total allocation.

The Treasury Estimates of National Expenditure (ENE) released in February showed the total Maritime Defence programme accounts for 7.8% of the department’s R30.7 billion budget, or R2 179 822. The ENE notes the navy budget has decreased from R2.6 billion in 2006/07 to R2.2 billion in 2010/11 “at an average annual rate of 4.7%, due to the commissioning of the frigates and submarines between 2006 and 2009.”

Exact figures were not provided for the SAAF. However, the MoD answer notes personnel costs for the current financial year is 35.71% of the total, operating costs are 28.01% and capital costs stand at 36.29%. “If the capital funding for Special Defence Package (SDP) aircraft, which is not part of the normal allocation of funding for capital acquisition, is omitted from the calculation the figures are personnel 45.86%, operating 35.97 %, and capital 18.17 %.” The SDP aircraft are the 26 Saab Gripen and 24 BAE Systems Hawk Mk120 fighters acquired for R26 billion in 1999.

The ENE posts the SAAF budget at R6 059 126. It adds the “Air Defence programme accounts for 26.2% of the department’s total expenditure, and increased from R7.3 billion in 2006/07 to R9.1 billion in 2009/10 at an average annual rate of 7.6% and then decreases to R8.4 billion in 2012/13 at an average annual rate of 2.6%.

The SAMHS budget for 2010/11 is R2 671 296 180. Of this personnel costs are R1 722 887 429 or 64.5% of the total. Operating costs – goods and services – will consume R888 021 368 or 33.24% of funds, while R49 331 272 or 1.85% is available for capital and R11 056 048 (0.41%) for “transfers”. However, the ENE puts the SAMHS budget at R2 770 215. The reason for the discrepancy between the Treasury and MoD figure is not known. The ENE adds the Military Health Support programme accounts for 8.1% of the department’s total expenditure, “which increases from R1.7 billion in 2006/07 to R3.2 billion in 2012/13, at an average annual rate of 11.1%.

The ENE put the SA Army budget at R9 982 892 or 29.25 of the defence budget. It adds the “Landward Defence programme accounts for 29.2% of the department’s total expenditure, in which expenditure increases from R6.4 billion in 2006/07 to R11.1 billion in 2012/13, at an average annual rate of 9.5%.

Heitman comments the Navy’s figures “show just how out of balance things are, with far too little for operating and capital budgets.” He says the accepted formula is 40:30:30, with 40% for personnel costs, 30% for operating costs and 30% for capital. “...also, of course, the breakdown does not reveal that the overall amount is far too little (the SAN should, arguably, get 20-25% of a bigger overall budget) and that salaries for key rank groups remain low.”

He notes the SAAF ratios are closer to the norm, “but the same problems apply as for the Navy.” Regarding the SAMHS he says he would expect “a higher ratio of personnel costs and lower ratio of capital costs than the combat services, so there is no surprise there except insofar that the capital portion is very low, even against that background.”

The overall problem, he says, “remains that we are underfunding the SANDF to the extent where unavoidable costs take up most of the budget, leaving no funds for proper training or maintenance or to acquire the needed equipment. The SANDF is eating itself, and that cannot go on for ever.”

With acknowledgements to defenceWeb.

---

The problems with both the SA Navy and SA Air Force are all about money.

But the money situation was well known at least twelve years ago.

I remember sitting in an office in Armscor in Pretoria and having the reality spelt out to me by a senior Armscor manager.

They knew then how much the defence budget was going to be for the next 10 to 15 years, how much of this was going to the SAN, how much for salaries and how much for equipment.

Since then the SAN has shed thousand of personnel.

It has implemented a new model of ship support where industry does nearly all thew work at much better value. But the SAN and the Naval Dockyard have lost the capability themselves.

Dozens of Naval Reserve officers are called up to man and command the SAN's vessels, including capital vessels, during things like commander-in-chief's sail pasts. This save the SAN a lot of money not having to keep permanent force personnel on its strength.

Yet despite all these giant cut-backs of costs and capabilities, the SAN has no money.

The SAN cannot operate its four frigates and three submarines for more than a fraction of the year and has not got the budget for buying sufficient spares and consumables.

After operating on a shoestring for several years it still wants to cut its support budget by a further 30%.

Yet the costs of supporting systems built mainly from commercial-off-the-shelf equipment increases dramatically in the second quarter of the vessel's life.

And we are now 10 years since starting full-scale development (when the equipment was purchased) and over 5 years since handover of the 4th vessel (when the equipment was starting to be operationally used).

And the reason?

It is because the DoD purchased a squadron of very expensive MEKO 200AS frigates, expensive to purchase and expensive to operate and support.

The MEKO 200AS with their combat suites cost about R1,2 billion in 1998 Rands more than the Spanish 590B that the SA Navy preferred.

And about three times more (R6,873 billion in 1999) than the R2,2 billion Spanish offer in 1995.

I have it on good authority that the Spanish project team was actually in South Africa to sign the 1995 contract when it got cancelled.


But the question remains, why is the SAN so cash-strapped when its financial requirements have been known so long and budgeted so long?


It comes down to the Arms Deal again.

When the European South African Corvette Consortium (EASCC) consisting of the German Frigate Consortium (GFC), Thomson-CSF Naval Combat Systems (NCS) and African Defence Systems (ADS) got top cover from Thabo Mbeki and Jacob Zuma they had the project team over a barrel. What should have been a R6,001 billion contract in 1998 became a R6,873 billion contract in 1999. And what's more the SAN got about half of what it specified for the combat suite at nearly double the price (R1,47 billion in May 1998 value escalated and inflated to R2,599 billion in 1999 value).

But the biggest consumer of the combat suite budget was about R500 million worth of Surface-to-Surface Missile (SSM) Launcher and SSM rounds. 32 were originally budget, but eventually only 17 were acquired. But all the available figures show that only one SSM round and the SSM launch systems were actually purchased under the SDPs and some special payment system was arrived at with Aerospatiale (in which Thomson-CSF has shares).

It seems that the SAN pays a lease for the 16 SSM rounds plus actually cost once these are fired in naval exercises.

So far it would appear to about 7 SSMs have been fired, possibly more since the latest SAN/German Navy exercises earlier this year.

These things costs about R20 million each.

Also strange is that it is known that the SAN never only acquired the Exocet MM40 Block II SSMs, which it said (under oath) it did. It has stated that it acquired some MM40 Block IIs and some MM4 Block Is. Very strange.

But not so strange if one looks more carefully.

The French Navy used to use MM40 Block Is and then upgraded to Block IIs and now to Block IIIs.

There were are lot of MM40 Block Is floating about, also from other navies.

It is quite clear to me that some of these Block Is were provided to the SAN rather than the Block IIs in order to save money and in order to allow the SAN to shoot missiles in vessel qualification and in exercises.

Now this is all very well, except for a couple of things :

• not if the qualification stock was acquired with SAN yearly funding (as opposed to SDP budget);

• not if the war stock was acquired with SAN yearly funding (as opposed to SDP budget);

• not if some or all of the frigates are carrying Block Is (as opposed to them being used for exercises).

Plus the annual maintenance of the SSM systems and onboard rounds is prohibitively expensive, many millions of Rands, even tens of millions of Rands, per year.

It is also know that the SAN had to purchased extra equipment for the frigates out of its budget, things like crypto equipment.

It's all there in the Treasury budget documents.

Even the cost of fuel is stretching the frigate operating budget.

The SAN insisted on CODAG (Combined Diesel and Gas Turbine) propulsion. Now when the Gas Turbines are being used (which is seldom these days), they use double the amount of fuel specified (and budgeted).

Another factor is the number of extremely serious mistakes made which have, inter alia, destroyed entire frigates engines which have had to be replaced.

What is saved in the training of the personnel, is quickly blown is damaged equipment.

In all, the SAN got far too expensive and far to complex frigates.

The submarines, it was never meant to be getting these anyway.

Only when British Aerospace introduced the concept of the package deal and threw in three unused Upholders into the fray.

The Brits thought that they could get the entire Arms Deal as one British package, frigates, maritime helicopters, Upholder submarines, Hawks and Typhoon Eurofighters and 104 Challenger main battle tanks included.

The Arms Deal, championed by Joe Modise, Alec Erwin and Chippy Shaik emasculated the entire SANDF for two decades at least.

As Heitman says, ruined.

At least Chippy and a group represented by him got USD3 million gilt from Thyssen for swinging the R5,5 billion Bazan deal into a R6,873 Franco-German deal.

Their bosses got USD22 million from Thyssen.

Plus millions, actually billions, from British Aerospace, Ferrostaal, and Thomson-CSF.

Probably about R2,2 billion all told, 2000 Rands and that excluding the DIP and the NIP kickbacks.

Arms Deal - Great Deal.