Irregular contract with Cuba dogs department of defence

The department of defence is harshly criticised in the latest auditor-general of SA report for its continued co-operation with Cuba, despite the contract being cited as irregular about two years ago.

During 2022/23, the department reported it spent another R308m on the bilateral contract for medical and military training as well as the repairs of its vehicles by Cuban mechanics. This irregular expenditure was one of the reasons the defence department, as well as the department for military veterans, has again received a qualified audit.

Parliament’s portfolio committee on defence and military veterans was briefed on Wednesday about the audit outcomes by auditor-general Tsakani Maluleke.

The audit outcome for the department of defence remained qualified with findings on compliance with laws and regulations and performance reporting, similar to the prior year. The audit outcome for Armscor as the defence acquisition agency, also remained consistent with the prior year as they obtained an unqualified opinion with findings.

A total of 15 targets out of 29 planned targets were achieved for 2022-23, which represents a 52% achievement based on the annual performance report, the auditor-general found.

Details about the main combat equipment and combat-ready capabilities are confidential and not included in the auditor-general’s report. However, it is no secret the equipment and capabilities are in a poor state.

Due to the poor condition of equipment in the UN peacekeeping deployment in Democratic Republic of Congo, the SANDF only received reimbursement of 57% from the UN (the target was 70%).

Insufficient funding impacted severely on the department’s ability to support peacekeeping operations and those undertaken to protect the country. These include border protection and participation in the UN intervention in the DRC.

“We however also observed that department of defence is not preventing/ recovering losses swiftly so that funds can be used economically and effectively. Several cases have been identified where there was lack of effective use of resources which included elements such as material financial losses, fruitless and wasteful expenditure, procurement not always done in a cost-effective manner as well as the lack of timely consequence management (eg prolonged suspensions).

“If the funds allocated to the department are not used optimally it may impact negatively on the lived experiences of the citizens of the country since the funds could have been used for other critical needs of the department.”

However, it was the details of the irregular expenditure on the Cuban contract (dubbed Operation Thusano) the auditor-general of SA has repeatedly been sighted in previous annual reports.

The auditor-general of SA found the department used supplementary agreements to the initial contracts to directly procure additional or extend existing technical and professional services resulting in the contracts being open-ended in nature and therefore not in line with the PFMA requirements.

In comparing the contract cost for the vocational courses to the local market it was assessed to be 136% more expensive to study in Cuba than in SA and the department could have saved an estimated R122.3m over the period of the medical students’ studies (2014-2028) if the 79 students were studying in SA and not Cuba.

This would have released funding for other competing priorities, given the tight budget the department is currently experiencing. In addition, 21 medical students who completed the vocational training in Cuba are also additionally enrolled at the University of Pretoria for 18 months for an integration course at an additional cost to the department of R8.2m (R391,109 per student).

For 70 (52%) of the 134 students who have completed their vocational training in tank and transport technique in Cuba no comparable Saqa (SA Qualifications Authority) accreditation has been obtained to date. This is because timely application to Saqa has not been made or no budget has been allocated to fund the accreditation cost.

Fifteen (54%) of the 28 mechanical engineering students who completed their vocational courses in Cuba during 2021 and 2022, and who received a comparable Saqa accreditation in B. Eng Mechanical Engineering, have not been deployed in professional positions as the SANDF did not have enough posts .

The actual cost for the 28 students was calculated at R1m per student. This is 86% more than the cost to obtain an equivalent engineering qualification in SA.

On the vehicle repair side it was found that due to a lack of complete and accurate management of information that include job cards and work schedules it was impossible to measure either the productivity of Cuban personnel or the number of recurrent breakdowns of “repaired” vehicles.

Vehicles preserved by the Cubans for future use were not stored according to acceptable standards as multiple SAMIL vehicles at the Mobilisation Centre in Bloemfontein were resting on trestles with no tyres.

Military sources told Business Day the SANDF is currently stuck with more than 30,000 vehicles beyond economical repair which would otherwise have been sold on auction to recover some much needed funding. However, a ban was placed on these auctions by the SANDF top management when the agreement with Cuba was signed because the Cuban mechanics apparently assured the SANDF they could repair the vehicles to serviceable status.

The SANDF has indicated it has no plans to cancel the contract due to expire in 2024.

The defence department has still not acted against those responsible for an irregular multimillion rand inventory and asset management contract as the auditor-general demanded in 2021. The auditor-general of SA has now referred the case to the Special Investigation Unit after the contract was not awarded to the bidder that scored highest points in the evaluation process.

Irregular lease payments for unoccupied buildings was referred to the Public Protector for action after the department did not apply consequence management in this regard since 2021.

A transparent procurement process was not followed when entering into a lease agreement for the St George’s Hotel to the value of R66m. The hotel was leased without a proper comparative study of other available buildings and is currently used as the Defence College.

Various other contracts with a total value of R554m were noncompliant with procurement legislation.

In terms of the department for military veterans, which is responsible for the welfare of all former combatants, the auditor-general found there was no correlation between achievement of targets and budget spent. The department achieved respectively only 33% and 29% of its targets, but 88% and 98% of its total budgets of R471m were spent.

Applications for compensation benefits are supposed to be finalised within 90 days. Instances were noted where applications received by the department as early as 2015 were only approved in 2022/23.

Benefits were also provided to people not registered on the database, while thousands of veterans have been waiting for years to receive any benefits. Military pensions were gazetted two weeks ago for the first 5,200 veterans to receive a monthly pension of R2,500.

“The full extent of irregular expenditure remains unknown and the control environment is not strengthened to ensure full compliance with applicable legislation. There is a risk of misappropriation of assets due to lack of proper record keeping and monitoring controls,” the audit report stated.