Deputy minister of defence and military veterans Bantu Holomisa has penned a scathing diagnostic report on the state of the department, exposing the scale of the rot, some of which was recently flagged by the auditor-general.
Holomisa said the department's CFO would be reporting to the minister and deputy minister biweekly to ensure compliance and improve the department’s performance.
The two leaders will also monitor the implementation of his turnaround plan to rectify its challenges, he said, calling for an investigation into the department's finances.
In a confidential document seen by TimesLIVE Premium and addressed to minister Angie Motshekga, Holomisa — who was appointed by President Cyril Ramaphosa to the ministry as part of the GNU — flagged shocking irregularities in the department following his investigation.
“To reiterate, as a matter of urgency, the ministry will have signing and oversight powers over the administrative team during the project cleanup to ensure the effective implementation of these solutions and maintain high standards of financial management and accountability.”
The department is the biggest offender in fruitless and wasteful expenditure constituting 97% for the year with R441.82m reported, including R271m from cancelled and renewed contracts, and R108.2m from unoccupied office buildings, he said.
He detailed how the department reported R338.49m in breaches, including R183.6m tied to Project Thusano with Cuba, where South African procurement laws were not followed.
The department of military veterans failed to comply with procurement laws, resulting in breaches amounting to R8.03m. He said the issue of fairness was violated in the R81.34m contract for aircraft fuel and airport services, where the winning bidder did not meet mandatory criteria.
“Transparency was lacking in a R46.79m lease agreement for St George’s Hotel, where the procurement process was not properly followed. Various other non-compliances in the department of defence and military veterans amounted to millions more.”
Holomisa said that one of the most concerning issues was the poor quality of annual financial statements, where 75% of these contained material errors when initially presented for auditing.
He said this reflects a growing trend of weakened financial oversight within the institution, raising alarms about the reliability and accuracy of the information the department is using to make decisions.
Holomisa said the errors were not simply clerical mistakes, but compromised the integrity of financial management and diminished accountability and eroded public trust.
“One positive outcome is that Armscor made subsequent corrections to its financial statements, ultimately obtaining an unqualified audit opinion. However, we must ask ourselves why these errors occurred in the first place and why other entities are not achieving similar outcomes.
“The fact that material errors were detected so late in the process points to a lack of effective controls and quality assurance systems. These gaps suggest that our current processes for preparing and reviewing financial reports are inadequate, leading to unreliable data that compromises decision-making at the highest levels.”
The deputy minister added that the auditor-general identified significant issues related to the department's management of goods and services, and investments. He said audit evidence on sensitive project expenditures and investments could not be obtained due to the classified nature of these operations.
“The inability to audit this portion of our budget raises concerns about whether public funds are being used appropriately, and it is our responsibility to ensure that the necessary controls are in place to mitigate any risk of mismanagement in these areas.”
Holomisa also raised concerns about the department's movable tangible capital assets, stating that the report found that certain assets could not be located and that not all departmental assets were properly accounted for in registers.
“In some cases, these assets were not even accounted for in accordance with established accounting standards. This is unacceptable, as it not only raises the risk of loss, theft or misuse of valuable equipment but also points to inefficiencies in our asset management systems. Our military assets are critical to our operational effectiveness and we cannot afford to allow such negligence in tracking and safeguarding them.”
He said the compensation of employees also revealed a number of worrying errors, including overpayments in housing allowances, deprivation allowances and basic salaries, adding that if not corrected swiftly, this could lead to further financial discrepancies and impact the morale of personnel.
He recommended the strengthening of oversight in the area of payroll management to ensure that such errors do not recur, and that all employees are compensated fairly and accurately in line with their entitlements.
This is a serious oversight, as irregular expenditure not only represents a misuse of public funds but also undermines the credibility of our financial reporting.
— Bantu Holomisa, deputy minister of defence and military veterans
The department failed to include all irregular expenditure in its financial statements, due to the absence of a system capable of accurately identifying and disclosing it, he said.
“This is a serious oversight, as irregular expenditure not only represents a misuse of public funds but also undermines the credibility of our financial reporting. We need to urgently implement a system that can track and record such expenditures so that our financial statements present an accurate and honest picture of the department’s financial health. The department of military veterans (DMV) is also grappling with similar issues. Movable tangible capital assets, as disclosed in the DMV’s register, could not be located during the audit.”
“Additionally, the completeness of irregular expenditure within the DMV for the 2022/23 financial year was not quantified. This lack of transparency around irregular expenditure must be addressed if we are to improve financial governance within the DMV.
“Moreover, we observed prolonged delays in registering military veterans in the database, with instances where it took over 12 months to process qualifying veterans. This delay has not only denied some veterans timely access to their benefits but also highlighted significant inefficiencies in the database management system.”
He pointed to a weakened Military Veterans Beneficiaries Database (MVBD) managed by the ICT department stating that system-generated reports on user access and maintenance records could not be provided, preventing the audit team from verifying if user access changes were authorised.
“Additionally, the audit revealed instances where benefits were granted to individuals not registered in the database, raising concerns about the overall integrity of the system.
“Be assured, this administration is adamant on cleaning up all forms of misuse, maladministration, corruption and any form or kind of noncompliance. We will not be popular, but the decisions we collectively take today will ensure a better defence force within the next three years. We understand that the cause of most of our issues is the continued defunding of the department of defence, but the effective management of the little resources we have at bay will assist us in motivating for larger reserves with the National Treasury.”
Holomisa recommended a revision of the database management standard operating procedure to ensure clear timelines for processing applications and implementing an integrated database management system (IDMS).
He said it was essential that before any benefits being approved, beneficiaries are verified against the database to ensure they are registered.
The deputy minister said the recurring issue of inadequate controls and quality assurance processes around financial reporting highlights a deeper problem.
“When financial reports are unreliable and lack credibility, they provide a false foundation for decision-making, creating a ripple effect that can undermine both our short-term initiatives and long-term strategies. This not only affects our ability to manage the defence budget effectively but also exposes us to potential financial irregularities and reputational damage.”
Holomisa said the situation requires the immediate introduction of robust internal controls to address the systemic breaches of procurement principles.
He said the department must address the issue of consequence management placing emphasis on fruitless and wasteful expenditure.
“The only way we can restore financial discipline is through decisive action against those responsible for the repeated financial transgressions highlighted in these reports,” he said.
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