A DISPUTE over the non-payment of R310 million owed by the Department of Defence to the Armaments Corporation of SA (Armscor) has led to the suspension of Armscor’s services rendered to the department.
Armscor provides travel services to the department, inclusive of the management of two travel offices as well as integrated travel solutions.
The department is responsible for all travel costs and charges, including prepaid ticket charges, rush tickets, delivery invoices and ticket reprints, penalties, waivers, cancellation charges, airline service fees, void processing fees and penalty costs incurred.
On May 30, Armscor CEO Solomzi Mbada wrote to the acting Secretary for Defence informing the department of its decision to suspend all travel services as the department had failed to execute its obligations as per the Service Level Agreement (SLA) between Armscor and the department.
The letter stated: “Despite numerous requests by Armscor to the DoD since 2021 and the continuous demands for payment of the outstanding amounts, the non-payment of overdue amounts due to Armscor has remained unresolved and we have unfortunately not been successful in getting the invoices paid or even reduced substantially. A workable solution has to date not been reached and the DoD has not provided the funding for the cost of the travel services.
“Armscor has run out of options to mitigate the matter and is not in a position to carry the cost of the travel services. Armscor has also now received correspondence from the Office of the Chief of the South African Army, disputing the outstanding amount in respect of services rendered, despite the provision of detailed supporting documentation to the account manager of the SA Army.
Mbada added: “The continuation of travel services to the DoD without the recovery of the cost of such services is creating a substantial risk to the management of the business of Armscor, and it would be irresponsible and reckless to proceed with such services on this basis. The board of directors of Armscor and the executive committee have to act in the best interest of the organisation, and must exercise due care and diligence in carrying out their duties. Accordingly, it was decided not to continue with the funding of the travel expenses of the DoD.”
Mbada stated that Armscor had no other option but to suspend travel services: “To date, the outstanding account has escalated to an amount of R310 261 863. In the interim, Armscor shall only continue to provide the travel service to the DoD where the necessary cost in respect of each request accompanies such request.”
Approached for comment, department spokesperson Siphiwe Dlamini, said: “It was unfortunate that an internal letter found its way into the public.”
DA spokesperson for Defence and Military Veterans (6th Parliament), Kobus Marius, said the failure to pay Armscor would compromise the country's security.
“It is unacceptable for the department to refuse to pay Armscor for services agreed as per the SLA. By refusing to pay Armscor, the government and the department are contributing to the deterioration of the South African National Defence Force and its ability to defend our nation and us as citizens.
“This is part of the failing ANC government, which must urgently be addressed and urgently corrected. If that means putting the DoD under administration, then the President, as the Commander in Chief, must do so urgently. If the financial affairs of the DoD are in disarray and beyond their capabilities, then the National Treasury must urgently step in to save Armscor and the SANDF's defence capabilities.”
Marais emphasised that the country must not allow the defence of the country to be left in the hands of incompetent officials and politicians.
Meanwhile, the Navy chief Vice Admiral Monde Lobese, said at the 20 years long service medal parade in Simon’s Town on February 29 that he was tired of the inefficiency and poor performance of the Armscor Dockyard, which had contributed to the limited availability of vessels, and was prepared to “divorce” the Navy from it.
He said aside from budget restrictions, “... another factor that is severely limiting our ability to get our ships to sea is the non-performance of the Armscor Dockyard.
“As the chief of the Navy, I have reached the end of my patience with their inability to repair the SA Navy ships. I have engaged the CEO of Armscor on numerous opportunities to resolve this situation.”
According to Lobese, something must give in the marriage between the SA Navy and the Armscor Dockyard: “… or we must allow it to end, as the SA Navy is getting very little return on investment.”
thabo.makwakwa@inl.co.za