SA Army v Armscor: Services suspended

A dispute over the non-payment of R310 million owed by the Department of Defence to the Armaments Corporation of SA has led to the suspension of Armscor’s services to the department.

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 to the department.

Armscor provides travel services to the division, including the management of two travel agencies and integrated travel solutions.

The department is responsible for all travel costs and fees, including prepaid ticket fees, rush ticket fees, delivery invoice and ticket reprint fees, penalty fees, waivers, cancellation fees, airline service fees, cancellation processing fees and applicable penalty costs.

On May 30, Armscor CEO Solomzi Mbada wrote to the Acting Minister of Defense informing the Department of its decision to suspend all travel services because the Department had failed to meet its obligations under the Service Level Agreement (SLA) between Armscor and the Department of Defense (DoD).

The letter states: “Despite numerous requests from Armscor to the Ministry of Defence since 2021 and continuous requests for payment of the outstanding amounts, the issue of non-payment of the amounts due to Armscor has remained unresolved and we have unfortunately not been able to get the invoices paid or even significantly reduced. A workable solution has not yet been reached and the Ministry of Defence has not provided the funds for the cost of the travel services.

“Armscor has run out of options to defuse the matter and is unable to cover the cost of the travel services. Armscor has now also received letters from the Office of the Commander-in-Chief of the South African Army disputing the outstanding amount for services rendered, despite detailed receipts being provided to the South African Army Account Manager.

Mbada added: “The continuation of travel services to the Ministry of Defence without reimbursement of the cost of such services poses a significant risk to the management of Armscor’s business and it would be irresponsible and reckless to continue such services on this basis. The Armscor Board and Executive Committee must act in the best interests of the organisation and exercise due care and diligence in the discharge of their duties. Accordingly, the decision has been taken not to continue to fund the Ministry of Defence’s travel expenses.”

Mbada explained that Armscor had no choice but to stop providing travel services: “To date, the outstanding amount has risen to an amount of R310,261,863. In the meantime, Armscor will only continue to provide travel services to the Department of Defence if the necessary costs for each request accompany such a request.”

When asked for comment, ministry spokesman Siphiwe Dlamini said: “It is regrettable that an internal letter has become public.”

Kobus Marius, DA spokesperson for defence and military veterans (6th Parliament), said non-payment of Armscor would endanger the country’s security.

“It is unacceptable that the Department refuses to pay Armscor for the services agreed under 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 country and us as citizens.

“This is part of the ANC government’s failures that must be urgently addressed and corrected. If that means placing the Department of Defence under administration, then the President, as Commander-in-Chief, must do so urgently. If the financial affairs of the Department of Defence are in disarray and beyond its capabilities, then the Treasury must urgently step in to save Armscor and the SANDF’s defence capabilities.”

Marais stressed that the country must not allow the country’s defense to fall into the hands of incompetent officials and politicians.

Meanwhile, Chief of the Navy, Vice Admiral Monde Lobese, said at the awarding of the 20-year service medal in Simon’s Town on February 29 that he had had enough of the inefficiency and poor performance of the Armscor Dockyard, which contributed to the limited availability of ships, and was ready to “separate” the Navy from it.

He said that in addition to budget constraints, “another factor that severely limits our ability to get our ships to sea is the non-performance of the Armscor Dockyard.”

“As Commander-in-Chief of the Navy, my patience has run out with their inability to repair the SA Navy’s vessels. I have asked the CEO of Armscor on several occasions for assistance to resolve this situation.”

According to Lobese, the link between the SA Navy and the Armscor Dockyard needs to be relaxed: “…or we must allow it to end as the SA Navy receives very little return on investment.”