Stefaans Brmmer
Expenditure on the government’s controversial arms procurement package cuts deep into this year’s Budget, with defence’s slice of the total pie increasing to 6,4%, almost one-and-a-half percentage points higher than three years ago.
Minister of Finance Trevor Manuel this year allocated R18,41-billion to defence, well up from R16,05-billion last year. This, says Idasa’s Budget Information Service, represents an 8% real increase in defence spending.
Manuel said in his Budget speech that the increase in the defence vote would provide for the increased costs of the arms package and that provision was also being made for the South African National Defence Force protection mission to Burundi.
The total cash price of the arms deal, he conceded, had risen from the original R30,3-billion to R52,7-billion due to depreciation of the rand and inflation. This amount excludes financing costs, which are budgeted separately with the costs of other state debts. The arms are to be paid for over a 12-year period ending 2012.
Manuel sought, however, to downplay the increases, pointing out that defence spending in 2002/3 would be 1,7% of gross domestic product, still less than half the 3,7% a decade ago at the height of PW Botha’s total onslaught era.
But these figures do not tell the entire story, particularly how the spiralling cost of the arms acquisition has caused defence to claim a higher portion of the national Budget. In 1999/2000 defence expenditure was just under 5% of total non-interest expenditure. In 2000/ 2001, the first year in which payments were made towards the arms deal, that figure jumped to just under 6%. It rose to 6,1% last year and 6,4% in the latest Budget.
Good news for the doves, however, is that at the national Treasury’s current projections this is the peak. In 2003/4, according to medium-term expenditure estimates, defence will get 6,2% of the national pie and 5,9% the year after. In real terms, according to Idasa’s calculations on treasury figures, there will be no growth in the defence budget next year and a small negative growth the year after.
The four corvettes, three submarines, 30 light utility helicopters, 24 trainer aircraft and 28 fighter aircraft that make up the arms package will take a R6,33-billion bite from the latest budget, up from R4,05-billion and R2,64-billion in the two previous years. It is expected to peak in 2005/6 at R7,7-billion.
An indication how the government got caught with its pants down on the arms deal when the rand headed south is the Treasury’s revised medium-term estimate for defence. Last year defence needed an extra appropriation of R250-million. The latest budget is almost R1,6-billion above earlier estimates, and one year on it will be R1,4-billion above.
The Treasury confirms in its estimates that the arms deal is the major culprit in defence spending, pointing out that the special defence account, from which the deal is paid, was by far the fastest growing aspect of the defence budget and will gobble up 44%.
Andrew Donaldson of the Treasury’s budget office was this week reported as saying it was unlikely the cost of the arms deal would be revised upwards again, since the latest figure was based on “forward projections” of currency fluctuations and other factors.
It remains to be seen whether the government will be caught with its pants down again.