1 Briefing to the Portfolio Committee on Defence on the Mobility/Exit Mechanism for Members of the SA National Defence Force and the Employee Initiated Severance Package for Public Service Act Personnel Prepared by the Chief of Human Resources, DOD 11 Jun 07

2 Aim To brief the Portfolio Committee on Defence on the implementation of the Mobility/Exit Mechanism (MEM) for members of the SA National Defence Force and the Employee Initiated Severance Package (EISP) for Public Service Act Personnel (PSAP)

3 Scope Exit Mechanisms Implementation of the MEM for SANDF members and EISP for PSAP Analysis of the Impact of Implementation of the MEM and EISP Conclusion

4 Exit Mechanisms: MEM Legal basis GEPF Rule 14.8 and 20 amended Approved by National Treasury Minister of Defence approved 5 Jul 05 (ito Section 55 of Defence Act [42 of 2002]) Intent of MEM Should lead to a tangible rightsizing progress Execute through realistic succession planning Guard against the exodus of expertise/scarce skills Advise members iro career progress as informed by the Transformation and Restructuring imperatives Choice to accept/reject offer – MEM is voluntary

5 Exit Mechanisms: MEM (cont) Guidelines for Succession Planning iro MEM Are functional groups/musterings constrained by critical shortages Status of ETD and learner throughput Maintenance of expertise Contribution to rightsizing (MTEF & longer) Contribution to race-rank distribution correction “Old” Service System contract expiries and renewal justified Succession planning: Role of Services and Divisions

6 Exit Mechanisms: EISP Minister of PSA determination introduced the EISP wef 1 Jan 06 Ito Section 3(3)(c), Public Service Act, 1994 DOD introduced the EISP wef 31 May 06 EISP Benefits Structure Pension beenfits ito the Gov Employees Pension Law, 1996 Departmental benefits ito the Implementation Measures EISP Application Employees initiate their separation via the EISP EISP Status DOD expects possible 200 applications for the total MTEF period

7 MEM FOR SANDF MEMBERS: BENEFIT STRUCTURE Less than 10 years service and/or younger than 55 years of age 10 years pensionable service and 55 years or older GRATUITY & ANNUITY - NO SCALING DOWN OF PENSION BENEFIT RULE (b) - WITHOUT AN ADDITION OF PENSIONABLE SERVICE RULE (b) ACTUARIAL INTEREST RULE STATE GUARANTEE: Third party debts recovered from exit pay CONTRACTUAL OBLIGATIONS: Released PRO-RATA SERVICE BONUS LEAVE: Payment of leave credit RESETTLEMENT: Actual expenses MEDICAL PROVISION: Plus 10 years service, option to buy into RFMCF up to age 60, and eligible for medical service according to SAHMS provisions EXIT PAY: 2 weeks for every full year service, but a minimum of R payable OFFICIAL HOUSING: One month’s notice SUBSIDISED MOTOR VEHICLE SCHEMES RESKILLING: Maximum of R for reskilling, training for employment opportunities, and entrepreneurial skills MEM Pension Benefits ito GEPF Departmental Benefits

8 EISP FOR PSAP EMPLOYEES: BENEFIT STRUCTURE Less than 10 years service and/or younger than 55 years of age 10 years pensionable service and 55 years or older GRATUITY & ANNUITY - NO SCALING DOWN OF PENSION BENEFIT RULE (b) - WITHOUT AN ADDITION OF PENSIONABLE SERVICE RULE (b) ACTUARIAL INTEREST RULE EISP Pension Benefits ito GEPF Departmental Benefits MEDICAL: 55 yrs & older qualify for post-retirement medical assistance: Less 10 yrs equal 12 times employer contribution 10 to 15 yrs equal to 36 times employer contribution 15 yrs plus 2/3 rd employer contribution per month STATE GUARANTEE: Third party debts recovered from exit pay CONTRACTUAL OBLIGATIONS: Released LEAVE: Payment of leave credit RESETTLEMENT: Actual expenses, 55 yrs & older compensated according to PSCBC Resolution 3 of 99 & Departmental Policies EXIT PAY: 2 weeks for every full year service, but a minimum of R payable OFFICIAL HOUSING: One month notice SUBSIDISED MOTOR VEHICLE SCHEMES RESKILLING: Maximum of R for reskilling, training for employment opportunities, and entrepreneurial skills PRO-RATA SERVICE BONUS

9 MEM AND EISP as at 31 May 2007: Approved by Minister of Defence Race and Gender

10 EISP as at 31 May 2007: Approved by Minister of Defence Race and Gender

11 MEM AND EISP as at 31 May 2007: Approved by Minister of Defence (cont) Age Group

12 MEM AND EISP as at 31 May 2007: Approved by Minister of Defence (cont) Age Group

13 MEM AND EISP as at 31 May 2007: Approved by Minister of Defence (cont) Fin year and Budget Holder

14 Termination Type2005/06FY2006/07FY Contract Expired Deceased Departmental Transfer Discharged Medical Discharged Resigned Retired Total EXIT PER REASON OTHER THAN EXIT MECHANISM Note: FY 2005/06: MEM/EISP = 12,8% of total exits FY 2006/07: MEM/EISP = 18,7% of total exits

15 Conclusion Steady results are being achieved on stated objectives eg representivity and age profiles with the implementation of the MEM 42% of all exits are middle-management (Col, Lt Col, WO1, WO2) 30,2% of all exits are White middle-management males 85,7% of all exits are White Difficult to forecast the exact rightsizing results as MEM/EISP are voluntary The tempo of implementation for both the MEM and EISP determines their success in the DOD Continuous (monthly) monitoring of progress Continued emphasis on succession planning efforts ito the MEM application

16 DISCUSSION/QUESTIONS

17 Exit Mechanisms: MEM Overview 1994 to 2005 Downsizing/rightsizing origins Interim Constitution (Act 200 of 1993) Section 236(c) Constitution (Act 108 of 1996) Section 24(1) of Schedule 6 and Provisions of the Interim Constitution continues in force, Sections 236(1),(2),(3),(6) & (7)(b) & (8), 237(1) and 2(a) Above provisions were aimed at the size and affordability of the DOD and informed the Defence Review of 1998 Envisaged compulsory employer-initiated retrenchment Overtaken by the availability of the Voluntary Severance Package (VSP) (July 1996) and the Employer Initiated Package (EIP) The DOD steadily downsized towards Regulars (excluding MSDS), mainly via natural attrition personnel exited from 1 Jan 96 – 31 May 07 ( via the VSP/EIP) Rightsizing = E3 and R3 (PFMA requirement iro resource management)