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The Democratic Alliance (DA) believes that the 89% remuneration increase of Sipho Thomo, Chief Executive Officer of Armscor, raises some serious questions that need to be explained to the Parliamentary Portfolio Committee on Defence and Military Veterans. The remuneration increase includes:
• a 19% salary increase from R1.22 million to R1.45 million; and

• a 1181% benefits increase from R108 624 to R1 391 395.
The Armscor 2008/2009 annual report reveals that Sipho Thomo received a salary increase from R1.22 million to R1.45 million (19% increase) and a benefit increase from R108 624 to R1 391 395 (1181% increase). His total remuneration increased from R1.7 million to R3.27 million, which amounts to a total remuneration of increase of 89 percent. The benefits increase includes bonuses, performance related payments and restraint of trade payments. Sipho Thomo is not exactly Jack Welch. The fact is that: * Sipho Thomo was required to undergo counselling to deal with his management style as well as a disciplinary hearing after making offensive remarks to an employee; * there are serious delays in various acquisition programmes including the Airbus A400m Strategic Heavy-lift Transport Aircraft, Ground Based Air Defence System and New Generation Infantry Combat Vehicle; * there appear to have been problems with frigate obligation of the defence industrial participation agreement for the Strategic Defence Package; * the state entity is swallowing up increasing government transfer payments while at the same time there is a concern that over the long term Armscor may not be able to fulfil its mandate to acquire defence materiel for the Department of Defence. Why are we rewarding Sipho Thomo and his management team with higher salaries and bigger benefits payments when there is a concern about the long term viability of Armscor? The Armscor 2008/2009 annual report also reveals that:
Benefits Paid 2008 Benefits Paid 2009 % increase
Executive Directors R 168,192.00 R 1,570,861.00 834
Non Executive Directors - - -
Management Board Emoluments R 415,037.00 R 1,107,993.00 167
Directors' Emoluments R 131,700.00 R 198,188.00 50
R 714,929.00 R 2,877,042.00 302



This means that executive directors received a combined increase from
R168 192 to R1 570 861 - an increase of 834% - in their benefits from last year. Overall benefits, including bonuses and performance benefits, for directors increased from R714 929 to R2 877 042, which amounts to an increase of 302 percent.

The Armscor annual report 2008/2009 shows the state entity reported a decreasing surplus of R37.9 million in 2009 compared to R44 million in 2008 as well as an increase in government transfer payments from R415.6 million in 2008 to R479 million in 2009. It seems as though without the increased government transfer payment of R479 million, Armscor would have made a deficit of R441.1 million in 2008/2009.


The DA will be asking some hard questions about how higher salaries and bigger benefit payments can be justified when Sipho Thomo and his management team appear before the Portfolio Committee on Defence and Military Veterans.


The meeting is provisionally scheduled to take place on Wednesday 22 September 2009 at Parliament.