Publication: Mail and Guardian Issued: Date: 2001-11-16 Reporter: Mungo Soggot and Barry Streek Editor:

More of a Cock-Up than a Conspiracy


Publication  Mail & Guardian
Date 2001-11-16
Reporter Mungo Soggot and Barry Streek
Web Link


The one-year forensic probe by law enforcement agencies into the arms package has cleared the government of any wrongdoing but uncovered a string of procedural irregularities in several parts of the deal.

Before the report was even tabled in Parliament on Thursday, it was being slated as a cover-up. The United Democratic Movement described the report as a "celebrated palace verdict", while the Democratic Party criticised the presentation to Parliament as a "glorified press conference". Both parties walked out of Parliament in protest as the auditor general, the director of public prosecutions and the public protector prepared to present their findings.

The New National Party's media director, Francois Beukman, said the report raised more questions than answers and his party was "not satisfied with the final product", while the Pan Africanist Congress's Patricia de Lille, who first spotlighted the problems in the arms deal, said the final report had been "sanitised".

However, although the report exonerates the government as a whole, and presents a glib summary of its findings, the main body of the 380-page document is littered with intriguing details about how officials ignored due process and tender procedures.

The investigators also hang Chippy Shaik out to dry. Shaik, the Department of Defence's acquisition chief, has been the focus of many of the investigations by the press that have in many instances set the agenda for the state's probe.

Former defence minister Joe Modise gets a rap on the knuckles for being involved in a company that benefited from the arms deal, the report observing that this was "extremely undesirable". But Modise will likely get away with it as the report found no evidence of impropriety.

The findings by the three investigative agencies will fuel suspicion that they have either not dug deep enough or have sought to shield the government from the damaging controversy. Since the arms saga began at the beginning of last year, officials have faced allegations of corruption, nepotism and twisting tender procedures - many of which are dismissed by the report.

De Lille's reference to the "sanitised report" follows revelations that President Thabo Mbeki and other Cabinet members perused the report beforehand. Mbeki may have invoked apartheid-era legislation designed to protect national security to edit the report.

Although the forensic report has now been finalised, the elite Scorpions investigative unit, which falls under the national director of public prosecutions, will continue pursuing criminal investigations stemming from the deal.

Of the three investigative agencies involved in the probe, the National Director of Public Prosecutions, Bulelani Ngcuka, and his Scorpions unit have demonstrated the most muscular approach. Earlier this week the Scorpions served subpoenas on members of Parliament to explain aspects of the deal. The subpoenas were withdrawn after the Speaker of Parliament said they violated parliamentary privilege, and the MPs are now expected to be interviewed at a later date.

Ngcuka said that some high-ranking officials had received gifts in connection with the arms deal, and that action would be taken against them.

The report also lists several other allegations involving serious impropriety that are still being probed as part of the ongoing criminal investigation.
Some of the report's salient findings are:

Corvettes: The report finds that apart from one bidder, Bazan, all the bidders failed to comply with key criteria affecting, among other things, their financing and technical requirements. Investigators discovered that one of the bidders, the German Frigate Consortium, which eventually won, was allowed to submit important information after the tender had been closed. The report says the consortium "should have been disqualified" for not providing the required guarantee in question. The investigators also say they cannot find evidence for how the selectors decided on key aspects of the bids.

Fighter aircraft: The report clears the government for intervening in this part of the deal, and allowing the final decision not to be based on cost - a move that resulted in a different bidder being selected. In the end the Cabinet endorsed a package of Hawk and Gripen aircraft from British Aerospace. The report observes that although such an intervention was "unusual", it was "not unlawful nor irregular. As the ultimate decision-maker, Cabinet was entitled to select the preferred bidder, taking into account ... other factors including strategic considerations."

The report says some information about the total cost was not submitted to the Cabinet. It says these extra costs would have to be borne by the defence department.

The report notes that "value systems" used to evaluate the bids were approved after replies had been collected. The report says it could find no evidence that South Africa paid more than the normal price for the Hawk and Gripen aircraft. It raises serious questions about the status of British Aerospace's industrial offset offerings, and the way in which they were evaluated.

C2I2: C2I2's Richard Young, who has led the charge against the state's handling of the arms deal, earns himself a special section in the report. The section, on his many allegations about the selection of systems for the Corvettes, shows it was riddled with technical slip ups.

Richard Young, the head of Cape-based C2I2, the company that lost out to a company related to Schabir Shaik, brother of acquisitions chief Chippy Shaik, said most of the findings were in his favour, but that many of the investigators' observations were "wishy washy". Young's chances of a successful lawsuit against the government were given a boost by the findings on Chippy Shaik's conflict of interest.

The report says it appears that Young's rival, African Defence Systems, was given a copy of his proposal. It also finds that the selectors lobbed on an extra R42-million risk premium to his price, without telling him beforehand.

The investigators say there was no evidence that a proper risk assessment was made. "It appears that the selectors decided to opt for the Detexis [related to African Defence Systems] product in view of the fact it was cheaper." The report says it could find no minutes reflecting the decision to give Detexis the contract. "It is therefore not clear when and by whom the decision was taken not to award the contract to C2I2. However, it is clear that such a decision was taken and that it was taken, generally speaking, by the State."

Submarines: The report finds that the German Submarine Consortium, which won, did not make the grade where its defence offsets were concerned, and therefore should have been left out the next round. It says that Armscor's legal division submitted a legal opinion that the Germans had "failed materially to meet the essential requirements of the [defence offsets]". The opinion was not passed on to the relevant selection panel. The investigators say that Shaik and a colleague allowed bidders who did not comply to get their house in order before the next round.

The cost of the deal: The investigators and their consultants pick holes in the government's affordability study on the deal, which stressed how the final cost would be affected by currency fluctuations. The contracts are long term, exposing the final tally to the vagaries of the rand. The report says the exchange rate forecasts on which the study was based were too optimistic, and that the model did not include all relevant costs.

The key recommendations of the report are:

Parliament should take "urgent steps" to ensure that high-ranking officials and office bearers, such as minister and deputy ministers "are not allowed to be involved, whether personally or as part of private enterprise, for a reasonable period of time after they leave public office, in contracts that are concluded with the state".

Effective controls should be evaluated to ensure a fair and regular process to exclude the possibility of manipulation.

Detailed and accurate information, including all possible costs, should be submitted to the Cabinet and all currency risk implications in international armament acquisitions should be disclosed to the Cabinet.

Adequate audit trails, with particular emphasis on the visibility of supervision, decision-making and assumption of responsibility, should be in place.

The Department of Defence and Armscor should develop specific rules and guidelines to address conflict of interest issues.

With acknowledgement to Mungo Soggot, Barry Streek and the Mail & Guardian.