An Investment to Safeguard Democracy
Among the many priorities facing the country at the moment is the maintenance of our capacity to safeguard our democracy and the social and economic gains that we make.
It is for these reasons, among others, that the Constitution adopted in 1996 said national security must reflect the resolve of South Africans "to live as equals, to live in peace and harmony, to be free from fear and want and to seek a better life".
It is also among the reasons that between February 1996 and April 1998 a comprehensive process was carried out to determine the kind of defence force we needed and how it should be equipped. This Defence Review was tabled and approved with the support of all parties in Parliament in April 1998.
The decision on how to equip South Africa’s defence force was carefully considered and thoroughly researched. It was made in the interests of maintaining an effective and modern defence capability over the next decade. Without this replenishment of the main arms of service of the SANDF, its operational capabilities would have been structurally impaired, undermining the country’s security and the Constitutional requirement for such a capacity.
In the light of the developmental challenges facing the country, the government has undertaken massive fiscal and budgetary reform to ensure prudent expenditure of limited resources. A procurement of this nature with expenditures spread over more than a decade meant a specific budgeting process and Cabinet adopted a three phased decision making process for the strategic procurement.
The process was unique for South African defence procurement because it was conducted in an open and transparent manner unlike decades of previous purchases; it was a single strategic package rather than piecemeal procurement; and a systematic process of industrial participation obligations was developed in line with the National Industrial Participation Program (NIPP) adopted by Cabinet in April 1997. This is applied to all public sector procurements where the imported content is over $10 million.
This approach meant there would be four national government departments involved in all decisions - Finance, Trade and Industry, Public Enterprises and Defence. A committee of the ministers of these departments was chaired by then Deputy President Thabo Mbeki (and later as President) and it prepared the final recommendations to Cabinet.
Cabinet then decided to conduct further negotiations with the short listed bidders to address affordability questions. It was also decided to appoint a Chief Negotiator, Jayendra Naidoo, to coordinate the negotiations and report to the President and the Ministers. After extensive negotiations involving the technical structure of the equipment, industrial obligation requirements and the financing of the deal a final report was prepared.
Importantly, this report assessed the economic, fiscal and financial impacts of the packages, including the risk and final affordability of the deal. This was done by the Department of Finance with the assistance of other government departments, external economists and a local university.
The National Industrial Participation Programme (NIPP) - the so-called ‘offset’- was not decisive in the final procurement decision. It arose only when the decision has been taken. Accordingly, the NIPP acts as an effective investment promotion device and was used in a number of the exercises to assess economic risks such as balance of payments effects and the growth impact. Though some people sought to justify the deal on the basis of these offsets, this was not the reason for the acquisitions.
The arms procurement package was therefore concluded after a lengthy and thorough process in which the government went to great lengths to ensure the integrity, transparency and fairness of the process.
It is therefore necessary that as the Public Accounts Committee conducts its review, the ministers and departments involved are given ample opportunity to address the issue raised in the Auditor-General’s review.
With acknowledgement to ANC Today.