Publication: Business Day Issued: Date: 2003-05-22 Reporter:

The Missing Pieces from the Final Arms Deal Report



Business Day

Date 2003-05-22

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The following sections are among those missing from the final report on the R60bn arms deal given to Parliament. The draft including these sections was discussed by the Ministers Committee and President Thabo Mbeki with Auditor-General Shauket Fakie prior to publication.

Gifts Received

On 10 December 1999, the project officer received a farewell gift of R7000 from ADS (Altech Defence Systems) and other subcontractors, the receipt of which had not been authorised by a superior officer, nor was it reflected in a gift register. It was handed over openly at a farewell function in the presence of staff of Armscor, the Navy and subcontractors.

At the same occasion the project engineer, who has since left the Navy, received approximately R4000 from ADS and other subcontractors as a farewell gift, which he used to buy a watch. This matter was referred to the DSO (directorate of special operations) and the PP (public protector) will pursue this aspect.

Inaccuracies in the presentation to Scopa

The presentation to Scopa (standing committee on public accounts) by the DoD (department of defence) contained various inaccuracies. In the Scopa presentation, under the heading "Proof of the German Frigate intention to form a vessel contractor with ADS for the supply of corvettes", the following is stated: "At the stage of the GFC (German frigate consortium) offer (May 1998) ADS had not yet any connection with Thomson, and was a wholly owned subsidiary of the Altech group of companies, in turn owned by Altron."

This is not correct. As has been pointed out, Thomson International bought the first 50% of the shares of ADS on 24 April 1998.

In the presentation to Scopa it stated: "At no stage in the RFO (request for offer) or Combat Suite tender process was any company designated by the DoD or Armscor as a nominated (preferred) supplier." However, it is clear that in various documents, eg: the SA Navy Patrol Corvette Combat Suite Element Costing and Description, which formed part of the RFO, the term "nominated" is used in respect of suppliers for the combat suite, eg: there is reference to "the nominated RSA combat suite supplier", "nominated companies for the various subsystem" and "the primary local company nominated to integrate the combat suite element as a system level is Altech Defence System."

In the Scopa presentation it is stated that, "at no point in the entire tendering process did the SA Navy indicate a preference for the CI IMS (Information Management System) product or technology, even though the SA Navy being (sic) a co-owner of the CI IMS technology", and "On the contrary, the final selection between the CI option and the alternative Detexis option was ratified by the PCB which was chaired by the Chief of the Navy."

Mr S Shaik testified before Scopa on 11 October 2000 that (the decision not to bear the risk of the IMS of CI) "was taken by the Chief of the Navy who chaired the meeting on the Projects Control Board with the approval of his Naval Command Council".

It is the view of the investigation team that the CI IMS was the preferred database of the SA Navy, at least up to a point. This is clear from its nomination as the IMS supplier, the amount spent by the Navy on its development, and the conclusion of the Navy (and Detexis) engineers as reflected in the "Report on the Diacerto bus". This was also confirmed by different witnesses.

The PCB meeting where the decision was allegedly taken, was on 24 August 1999. However, the minutes firstly show Mr S Shaik was chairperson, and gave no indication that he, at any stage, handed the chair over to the Chief of the Navy. The minutes therefore do not support the statement to Scopa that the Chief of the Navy chaired this meeting. Furthermore, apart from showing that Mr S Shaik took part in the discussion, the minutes do not reflect the alleged ratification, but merely show that the PCB was informed that the JPT had categorised the CI bus as a Category B risk.

As has been pointed out, it is doubtful whether the alleged prior meeting of 19 August 1999 had in fact taken place.

In the presentation to Scopa, it was stated that Mr S Shaik disclosed "his potential conflict of interest due to a family member being associated with one of the candidate suppliers"; further that the PCB agreed that the procedure to be followed would be that he would hand over chairmanship of the PCB to the Chief of the Navy during discussion/decisions on combat suite matters in which he would take no part unless requested to amplify a point. This procedure was followed throughout the combat suite tendering and contract negotiations phase. In several instances the Chief of Acquisitions physically absented himself from the meeting room during such discussions/decisions".

The alleged agreed procedure does not appear in the PCB minutes. Had it been agreed upon, one would have expected it to be recorded. Certainly Mr S Shaik had an interest in ensuring that it was recorded. Furthermore, no recusal in the sense of leaving the meeting took place. The minutes of the 11 meetings between 29 September 1998 and 6 October 2000 reflect the following: Mr S Shaik declared a conflict of interest on four occasions; he handed over the chair to the Chief of the Navy on two occasions but remained present; he took part in discussion relating to the combat suite on three occasions.

With acknowledgement to the Business Day.