Publication: Noseweek Issued: Date: 2001-11-01 Reporter:

The Three Brass Monkeys




Date November 2001, Issue 38

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OK, Mr President, you got us. We're racists. But you got the race wrong. It's not Africans we despise, it's the Arsehole race - who come in all colours and who've infiltrated the highest reaches of power.

Our President, unlike some others in his party, never plays the race card. That phrase suggests conscious manipulation. Mbeki's racial grievance is evidently constant and inherent. He cannot help it.

This is once again evident in a comment in his weekly "Letter from the President" published on the ANC website. After claiming - incorrectly - that the arms deal report exonerates government, Mbeki argues that those who criticize the report are motivated by racism.

"As soon as the report of the investigators was issued yesterday, so soon did the campaign begin to discredit this report. The truth will not be allowed to stand in the way of what had to be proved - that Africans and black people in general are corrupt."

Complaining about the sources of this dastardly campaign, the President referred darkly to "people who still have to account for the role they played in the perpetuation of apartheid, including involvement with murder squads".

Surely he is not referring to Public Accounts Committee chair Gavin Woods, who got embroiled (relatively innocently, it would seem) in the Inkathagate scandal when he was director of the Inkatha Institute?

Another government response was even more sinister. "In the light of the damage to our country, caused by unfounded allegations of massive corruption on the part of government and reputable international companies [sic], government will institute its own investigations to ascertain the source of these allegations and the purpose they sought to achieve."

It seems that we at noseweek are being called to account. Well, let's make a start. Dear readers, we know you are all tired of the arms deal scandal, but it won't go away on its own. The release of the report, because of both its contents and its handling, has reconfirmed the scandal‘s importance.

Government has clearly relied on the vast majority of people not reading the 380-page report. Any reasonably informed reader who does wade through it will surely see that it has been sanitized. [Prove us wrong! Release the drafts before and after the report went to the Ministers and the President for comment.]

The detail of the report does indeed contain enough examples of corruption and mismanagement to have given fresh impetus to the investigation - and to have vindicated the original (much-maligned) reports of the Public Accounts Committee and the Auditor General.

The report presents a summary that exonerates "Government" (whatever that is) despite the fact that for eight serious allegations investigated by the Scorpions, six enquiries are still underway - including some understood to refer to former Minister of Defence Joe Modise. [We fear some may mourn his recent death from cancer more than others.]

In some cases the summary is patently disingenuous, as in noting that no substantiation was found of the allegation that former Armscor CEO Llew Swan subsequently became a director of BAE Systems (one of the prime contractors). What is left unstated is the fact that he became a consultant to BAE.

The summary presented by the three monkeys (allegorical, Mr President, not racist) has, predictably, been seized on by government to launch a campaign to shut out any further attempts to question the arms deal or the investigation.

Let's look at some of the issues that the three investigators failed to highlight.

After months of investigation, the report fails to disclose the true total cost of the deal - even without taking the deteriorating exchange rate into account.

It appears that Cabinet was never informed of the financing cost (i.e., interest) that, in November 1998, amounted to about half the cost of the R30 billion deal. The Cabinet sub-committee, which oversaw the procurement process, was presented with an affordability study making no reference to financing costs.

The affordability study was seriously flawed in other ways. It stated the total cost as R36b, based on a forward-estimated rate of exchange, including estimated currency depreciation. Even the three monkeys in their report describe this as "overly optimistic".

In addition, an as yet undetermined figure will need to be found in the defence budget from year to year to make the equipment viable. For instance, the report says that some "essential capabilities" of the Hawk and Gripen jets were not included in the purchase contract.

One more thing. While the report claims that the risks inherent in the huge expenditure for the deal were fully canvassed by the sub-committee, no evidence is tendered to support this claim.

Among the findings is the claim that there are "no grounds to suggest that the government's contracting position is flawed". But in the summary it emerges that the selection and contracting process was irregular and even chaotic. (For no losing contractor to act on these irregularities would be no indication that they are not substantial. Defence contractors have a symbiotic relationship with governments and are reluctant to take them on, at least openly in court.)

The purchase contracts are between Armscor and the suppliers. The report makes clear that some Armscor acquisition procedures were not complied with. The involvement of Cabinet in the decision-making process does not absolve Armscor of its legal and contractual responsibilities. Two winning bidders, the German Submarine Consortium and the German Frigate Consortium, ought to have been disqualified for not meeting bidding deadlines or certain minimum requirements. This was according to Armscor's own legal advisors.

The body that overrode the disqualification - the Strategic Offers Committee - was found to have no decision-making powers in terms of its constitution. This body and its co-chairs, Chippy Shaik and H Esterhuyse, took a variety of decisions with an impact on virtually every prime contract. If they didn't have authority to do so, the resulting contracts may be invalid. But the monkeys in their report simply chant the required "All is well".

In the case of three contracts, for the Hawk jet trainer, the German submarines and German frigates, it was the non-defence National Industrial Participation (NIP) offers alone that were decisive in securing preferred-bidder status in spite of highly inflated figures.

The report found there was "no evidence the NIP value system was approved by the DTI or any authority at Armscor/Department of Defence". NIP scores were multiplied by so-called "quality factors", which - surprise, surprise - favoured the British and the Germans. These were not properly authorised and were "not linked to any documented benchmarks".

The evaluation of the submarine contenders was so shot through with numerical errors that the Auditor General has admitted it was only by chance that the right bidder was selected.

The finding that the Cabinet committee was entitled to change the tender evaluation of the jet trainer to exclude cost, making the British Hawk the winner instead of the Italian trainer, is illogical and unsupported by any legal opinion. If the Cabinet was entitled to take into account undisclosed "strategic" considerations, as the findings claim, then why did they bend over backwards to manipulate the scores?

The reason is obvious - Cabinet is as bound by the law as any citizen. No clause in the tender documents is cited to support Cabinet's right to weigh up additional factors.

The whole process of acquiring the corvette combat suites, costing some R2,6b, was conducted outside Armscor's and the Navy‘s normal tender provisions. The report states, "It is not clear who authorised this, and whether had she had the necessary authority to do so."

Among the allegations initially presented to the investigators, two have been neither discounted nor mentioned as being still under investigation. These are the allegations that both BAE Systems and the German Submarine Consortium paid bribes. Such allegations, if proved, could nullify the contract. Perhaps these are matters that relate to "areas of a criminal and sensitive nature'' which were considered inappropriate (!) to be included in the report.

The conflict of interest between Chief of Acquisition Chippy Shaik and his brother Schabir, representing the French company Thales (formerly Thomson-CSF ), is well established by the report, as is Chippy's involvement in matters affecting Thomson (a main contractor). There is no assessment in the report of the impact of this on the validity of the contract.

While there has been much media focus on subcontracts and the role of Chippy Shaik, the most striking aspect of the report is the irregular decisions and "errors" in favour of the main British and German bidders. Genuine errors should be distributed evenly in favour of all the bidders, but the pattern is very different. For examples, see

The report has shown up plenty of white Arseholes. Minister Erwin and the two Admirals come to mind. Africans are not more prone to corruption, venality or incompetence than anybody else - but they are not less so. Power corrupts. Those currently in power are predominantly black, so the corrupted will logically be found to be predominantly black.

The really sad part is that poor, powerless people (overwhelmingly African) end up paying the price.

With acknowledgement to Noseweek.