Publication: Mail and Guardian Issued: Date: 2005-01-07 Reporter: Sam Sole Reporter:

Arms Report Sanitised



Mail and Guardian




Sam Sole

Web Link


New evidence of serious irregularities in South Africa’s multibillion-rand arms deal has emerged from confidential documents wrestled into the public domain by defence contractor Richard Young.

The documents, consisting of earlier drafts of the final report on the investigation into the arms deal that was published in November 2001, were given to Young last month after a marathon legal battle against Auditor General Shauket Fakie. Young has been contesting the exclusion of his company from one of the sub-contracts.

The documents suggest an explanation as to why Fakie fought to avoid disclosure. The papers show the extent to which the draft reports appear to have been sanitised and watered down in the final published report.

Among earlier findings by investigators later omitted from the final report were that:

- there were “fundamental flaws” in the selection of joint British-Swedish bidders BAE/Saab as suppliers of the jet trainer and fighter aircraft — the most expensive part of the entire acquisition;

- in the investigation “it became apparent that during the technical, DIP, NIP [defence and national industrial participation or ‘offsets’] and financial evaluations as well as during the negotiation phase, preference was given to BAE/Saab”;

- the late defence minister Joe Modise personally influenced the decision to opt for the more costly Hawk trainer as opposed to the Italian jet favoured by the South African Air Force (SAAF) and “caused the Hawk to be selected”;

- the DIP evaluation process with regard to the submarines was “materially flawed”, resulting in “potential prejudice to unsuccessful bidders”; and

- the award of the contract to supply engines for new military helicopters was “irregular”.

Fakie has repeatedly denied making any material changes, in particular as a result of pressure from the executive. Prior to the final report, a draft report was given to ministers and President Thabo Mbeki, who apparently responded with a point-by-point rebuttal that has never been made public, although an excerpt of it was in papers supplied pursuant to a court order.

Fakie has claimed that only “verified facts” provided in the government response were taken into consideration. However, the drafts suggest the final version was edited to exclude:

- any earlier findings that might indicate a breach in governance serious enough to threaten a contract;

- any direct contradiction of Cabinet ministers; and

- any finding that a Cabinet minister personally influenced the decision-making process.

Instead, the final report contained piecemeal criticisms that avoided substantive conclusions relating to the probity of the process. It completely exonerated ministers and found that there were “no grounds” to suggest that the government’s contracting position was flawed.

Now the draft reports have exposed a welter of new facts and quotes, highlighting irregularities in the acquisition process, which were left out of the published report and call into question some of its findings.

Among the most significant of these omissions is the existence of a second set of minutes of a crucial ministerial briefing that materially diverge from the previously published account of the meeting.

This was the briefing at which a ministers’ committee purportedly took a decision to recommend to the Cabinet that the British Hawk, twice the cost of its Italian rival, be selected.

This was avowedly for strategic reasons related to a proposed alliance between British defence company BAE and South African parastatal Denel, as well as the anticipated industrial participation benefits.

The final report does quote a letter from then secretary of defence Pierre Steyn to chief of acquisitions Chippy Shaik in which Steyn contests the accuracy of certain minutes, but reference to the ministers’ committee meeting is omitted, making it unclear that Steyn is contradicting the ministers’ version.

In the drafts that link is made and it emerges that Steyn’s view was supported by a second set of minutes not drawn up by Shaik, but by his acquisition committee co-chair, Erich Esterhuyse, a senior official from state defence procurement agency Armscor.

The existence of parallel minutes was not disclosed in the final report. This is significant as the new minutes reflect that the meeting did not recommend the Hawk, but instead decided that both options should go to Cabinet pending a proper investigation of benefits to the local aerospace industry of pairing either with BAE or the Italian company.

The Cabinet was presented only with the Hawk proposal, and the BAE deal to purchase an interest in Denel later fell through.

Ignoring these anomalies, the final report found without contradiction that the ministers’ committee had indeed reached a decision to recommend the Hawk by post facto adopting an evaluation model that disregarded cost. Without citing any authority, it found this decision was “neither unlawful nor irregular”.

The draft reports also contain new facts that call into question the stated basis of the ministers’ view that the BAE option would be beneficial.

An earlier report noted that in December 1997 Denel directed a letter to the SAAF saying: “Industry was united behind the fact that the BAE/Saab Industrial Participation offer was very poor and was aimed at the absolute minimum they could get away with ... ”

These remarks were edited out of the final draft, but as recently as last year Denel complained to Parliament about difficulties in realising any benefit from the defence contracts flowing from the deal.

The draft reports also highlighted doubts about the quality of the industrial participation benefits attached to the Hawk offer, including a quote by senior Department of Trade and Industry (DTI) official Paul Jordaan, who stated: “We do not normally help a seller to this extent, but we are given to believe that a Hawk purchase will be made come what may, in which case we’d like as high a NIP commitment as possible.”

This remark, edited from the final report, was made in relation to what the final report noted was termed by DTI to be a “radically inflated Hawk NIP offer” presented to the Cabinet, which then had to be salvaged as DTI scratched around for viable projects for BAE.

Fakie has repeatedly denied that the report was edited in any material way, but the drafts differ from the final version strongly in tone and conclusion.

Some of the cuts, in particular, call into question the bona fides of the editing process. One example relates to the selection of the Gripen fighter.

Of particular importance here was the failure of the German and French contenders to supply details of their financing bids, meaning they were awarded zero for a category counting 33%.

The final report refers to claims by the Arms Acquisition Council that the two bidders were asked “repeatedly” to supply such information, but it omits counter claims from Department of Finance officials and a written denial from the French company Dassault stating that no follow-up information was requested.

Smaller omissions are also telling. Draft reports quoted in detail the recommendation from the high-level International Offers Negotiation Team recommending the purchase of the Gripen fighters be delayed or scrapped. Among the motivations were the startling facts that South Africa had 50 Cheetah fighters that would be serviceable until 2012, but in any case currently had only nine pilots on operational duty capable of flying the jets.

In the final report this detail was paraphrased to reflect merely a consideration of “the fighter pilot capacity of the SAAF”.

The disclosures could prove embarrassing to Fakie, who was grilled by Parliament’s standing committee on public accounts in August 2003 in response to earlier press reports that he had “heavily edited” the final report.

Fakie was asked to assure the committee that there would be no new shocks related to his report on the arms deal. However, in denying making material changes, Fakie chose to provide Parliament with only one chapter of the draft report with which to make comparisons. The significance of that decision is now clear.

The auditor general was provided with written details of the issues raised in this report, but had not replied at the time of going to press. His personal assistant, Peet Grundlingh, told the Mail & Guardian that the auditor general was preparing a general press release in response to queries received from the M&G and other media. Grundlingh confirmed he understood the response was not expected to be released in time for the M&G’s deadline.

With acknowledgements to Sam Sole and the Mail & Guardian.