Publication: Business Report Issued: Date: 2007-10-29 Reporter: Donwald Pressly

Feinstein Recounts Arms Deal Conflicts



Business Report

Date 2007-10-29
Reporter Donwald Pressly

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Shady links exposed in former MP's book

Cape Town - Shady connections between arms deal companies and the late defence minister, Joe Modise, are described in a new book by Andrew Feinstein, a former ANC MP. So is then deputy president Thabo Mbeki's questionable role in selecting BAE and Saab to provide the SA Air Force with fighter and trainer jets.

Feinstein, who now lives in London after resigning from parliament in 2001, has launched After the Party, which he describes as a personal and political journey inside the ruling party. It explains how his feelings of euphoria at being part of the new South Africa slowly soured.

Feinstein, a former economics adviser to Tokyo Sexwale, now a billionaire businessman and possible ruling party presidential candidate in December, headed the ANC component on parliament's standing committee on public accounts (Scopa) during its probe into the arms deal.

He says it is clear that the ministers' committee, chaired by Mbeki, took the final decision to go with BAE/Saab rather than the Italian equivalent, Aeromacchi, which was the preferred technical choice of the air force "and half the price of the BAE/Saab equivalent".

Defence force arms procurer Chippy Shaik was asked about a perceived conflict of interest because his brother, Schabir, was a director of African Defence Systems (ADS), a company bidding for sub-contracts to build the combat suites for four South African Navy ships. Chippy Shaik said repeatedly that he had recused himself from the meetings at which the relevant decisions were made.

Then Scopa chairman Gavin Woods asked him what role ADS had played in the arms deal. He was told that 50 percent of ADS was owned by Thomsons, the company chosen by the builder, German Frigate Consortium, to provide the combat suites.

Chippy Shaik's shady dealings with representatives of arms companies included a suggestion to one that he contact Tsepo Molai, who was linked to Modise. The representative reported that Molai proposed that the bidding company hire him (Molai) as a consultant, suggesting a start-up fee of $250 000 (R1.6 million) and a retainer of $25 000 a month. Fincantierer, an Italian company bidding for the frigate and submarine contracts, had a similar experience with Chippy, according to Feinstein. The firm was asked to meet him at an informal venue and Chippy suggested Schabir as an appropriate empowerment partner, implying that failure to follow his advice would hinder Fincantierer's efforts to secure a contract.

Feinstein notes that the joint investigation team into the arms deal found Chippy Shaik had a massive conflict of interest and did not recuse himself from relevant meetings.

"So he had lied to parliament. At the Scopa public hearing he had been asked specifically whether he had physically left the meeting rooms whenever issues relating to his brother's company were discussed. He replied emphatically that he had ... I wrote an open letter to speaker [Frene] Ginwala suggesting that to protect parliament's integrity Shaik's misleading of the committee should be investigated. I never received a reply. No action was ever taken."

Chippy Shaik recently emigrated to Australia.

Feinstein notes that British Aerospace, now known as BAE Systems, donated R5 million to the Umkhonto we Sizwe Military Veterans' Association, whose life president was Modise.

"One of the bidders [in the arms deal] allegedly bought Modise millions of shares in defence company Conlog," says Feinstein. A few weeks after leaving office as defence minister in 1999, Modise became chairman of Conlog, which benefited from the arms deal.

Feinstein does not even leave finance minister Trevor Manuel untouched. He met him at Speaker's Corner, a restaurant near parliament, during the Scopa investigations. Manuel is reported to have said: "We all know JM [as Modise was known]. It's possible that there was some shit in the deal. But if there was, no one will ever uncover it. They're not stupid. Just let it lie. Focus on the technical stuff, which was sound."

Of Mbeki, Feinstein relates the story of the exclusion of a unit headed by Judge Willem Heath from the arms deal investigation. "Given that the president had acted as chair of the cabinet subcommittee that made the key decisions in relation to the arms deal, it was improper for him to be setting the terms of the investigation into his own conduct."

Feinstein quotes a source in the auditor-general's office as saying staff who had been directing the inquiries into the deal for more than a year were removed from the investigation *3. Another source said the auditor-general had been summoned to a couple of meetings with the president. Mbeki "made it clear in no uncertain terms which aspects of the deal the auditor-general could and could not investigate".*1

With acknowledgements to Donwald Pressly  and Business Report.

*1      Almost surely the Thomson-CSF deal where Mbeki had had ongoing personal interaction with the French company from 1997 until mid-1999, right through the pre-contract acquisition process.

Now Mbeki can't remember any of this interaction with the French, despite it consisting of a series of documented meetings In South Africa and Paris.

This contract at least would certainly have been annulled at the instance of the Special Investigation Unit at a Special Tribunal held under the Special Investigation Units and Special Tribunals Act had an SIU been given the authority to investigate.

This is what terrified *2 Mbeki so much that he lied point blank to the nation on national television in January 2001 where he said that Advocates Frank Kahn SC and Jannie Lubbe SC had advised him that there was no prima facie evidence of any irregularity in the Arms Deal and therefore it was unnecessary for an SIU to investigate.

Mbeki should be impeached on this point alone.

*2      Waving my
Organgrams in the air before the cameras.

How melodramatic, how delicious.

But he survived to fight another 2 481 days (so far).

*3       This is common knowledge, Deputy AG Wally van Heerden and DoD specialist Etienne Smith CA(SA).

These two stalwarts were instrumental in drafting the AG's Special Review in September 2000 which led to SCOPA's 14th Report which in turn led to the Joint Investigation, which Shauket Fakie CA(SA), Bulelani Ngcuka and Selby Baqwa SC cocked up good and solid (on purpose).