Publication: Sunday Times
Reporter: Megan Power
Reporter: Jocelyn Maker
Bombshell That Points Fingers at Both Mbeki and His Former Deputy : Special
Megan Power, Jocelyn Maker
Shocking extract from the secret report
Sensational claims, broken promises
A German shipbuilding giant paid President Thabo Mbeki R30-million to
guarantee it won the submarine contract in South Africa's multibillion-rand arms
Mbeki gave R2-million of this to Jacob Zuma and the rest to the ANC.
This staggering new allegation has surfaced for the first time in a secret
report compiled in 2007 by a UK specialist risk consultancy.
The consultancy was commissioned by a leading Central European manufacturer to
investigate the worldwide activities and "questionable business practices" of
the shipbuilder, MAN Ferrostaal, which had launched a hostile takeover bid
The suspected shady practices included bribery,
corruption, money laundering and a failure to deliver on its investment
commitments to the countries to which it sold weapons.
Other than South Africa, the probe involved arms deals in Libya, Nigeria,
Angola, the Democratic Republic of the Congo and Zimbabwe.
The Sunday Times has also established that the report which makes the Mbeki-Zuma
allegation is in the possession of the office of the director-general of the
European Commission's External Relations in Brussels, and the Munich state
attorney in Germany.
MAN Ferrostaal, which led the German Submarine Consortium (GSC), won the
contract to sell three submarines to the SA Navy, for more than R6-billion.
In return, it promised to build a R6-billion stainless steel mill at Coega in
the Eastern Cape, which it promised would provide 1 000 direct jobs and 3 000
The project, which promised billions of rands in export
and local sales, has not happened.
On page eight of the report under the South African section of the probe,
The report says it was "unlikely that this information will be leaked in the
near future because Mbeki maintains a tight (rein) on the National Prosecuting
Authority where this matter would be dealt with".
- "A former South African official who had access to such information
informed us in confidence that Ferrostaal paid R30-million to current
President Thabo Mbeki to gain the arms contract in the first place.
- "When questioned by investigators in South Africa, Mbeki claimed that
R2-million was given to his former deputy president Jacob Zuma and the rest
went to the ANC."
Mbeki's presidential spokesman, Mukoni Ratshitanga, said: "These allegations
have been in the public domain for some time, which gives lie to the assertion
that they are, for whatever reason, 'unlikely (to) ... be leaked in the near
future'. They are of such fantastical proportions as not to warrant any
The Sunday Times pointed out to Ratshitanga that this was
in fact a new allegation. He failed to respond.
ANC spokesman Jesse Duarte said: "Any person
anywhere in the world who has evidence of corruption should take it to the
police *1. Anyone can write a document and claim it is authentic."
The report also states that South African intelligence services have proof that
MAN Ferrostaal paid the bribe to Mbeki.
MAN Ferrostaal dismissed the allegations as a "fishing expedition" intended to
damage its reputation and that of the South African government.
A number of arms dealers who were involved in bidding for the contracts told the
Sunday Times that they knew Zuma acted as Mbeki's front
man during the arms deal negotiations.
They said some of them were summoned to meet Zuma a number of times, and
that at least once the four Shaik brothers, Chippy, Mo,
Yunis and Schabir, were present.
At these meetings the dealers were told that if
they wanted to do business, it had to be through the Shaiks. Yesterday
Yunis Shaik said this was "all just lies".
Others involved in the negotiations told the Sunday Times that bribes had been
solicited from them.
They said that during the deal many of the high-ranking politicians and
officials involved were so greedy they even asked
for money, jewellery and perfume for their wives and girlfriends.
Tipp-Ex and Some Dodgy Deeds
In another twist in the arms deal saga, the Sunday Times has come into
possession of a draft report into the submarine contract, drawn up by the
attorney-general (sic) in May 2001. This draft,
which has never been made public, was diluted and sanitised before being
included in the final report of the Joint Investigation Team, set up to probe
the arms deal.
It has emerged from the document that the process of evaluating bidders for the
submarines was skewed and highly suspect. The draft says it is apparent that
"deviations from the approval process occurred" and that "good procurement
practices were lacking", including:
* The changing of the overall evaluation formula to favour the preferred bidder,
* That Tipp-Ex was used on the evaluation working papers, contrary to
instructions. These corrections were not initialled by anyone. The
attorney-general questioned what impact this would have had on the evaluation
process. He said someone else could possibly have purposely altered an
assessment ; and
* There were questions raised about the high score given to Ferrostaal's Coega
stainless steel offset project.
What the President Brushed Aside
The Sunday Times has established that Mbeki, when presented with the August
1999 affordability study which assessed the economic and financial impact of the
arms deal, chose to ignore it and two vital independent steel reports attached
These warned that Ferrostaal's stainless steel offset project the local
investment pledge on which it won the submarine deal was high risk and likely
to fail. The studies were conducted by two of the world's top steel experts,
London's Warburg Dillon Read and New York's Locker Associates.
The affordability study and its annexures, presented to Mbeki almost a year
after he announced who would get the submarine contract, have never been
released to the public.
Circulation of this document has, over the past nine years, been
Locker Associates warned that the mill, with an annual capacity of 800 000 ton
stainless flat-rolled steel, was highly risky.
Warburg Dillon Read said that South Africa did not need another steel plant in
addition to the many in the country.
Paul Dunne, a professor of economics at the University of the West of England,
who specialises in the economics of peace, security and military spending,
described the affordability study as "a very thorough piece of work".
"I think ignoring these warnings was most definitely
reckless," he said.
The Story So Far
In 1995 the ministry of defence highlighted the need to restructure the new
South African National Defence Force.
The defence review of 1998 said the SANDF needed to be re-equipped to meet the
national security needs of the new democracy. The review aimed to provide
credible and convincing reasons for investing large amounts of money in defence.
The result was the proposal of a multibillion-rand strategic arms procurement
package, now widely known as "the arms deal" .
By the end of 1999, the South African government had signed contracts totalling
(US Dollars) 4.8-billion (R30-billion in 1999 rands)
to modernise its defence equipment, which included the purchase of corvettes,
submarines, light utility helicopters, lead-in fighter trainers and advanced
light fighter aircraft.
Since then taxpayers have forked out billions of rands to pay for the massive
loans that the government took out from banking institutions around the world.
With acknowledgements to Megan Power, Jocelyn Maker and the Sunday Times.
*1 But that's what we did.