Critique of the JIT Report
by Dr Gavin Woods
In October 2000, Parliament
referred the Auditor-General’s “Review of the Strategic Defence Package (SDP)”
to the Standing Committee on Public Accounts (SCOPA). In terms of the
Constitution and the Rules of Parliament, this obliged SCOPA to look into the
issues raised in the Review and into any related matters – in representing the
interests of the public. To this end, SCOPA, through its 14th
Report, strongly indicated the need for in-depth investigation into key
aspects of the SDP. SCOPA proposed that a multi-agency investigation, in
addition to its own ongoing investigation, would be necessary - given the
magnitude of the SDP and the nature of the initial concerns which had emerged.
These proposals were adopted by Parliament.
Some thirteen months later, the
Joint Investigation Team (JIT) completed its work and has submitted its findings
to Parliament. SCOPA, through decisions and actions of its majority component,
was prevented from undertaking its further investigation and therefore from
meeting its obligation to Parliament and to the South African public.
The purpose of this paper is :
to restate the research-based questions and concerns laid out in SCOPA’s 14th Report which provided the basis for the proposed investigative work
to reappraise the importance and relevance of these questions and concerns
to establish the extent to which the JIT (as the only investigative response) has dealt with these questions and concerns.
Now that both the Executive and
Parliament, to all intent and purposes, have proclaimed the Arms Deal
controversies to be behind us, it is important, given the circumstances, to
establish whether the more important public interest considerations and its
right to know, have been adequately dealt with.
this paper will show, the more significant questions and concerns remain largely
unanswered in relation to the following issues.
of the SDP
Selection of Suppliers/Awarding of Contracts
and Procedures Followed
of (Criminal) Wrongdoing
of Cabinet/Cabinet Sub-Committee
SCOPA’s 14th Report – Issues/Concerns Raised
concerns at the substantial increase in the overall cost of the arms
The possibilities of this increasing further and the potentially serious effects thereof.
Given the more serious
implications for social spending, the fiscus and the macro-economy that the
raising cost of the SDP could hold, the public should as far as possible be
informed as to how much they as the taxpayers will ultimately have to pay and in
what other negative ways they could be affected (e.g. through the budget). The
significance of these tens of billions of rands is undeniably great.
The JIT, through the
Auditor-General, did not address the main concerns expressed by SCOPA. Rather,
it spent its time confirming factual situations which SCOPA had already
established in its 14th Report, i.e. :
when announcing the SDP, Cabinet had been in a position to have more fully
informed the public of its cost implications and other possibilities; and
that the Affordability Study was an essentially sound and comprehensive piece of work.
The JIT’s studious
documentation of an historical perspective of these two matters is useful for
the record, but does not address the central concerns which SCOPA (and the
public) wanted looked into. The lack of public response to the JIT findings
bears this out.
It will be seen that the “Scope of the Investigation” (9.2.1. of the JIT Report) established by the JIT was not relevant to SCOPA’s stated concerns – with the exception of one item (22.214.171.124) which promises investigation into “The full financial and fiscal implications of the SDP”. Strangely, the JIT then fails to undertake this particular investigation. The 6 “findings” from this part of the JIT’s investigation (9.3) simply served to confirm what SCOPA had stated as a matter of fact in its 14th Report. It makes no reference whatsoever to SCOPA’s main concern regarding the financial and fiscal implications of the SDP.
With reference to the above, an investigative exercise along the following lines would have been especially informative :
R x including all direct cost aspects of the arms
R x inc. insurance, freight etc
Project Management costs
R x for ECA-loans
R x the contractual inflationary consideration
the R22.9bn (Armscor estimate) which is
to be included in Treasury budget
R x the R1 – 2bn “extras” which is to be financed through the Defense budget
R x use SARB projections to establish high/low scenarios
Higher maintenance costs
R x these are referred to as “the biggest cost challenge” in the JIT report
R x the “underestimating of the long term full cost of ownership of the packages” is referred to in JIT report
Conversion of Denel Aviation
R x for replacement of Italian technology and expertise
R x to be purchased to make Corvettes fully functional
Full Projected Cost
R x indicated through a range of currency permutations
It will be seen from the 2002
Budget Review that Treasury’s total cost figure of R52,7 billion omits
many of these cost items – including the estimated R20+ billion SDP debt
Further, the JIT might have
been expected to conduct some enquiry as to the implications of the rising cost
to the country – even if this was only to have the economists they employed
identify and quantify the theoretical consequences; and then to have sought
governments thinking on how they might manage such situations should these
It is clear that Cabinet had to
stretch every aspect of the affordability question in order to agree to the
original R30 bn cost – so how can the fiscus afford the equivalent of at
least double that cost? How will the unanticipated price rise be met? Through
curtailed social spending, loans, higher taxes? And what of the inevitable
balance of payment effect – which was another concern referred to in SCOPA’s
14th Report? The 30:110 proportions (Cost:IP Value)
which government said were necessary to render the SDP economically neutral is
now closer to 60:110 and still closing. Does this already mean a balance of
payments problem which will need to be taken care of by discrete sacrifice
elsewhere? There will be implications and the public have a right to know what
these might be. The reluctance of government and the JIT to admit to these is
All this, together with Cabinet’s misleading public contention that “over the medium and long term the benefits from the DIP and NIP programmes will fully off-set the economic and fiscal costs of the military equipment” (GCIS 2001-01-23 is ignored by the JIT. The important question regarding the extent to which the offsets might counter currency effects of the cost of the deal is just one such aspect that should have been probed and explained. Clearly, the benefits of offsets/industrial participation projects (plus any escalation in their monetary value) overwhelmingly accrue to the wealth of independent business interests and not to the state. Simply put, the State (through public taxation) has to pay more when the cost increases through a weakening Rand – but does not get this back through any respective increase in value of the Industrial Participation (IP) projects.
These failings to investigate
and report on the critical issues related to the cost of the SDP is
disappointing. Even more disappointing is the manner in which the JIT tries to
excuse itself from undertaking the most important work in this regard. This
being seen in the final sentence of the chapter where the JIT contends “Ultimately,
the decision as to what the country can and cannot afford is one of political
choice”. This seems to be saying to the people of the country that the
ultimate price you (as taxpayers or you as receivers of services) will pay is
none of your business. This is most regrettable coming from those who should be
promoting public accountability - and not dismissing it. This attitude is seen
to be characteristic of JIT positions taken in other areas of their report,
where short unsubstantiated statements substitute for lack of proper
investigation – and coincidently in each case does so to the advantage of the
Note: The undertaking by the
Portfolio Committee on Finance in their report to Parliament in December 2001
will not address these essential concerns.
Report –Issues/Concerns Raised
The issues/concerns raised by
SCOPA were :
What constitutes the difference in value between the total value of the
I.P. projects and their economic value.
The need to verify the make-up of both these amounts, their credibility
The conflicting statements from government/cabinet as to the purpose of
Uncertainties as to the enforcement of the NIP (National Industrial
Participation) and attainment of these promised offset projects.
The experience of developing countries with promised offsets.
The exceptional high I.P. demands on the suppliers.
The seemingly low penalties.
The unconditional release from I.P. obligations once a penalty is paid.
The weak position of the arms suppliers/the international arms industry
at the time of negotiating the offsets.
The IP’s defiance of business logic.
The bigger value-for-money aspect of the IP in the overall Arms Deal.
The need for an effective monitoring system.
Possibilities for tightening up on the IP arrangements.
The possible optimistic estimations of jobs.
The IP contracts and their appearance of not being well prepared.
As the public was led to believe that the decision to proceed with the SDP was contingent on the IP, it is vital that this IP deliver what has been promised. Against this therefore, the great importance of the above issues and concerns is self-evident.
As can be seen, the JIT simply discarded 10 of the 14 concerns SCOPA wanted investigated. And none of the 4 it looked at were satisfactorily addressed. The JIT chose to narrow its scope down to particular aspects of the performance guarantees, their comparability to a selection of countries and government’s plans and ability to monitor the delivery of the IP. In doing this, it spent considerable time on the DIP (Defence Industrial Participation), which as SCOPA pointed out in its 14th Report, were not a concern as these are required for completion of the armaments - meaning that the supplier could not deliver the armaments and receive payment if the DIP was not met (a SCOPA contention which is proving to be correct). All SCOPA concerns obviously revolved around the NIP which comprised some 86% of the IP.
|NIP||R31 bn||- purchase of SA goods by the arms suppliers|
|R24 bn||- foreign investments in SA by companies associated with arms suppliers|
|DIP||R 4 bn||- via direct participation in the production of the aircraft and ships|
|R 3 bn||- via technology transfer (in royalties and licensing agreements)|
|R 7 bn||- via promotion of the defence contracts with third parties|
The JIT’s one-dimensional
approach to the IP guarantees is not helpful. Firstly, by failing to make the
arithmetic adjustments necessary to compare the South African penalty percentage
(which is of contract price) to the penalty percentage (which is of IP value) in
the other countries, the JIT finding on the issue is flawed. Secondly, by
ignoring the international norm of having a predominant proportion of DIP in
relation to NIP (for reasons referred to above, i.e. the assuredness of DIP),
the JIT misses the major underlying risk issue in the South African case
(international practice in the region of 85% DIP to 15% NIP, the South African
mix is approximately 14% DIP and 86% NIP – e.g. see US Congress comparative
report). The JIT also missed the strong international tendency to pursue high
technology-transfer NIP which is more secured. As is noted in South Africa’s
case, government accepted a very wide variety of NIP types across many
industries. And then the JIT also missed the concern expressed by SCOPA relating
to the 3,5:1 ratio (value of IP to cost of armaments) as was “achieved” by
the negotiators of the South African IP. As this is the highest in the world, it
should have rung alarm bells as to whether it is sustainable or even possible.
If it made any sense, as top economists keep pointing out, many countries would
spend huge portions of their budgets on armaments in anticipation of receiving
almost 4 times the value in return. The issue of the adequacy of the penalties
therefore remains a lesser issue in the face of these big realities and the JIT
is very mistaken to claim that their superficial “finding” will “allay
the concern raised by SCOPA” (in its 14th Report)
experience is that IP is also impossible to monitor with any accuracy – and
for the country to ultimately know if everything promised was received. Given
the width and complexity of South Africa’s unique arrangements (see above), it
will be interesting therefore to see the methodologies the Auditor-General
proposes using to meet his undertaking in this regard. A recent study on the
many discrete ways in which to discount export values and inflate imports is
informative. There are numerous other ways to produce figures which would
suggest whatever is intended. The concern is that progress will prove impossible
to record and monitor – especially after the initial (easier) IP has been
forthcoming and when the armaments-supplying companies (as profit-driven
businesses) get to that IP which offers little or nothing to their bottom lines.
Over the decades, business has become extremely inventive when it comes to
getting out of deals which do not offer the best return on their investment. It
is the rationale most pivotal to their existence. The single issue approach (IP
penalties) of the JIT appears altogether unaware of this.
The system of issuing credits
is likely to be very contentious and dependent on subjective assessment. This
will be very vulnerable to the tactics of businessmen wishing to escape part of
The likelihood of it all is
that much of the promised IP will not turn out as hoped and, given
government’s potential embarrassment, it is equally as unlikely that the
public will ever know of any serious failings in this regard.
There has, however, been some
acknowledgement of this from the Executive (more so than from the JIT). While a
particular Cabinet minister (Minister of Trade and Industry) repeatedly says
there is no risk whatsoever concerning the non-delivery of the IP, he was
contradicted by his colleagues who have said “government is naturally aware
that the risk of the NIP and DIP not materializing fully is intrinsic to the
procurement” (GCIS 2001-01-23). This is an important admission and is more
than borne out by the large body of international evidence concerning failed and
partially fulfilled IP obligations. Indeed, the USA, Canada and the EU have in
recent years moved to prohibit the tying of IP and countertrade to their own
armaments purchases. If the JIT has had a look at this evidence of failed
obligations (where penalty clauses were also in place), it might have added more
appropriate scope to its “investigation”.
The sensible thing for the JIT
to have done would have been to closely evaluate the viability of the IP from
the business plans suppliers were obliged to submit, rather then to have
resigned itself to a “lets wait and see” approach. This is an obvious
requirement of SCOPA’s 14th Report. This could have
produced a much more accurate understanding of what is likely and what is not.
It might have also provided sufficiently early warning to try and resolve
possibly shortcomings. We have already learnt that the business plan of the
largest of all the IP plans (Coega) was seriously flawed and unrealistic. The
Chairman of SCOPA attempted to call for the IP business plans in order to carry
out such an examination, but was blocked by the majority component of the
Committee. It was therefore doubly disappointing when receiving the JIT Report
and noting the omission of this important exercise, preferring to limit itself
to a mechanical compilation of very specific circumstances, rather than rigorous
investigation across a fully relevant framework of issues.
Regarding the quality of the “IP Agreements” which SCOPA referred to in its 14th Report, it is beyond dispute that the JIT, in attempting to dismiss this concern in its report (Chapter 13), makes the mistake of looking at the “Supplier Contracts” (instead of the IP Contracts). At least 3 references in the chapter prove that, notwithstanding the Public Protector’s subsequent denial of having erred. Actually, in the case of the IP contracts, the investigation which informed the 14th Report was carried out on behalf of SCOPA by one of the more senior members of the Auditor-General’s office. The available working papers cite exact pages and paragraphs where the errors exist. For the JIT to completely miss this and produce the comments which they did, is inexcusable.
In concluding this section, it
can again be pointed out that almost all of the questions which underlie the
public’s interest were not responded to by the JIT.
SCOPA’s 14th Report – Issues/Concerns Raised
Why the evaluation system for the LIFT (Lead-In Flight Trainer) was
changed after the submission of tenders.
Whether both the costed and non-costed options were submitted to Cabinet.
The possibility of price-loading in the case of Gripens and Hawks.
The all-round appropriateness and effectiveness of the policies and
The application of the policies and procedures.
An evaluation and review of polices and procedures.
There have been many case studies which show how costly the consequences of poor application of good procedures and practices can be. These experiences across many countries have gradually led to an internationally-developed set of principles and best practices. Regarding the SDP, it is important to establish whether government went to sufficient lengths to put the necessary procedures in place to limit the risk of inappropriate actions and decisions; even more so considering the degree of public opposition to the proposed Arms Deal as the biggest single spending package ever undertaken by government. Weak or flawed policies and procedures can advertently or inadvertently lead to hugely expensive mistakes which produce unintended results. As serious, is the poor or inconsistent application of the policies and procedures. It is therefore an imperative of good practice to ensure that all policies and procedures are firmly in place, with accompanying controls, prior to the transactions taking place. Amongst other things, this would include having researched and established the required product specifications against which tenders will be invited and against which the products offered will be evaluated. This prevents unfairness, dishonest manipulation and ensures the securing of supplies which meet fully one’s considered requirements.
In this area, the JIT did considerable work which is useful to the evidence-gathering stages of this part of the investigation. The conscientious way in which they sequentially documented the historical process is acknowledged and appreciated. The failing seems to be in the analysis of and deductive reasoning from the facts established. This led the JIT to understate serious actions and in cases to justify the shortcomings found, as can be seen from the somewhat weak “findings” listed by the JIT, which detract from the many serious departures from the laid down rules and procedures.
there is vast international agreement over what constitutes
procurement/tendering best practice. These best practices apply to any country.
Given the collective experience that has gone into the compilation of these and
the subsequent proof of their relative effectiveness, the DoD and Armscor should
have ensured that these were firmly in place well in advance of the SDP. The
decision to “cut and paste” DoD, Armscor and other acquisition procedures in
an attempt to cover all SDP bases inevitably left some weaknesses. The JIT
points out that changes were introduced to deal with these weaknesses well after
the procurement process had begun. The JIT does, however, wish to assure us that
this exercise ultimately produced procedures which compared favorably with those
used in other countries and, in fact, only mentions one related shortcoming in
The establishment of an adequate range of the necessary procedures is an essential requirement. As essential, is the full and proper adherence to these procedures. In this latter regard, it will be noted from the JIT Report (Chapters 4 to 12) that there were well over 50 instances of non-compliance, especially across the selection and awarding processes that led to the 5 prime contracts. Many of these rules which were broken are considered to be fundamental to good practice.
These many failings go beyond
simply being unacceptable. These would, in fact, represent a crisis of
credibility for procurement transactions anywhere else and would see those
responsible for such flagrant disregard of the rules being the subject of
considerable sanction. In the SDP, the officials concerned and indeed the
decision-makers appear to have been quite at ease when changing the carefully
prepared and internationally-established procedures, criteria and conditions,
often for the most dubious of reasons. Even though this invariably led to
different results to what the laid down practices and criteria would have
otherwise produced, the JIT is relatively unmoved. In select instances and
without substantiation, it claims that the changes of rules and formula had no
bearing on the resultant outcomes. In no single case did the JIT find it
necessary to criticize anyone for having departed from the rules, no matter how
serious. Neither does it give details of any exercises it did to support its
Far less significant acts of
non-compliance in the ordinary course of government business are identified and
reported on in strong terms by the Auditor-General. In terms of Public Finance
Management Act standards, the Auditor-General would have had to declare most of
the five main SDP transactions as unauthorized or irregular expenditure. As a
result of this there would have been serious consideration in Parliament as to
whether this expenditure should be allowed and whether the responsible
decision-makers should be made to answer for their unacceptable actions. But
with the SDP, notwithstanding its size, policies, laws, rules and regulations
were frequently flaunted with implications for hundreds of millions of Rands;
and this is all either rationalized away or quietly stepped over in the
“findings” presented by the JIT.
Even a superficial scanning of
the relevant sections of the JIT Report bring into the question the JIT
claim that the procedures adopted compared favorably with those used in other
countries. It is yet another of the single statement variety the JIT uses
throughout its report to dismiss serious concerns without producing the
necessary investigative work. Elementary requirements of good policies and
procedures concerns the controls and disciplines that are built in - to ensure
application. As earlier indicated, the JIT Report itself shows over 50 instances
which were apparently possible due to a lack of the control dimension. To imply
this to be acceptable, as it is comparable to that in other countries, is hard
to accept. It is another case of the JIT’s failure to work according to the
As mentioned, the established procedures and practices were repeatedly disregarded across the five main transactions. To mention some of the more critical contraventions of accepted practice, one could include the following :
shortcomings in the application of the evaluation system
inconsistencies in the evaluation processes
to criteria even at advanced stages of the process
treatment of tenders within and between the various transactions
records of meetings
irregular incidents in the decision-making process
The facts show that had the
laid down rules and criteria been adhered to, at least three of the five choices
of armament suppliers (LIFT, Submarines, Corvettes) are likely to have been
different. The JIT argued that in two or three instances the breaches would not
have changed specific results along the decision-making line, but did not point
out that the final choices were in most cases affected.
In the cases of the Submarine
and LIFT selection processes, the JIT seemed to run out of “reasons” with
which to rationalize away the endless succession of departures from the rules
and in the case of the latter it ended the chapter seemingly unable to give an
investigation finding. So it lamely suggested that the Cabinet, in choosing the
Hawk, had the right to do whatever it wanted to do. This is a shocking position
to take, especially as it dismisses the need to establish the truth. Its
position displays a surprising disregard for the principles of accountability
and transparency and leaves the public to speculate as to the actual reasons why
Cabinet took a decision which was in stark conflict with the predetermined
policies and procedures. In fact, the JIT in its findings, finds it difficult to
take issue with any malpractice, no matter how serious. Never once do they even
hint at possible irresponsibility or incompetence of the decision-makers, who
until recently, vehemently denied any shortcomings in the processes and any
possibilities for any human failing.
The LIFT process is
particularly disconcerting; where it took a succession of rule changes to keep
the Hawk in the reckoning. When there were no rules left to change and the
manipulated process had still not elevated the Hawk to that of leading
contender, Cabinet chose it anyway. The JIT suggests this was acceptable and
that we just live with the result. In a search, outside of the JIT Report, for
the reasons as to the choice of the Hawk, there have been at least three
conflicting explanations given, none of which were quantifiable. These came from
the Secretary for Defence, the Department of Trade and Industry and the group of
four ministers at their press conference in January 2001. The reason hinted at
in the body of Chapter 4 of the JIT Report, which is the same as that
of DTI, is that BAe’s higher IP secured it the contract. If this were the
case, the IP weighting in the overall evaluation and selection process would
have had to be pushed up from the predetermined one third to two thirds, with
the financing, cost and technical considerations only amounting to one third.
The JIT did not consider this remarkable situation to be worth commenting on.
Neither did it make an issue of the failure of the decision-makers to comply
with the universal tendering practice which is to give the other bidders an
opportunity to resubmit their offers, in line with the goal posts which had been
moved to dramatically advantage one particular bidder.
statement made by the JIT which instantly dismissed a major contention, also
made by SCOPA in its 14th Report, is seen in their
Finding 4.12.6. This is where the JIT says “No evidence could be found
in support of the allegation that South Africa is paying more than the normal
basic unit price for the Hawk or Gripen aircraft”. No explanation
whatsoever is given as to what work the JIT undertook in coming to that
dismissive conclusion. As South Africa is the only country outside Sweden to
have bought Gripens, where does the JIT find the “normal” basic unit price
to compare against? There just isn’t one. And regarding the Hawk, information
is available to easily contradict the JIT’s comparative exercises it claims to
have undertaken. It is reasonable to suspect that no such exercise was
undertaken. Further, it would have been hoped that the JIT would have completed
the exercise which SCOPA was prevented from completing; which was to study the
cost breakdown of the two aircraft in order to establish if the profit margins
were reasonable and to see if these costs included a loading to cover possible
IP penalties, as has happened in other countries. They did not do this either
and, all-in-all, the investigation failed to tell the taxpayers if they were
overcharged by BAe. Note the statements by the former Secretary for Defence,
statements by the chairperson of UCC (Ukhozi Control Council) and even the JIT
itself (4.1.14), where it says “in terms of quoted acquisition and life
cycle support costs, both aircraft (Hawk and Gripen) were by far the most
expensive options in their respective classes”. Does this not contradict
their finding which suggests that the costs were comparable to purchases
Particularly disappointing is
the failure of the JIT to give an overall account of the contraventions which
would have accurately portrayed the suspect credibility, or otherwise, of the
whole process and those responsible for it. From an investigative perspective,
it also fails to contemplate possible wider ramifications of the contraventions
and from this to extend its investigation. The lateral and rigorous thinking
which characterizes good investigation is notably absent.
SCOPA’s 14th Report – Issues/Concerns Raised
role played by influential parties in the selection of sub-contractors
having no influence in the appointment of sub-contractors
basis for comparison between competing products – concerning a specific
basis upon which the risk for a particular South African product was
Importance of These Issues
establish whether there was any improper influence from individuals within the
SDP process, related to selection of sub-contractors (see also “Conflict of
Interests” section) and to understand why a seemingly acceptable South African
product was rejected in favor of a more expensive foreign product.
The wider implications of these two issues should be apparent.
The JIT’s investigation into
Government’s involvement in the selection of sub-contractors was sufficiently
informative. Its lines of enquiry satisfied the general questions which SCOPA
had on the matter.
Specific questions relating to
the C²I² Systems
issues were, however, not adequately addressed.
Note : The JIT’s investigation and related findings into possible conflicts of interest are responded to in the following section.
Notwithstanding denials by the
Department of Defence, proof has been forthcoming that Government, on occasions
via Armscor, did intervene and even instruct prime contractors regarding the
selection of sub-contractors (see 126.96.36.199. (j), (l)). This was done in a way
which went beyond the scope allowed for by Armscor policy. For its part, the JIT
points out instances of where principles of openness and fairness were not
followed and goes on to say, somewhat weakly, that in these instances the
process could be criticized. As in other areas of its report, the JIT tends to
understate the seriousness of the contraventions of laid down procedures.
The basis for the risk loading
which priced C²I²
out of contention is left unexplained as the JIT says it was not feasible to
pursue the matter. It is disappointing that the JIT was unwilling to take this
matter further as it does have a clear South African interest aspect to it and
the associated allegations of underhanded manipulation do have a plausible
basis. Yet another case of where the JIT uses a single contention to put an
important, unresolved, issue behind it. There is something very wrong if such
explanations are just “not feasible to pursue” and it would have been
hoped that the JIT would have at least given account of the steps it took to
establish the facts from the supplier in question. Could Armscor, with its legal
right to demand information relating to the awarding of sub-contracts, not have
provided an avenue?
The JIT does not address the
key question concerning the basis used to compare the C²I²
and competing products. The validity of the contention made in this
regard by DoD/Armscor is fundamental to investigation of this situation.
Also notwithstanding the many irregularities discovered by the JIT, it strangely fails to make a single recommendation in this regard. It is also apparent that much available evidence was not taken into account by the JIT.
14th Report – Issues/Concerns Raised
of interest concerns
great a concentration of influence
of improper influence having been exerted in certain of these selections
The importance of the above
concerns is self-evident insofar as these could question the integrity of the
SDP and the opportunities for individual officials to dishonestly benefit at the
The JIT lists almost all the positions held by DoD’s Chief of Acquisition (CAcq) within the Arms Deal structures. It also lists the businesses in which the CAcq’s brother had a significant business interest. Not mentioned are businesses in which his political and other associates had an interest. The JIT succeeds in establishing further instances of incorrect and dubious actions by the CAcq, but notwithstanding the vast grounds for suspicion and associated allegations, the JIT says its investigation failed to find sufficient incriminating evidence regarding the CAcq. The other concerns raised by SCOPA were ignored by the JIT.
The seriousness of the
situation and its exploitive possibilities only becomes fully apparent if a
bigger picture exercise is carried out, which the JIT failed to do. Such an
exercise would include the following :
A diagrammatic layout of all the organogramically-established structures, covering the preferred bidder selection stages from tender documents through to Cabinet approval and covering the negotiation stage structures from the preferred bidder through to the Cabinet
An overlay showing the sequential processes
An overlay showing the key individuals within the structures, indicating at wherever these individuals had a role and where they had actual involvement.
An overlay showing the
decision making points and flows across the two sets of structures
overlay of the document basis which was used to facilitate decision making-
particularly at the higher levels
An overlay of who prepared this documentation - and under whose instruction/guidance especially the recommendations made at each stage
An over lay of who presented
these documents and the recommendations (e.g. power point presentations) –
through the key decision-making stages and structures right through to Cabinet.
The JIT would have found a more
lateral exercise f this nature very informative and of much assistance to a more
inferential investigative approach as opposed to their approach of trying to
make sense of a smattering of incidents and anecdotes – which they admit left
them with suspicions but without a way forward. The above exercise as
representing a more composite reality, would show that there are a number of
officials who had an undesirable degree of influence and the possibility to use
this influence in a dishonest way. While allegations have been made concerning
certain of these officials, the country is in the dark as to whether the
Director of Public Prosecutions will undertake thorough investigation – or if
he will investigate them at all.
The appearance of the Head of
Procurement (HoP) across the completed diagrammatical exercise is staggering.
His presence and strong influence is seen at virtually every level of the
selection process – the actual evaluation of tenders, the SOFCOM, the AASB,
the AAC, the Cabinet Sub Committee through to his appearances at all Cabinet
decision-making sessions. And similarly through the negotiation stages – the
PCB, the technical assessments, the IONT, the Affordability Team and again
through to the Cabinet sub-committee and Cabinet itself. And within all this, he
was the Secretary for the Cabinet sub-Committee and played a leading role in the
presentation of recommendations for final decision-making to the Cabinet
Sub-Committee and to Cabinet itself. This remarkable scope of involvements,
which altogether escapes the JIT, and its associated influence contravenes the
most cardinal of good practices and division of responsibility rules. Cabinet
portray an ignorance of this and the JIT apparently felt no need to explore the
possibilities this gave rise to. Again a documented concern of SCOPA’s was
treated superficially by the JIT.
This JIT failure to establish a
more comprehensive view and therefore its not knowing where to look for more
evidence left it unable to attribute blame for who was responsible for the
highly irregular state-of-affairs - besides the HoP himself, who simple took the
opportunities presented to him. Even where the JIT is able to produce evidence
which shows the HoP to have lied about the extent of his potential
conflict-of-interests and his claims of disclosure and non-participation, the
JIT avoids recommending any sanction. It would appear however that Parliament
through SCOPA’s post JIT Report (December 2001) was also prepared to
ignore the fact that the HoP lied to it.
The HoP should have been
suspended from active duty as soon the JIT was announced at the end of 2001 –
given the allegations and possibilities which were then already public. This is
a non-negotiable condition of this type of investigation all over the world, but
for some reason the JIT was reluctant to do this. His domineering and
intimidatory style was brought to the attention of both Gavin Woods and Andrew
Feinstein, who were told by anonymous DoD officials in February 2001 that they
wished to offer important evidence regarding the arms deal, but out of fear
would not do so while the HoP remained in his position. It is noted in the Mail
and Guardian newspaper of 30 November 2001 that the HoP was even able to
influence changes (to his advantage) to the Auditor-General’s Review into the
SDP in October 2000 - and in fact had personally produced the actual substitute
words which were to appear in the Review. It is further noted that he received
copies of a draft of the JIT Report and it is alleged that through his
lawyers he managed to influence changes on this occasion as well.
The JIT Report, while
doing some good work in cataloguing the conflict of interest and potential
conflict of interest situation, as explained above, fails through the poor
investigative quality of its work to do deliver answers to the questions of
Parliament and the public.
Report – Issues/Concerns Raised
the need for a comprehensive forensic investigation to look into the many serious allegations put forward
The extensive media coverage given to the arms deal and its possible failings indicates the high degree of public interest in the allegations. This coverage was especially high in respect of allegations of criminal-type wrongdoing. This has a negative bearing on the morale of the public, their respect for government and ultimately also bears negatively on economic sentiment. The need therefore to establish the truth or otherwise of the allegations is crucial, as to leave the allegations unaddressed would compound the negative perceptions of the country and would do little to discourage such criminality in future.
The JIT Report did not go much further than to say that the Directorate for Public Prosecutions had had reasons to dismiss many of the allegations and would continue looking into those which it believed to be worthwhile.
It is known that many Arms Deal-related
allegations of wrongdoing have been sent to the units falling under the Director
of National Prosecutions, certainly more than one hundred of these. A considered
assessment of those allegations which were in the public domain might suggest
that at least 50 of these have substantive credibility in terms of their
source, their plausible correlation with actual occurrences and their
consistency with facts already known. The JIT fell somewhat short on explaining
the scope of its investigation into such allegations. Strangely it singled out 4 particular
allegations for public dismissal (see 1.3), but in doing so gave these an
incorrect slant which made them easier to dismiss, e.g. in 1.3.1. (a) where
a “consultant” becomes a “director”, and in 1.3.1. (b)
where “sub-contractors” become “prime contractors”. Also,
by dismissing these as lacking substance, the JIT leaves the reader to believe
that they have no truth. No detail is given as to the extent of the
investigation which brought them to this abrupt conclusion. An example here
would be dismissed allegation 1.3.1 (d), which reads “That the former
Minister of Defence, Mr Joe Modise, paid for share in Conlog with a bribe
received from a successful prime contractor”. It is well known that there
were a variety of allegations concerning the nature and the source of the money
which Mr Modise used to buy Conlog shares. Why does the JIT in very
specific terms only dismiss one of these? Surely the question on the public mind
is “How much did Mr Modise pay for his large Conlog shareholding,
where did he suddenly get this money from and did he and/or his associates
receive any other material benefit, as is alleged?”. Thus the JIT does not
answer these obvious questions, leaving some to wonder why not?
The report then goes on to say
that certain allegations do have substance which require extensive investigation
and lists only seven as being investigated by its Directorate of Special
Operations (188.8.131.52). It is unclear as to whether these are the only seven
allegations being investigated and if so what about the many others that were
made public, especially those which have not been challenged by those accused of
wrongdoing? Will the JIT (via the DoPP) at any stage explain which other
allegations he chose not to pursue and why not? Will there be an indication as
to the extent of his investigative efforts, or will the public be left in the
dark? As has been seen with a number of other cases taken up by the DoPP, these
can carry on for many years without the public even knowing if it has been
abandoned or the eventual outcome. This gives rise to the questions of how the
DoPP is held accountable for his work?
According to the JIT, this
remains the only area of on-going JIT/DoPP work and it seems that only time will
tell if it will get closer to exposing more truth than the rest of the JIT’s
efforts were able to do.
Given the known problems with
the SDP processes, it is appropriate to question whether the decision-makers
acted responsibly and competently. This is especially so given the JIT’s
frequent and unsolicited defence of their involvement. The following points
should be reflected upon :
From a basis of fact, SCOPA
pointed out in its 14th Report that Cabinet had been put
in a position by the Affordability Team to know and understand the full
financing and economic implications of the SDP. The JIT for some unknown reason
re-engages the issue and comes up with the same finding, i.e. “The
Ministers’ Committee was put in a proper position by the Affordability Team to
apply their minds in essence as to the financial impacts of the procurement”
(9.3.5); and “The Ministers’ Committee was made fully aware of the
(currency) risk ……” (184.108.40.206; see also 220.127.116.11).
The scope that the Cabinet gave
to individuals, including the CAcq and the irregularly-appointed Chief
Negotiator, to act within the structures and processes, was repeatedly in
conflict with basic good practice.
The number of serious deviations from good tender practices that went unchallenged or unnoticed by the decision–makers is astounding considering that their very important decisions were reliant on those very practices.
Given the evidence produced in
the detail of the JIT Report, but omitted from its findings, together with
the facts highlighted in this paper, the Cabinet and the Cabinet Committee in
particular, did not act in a sufficiently responsibly manner when applying their
minds to the SDP processes and when making the important decisions. Thus the
public has been let down by the way in which this single biggest expenditure of
the South African government was decided.
It is therefore not
unreasonable to wonder if it was the members’ of the Cabinet Sub-Committee
subsequent awareness of their failings that caused their disapproval and
ridicule of SCOPA’s proposed investigation into the SDP. A suspicious mind
will wonder about the particular interventions which so inhibited further
investigative efforts. (See paper – SCOPA’s Intended Arms Deal
Investigations – The Interventionist Causes of its Failure).
There is, however, a theory
which might demonstrate some sympathetic understanding towards the
decision-makers and any their shortcomings in this regard. It suggests that, as
frequently happens in organizations, those who prepare and present analytic
reports and accompanying recommendations are the most influential parties in a
decision-making situation. That this is especially likely when the actual
decision-makers are very busy people who are not involved in the day-to-day
issues and who simply attend the occasional meeting in order to receive a
presentation and its recommendations, as well as to ask any questions which come
to mind and then to agree or disagree with the recommendations presented.
Invariably the recommendations are accepted in such situations as the presenter
has pre-empted likely difficult questions which could have threatened his/her
The quality of the JIT
investigation as documented is generally poor and superficial and, given the
secrecy, politics and controversy by which it was surrounded, an inevitable
skepticism prevails. For SCOPA, through its majority-produced and majority-voted
report, to express gratitude to and confidence in the JIT, especially when the
latter ignored almost every issue or concern SCOPA had raised and which
parliament had adopted, will remain a blight on the oversight record of SCOPA
The high recurrence in the JIT Report of shortcomings which are discovered, but than dropped or explained away as having insufficient influence to have led to different decisions, borders on the absurd. The JIT in almost every instance says that despite all that was wrong, there were no seriously negative consequences arising from any of the decisions made. The choices of armaments suppliers, the prices to be paid, the IP to be received, the actions of the officials concerned, etc., have all turned out well, despite the mountain of information to the contrary. The JIT does not point out a single serious failing which was to the disadvantage of the State. No seriously damning or embarrassing findings. Not one shortcoming serious enough to cause sanction or disciplinary action for a single official, or criticism of any politician. It was an exercise which produced findings which conclude that beyond some sloppiness and a degree of inadvertent non-compliance, nothing really was wrong. All this would suggest that South Africa’s SDP amounts to the most perfect international armaments acquisition over the past few decades, with high value-for-money purchases and no impropriety or dishonesty on the part of anyone..
As this paper more than proves,
the JIT did a very sub-standard job, whether out of pure incompetence, or for
whatever reasons, we will probably never know. It was an exercise of much
information-gathering, but with very narrow lines and very shallow depth of
investigation. There is virtually no thorough forensic (as defined)
investigation in evidence. At best, it looked around the peripheries of some of
the SCOPA-raised issues while ignoring all the more important of these. Where it
came across poor practices, it suggests that these still somehow produced the
right answers, but it never gives proof of this. And wherever it could not
produce the more important sought-after answers, it simply closed the door on
the problem or question by way of one-off statements such as “it is a
political decision”, “the cabinet had a right to change its mind”,
“compares favorably with elsewhere in the world”, “there was
insufficient evidence available”, etc.
Thus the JIT has produced a
report which finds little wrong with the SDP. This led to celebration by those
who might otherwise have been embarrassed and has led to the whole saga now
being assumed buried. The Executive warned everyone to put the affair behind
them and Parliament reacted smartly by pushing the report through a superficial
Of one thing we can be certain, with the JIT having taken the positions it did and Parliament, mostly through SCOPA, having abdicated its investigative responsibility, justice has not been done to the public interest. Parliament has failed the people.
 Chairman of Parliamentary Standing Committee on Public Accounts (SCOPA) for two years until 2002-02-28