The Parliamentary Monitoring Group
Summary and Minutes of Meetings regarding Joint Investigation Report
For the edification and delight of VPO visitors, we have compiled the following Precious and Semi-Precious and Just Plain Beautiful gems regarding the Joint Investigation Report into Arms Procurement Package gathered from the meetings of the relevant parliamentary committees and their interaction with the Heads of Joint Investigation Team into the Strategic Defences Packages, the esteemed Mr S.A. Fakie, Adv B.T. Ngcuka and Adv S.A.M. Baqwa SC.
1. Committees on Defence; Finance; Justice, Public Service and Administration; Trade and Industry; Standing Committee on Public Accounts and Joint Committee on Ethics and Members' Interests
Press Conference with Heads of Joint Investigation Team
15 November 2001
1.1 Alan Fine (Business Day): Why were certain people removed from their positions in the Auditor General's Office during the investigations?
1.2 Mr Baqwa said that they had taken people off their positions where their duties were incompatible, those, for example, who are responsible for auditing the Department of Defence.
1.3 Carol Paton (Sunday Times) pointed out that the Auditor General's original Report had referred to a substantial departure from procedures. Do the strategic considerations now outweigh everything else? Does the team maintain that there are irregularities in the contracts?
1.4 Mr Fakie pointed out that the initial report was a review, not a report and it merely identified certain issues. This final Report is a result of a nine-month investigation. The Report speaks for itself. In terms of the original brief, SCOPA was meant to brief the investigative team, which was later not possible because of certain constitutional problems. But the teams have a prerogative and constitutional mandates and did not even need such a briefing.
1.5 Mr Ngcuka retorted that since the Report was made available only after the sitting of the National Assembly and it was 400 pages, when had opposition Members read it in order to draw this conclusion?
1.6 Alan Fine (Business Day): There had been dissatisfaction about public hearings. How was that to continue?
1.7 Mr Baqwa said that even though the investigation had been divided into three phases, on the day of closing the public phase they had hoped to keep the door open but no other witnesses came forward. These hearings will not reconvene. They had gone through masses of evidence and there were checks and balances built in, due to there being three investigative bodies. He assured them that he would not be party to any whitewash.
1.8 Carol Paton (Sunday Times): Would they explain the investigation into former Minister of Defence Modise, against whom there are serious allegations.
1.9 Mr Baqwa said that Modise had been involved in a company that was to benefit from procurement and he had an active role in procurement. There are issues still under investigation. The team concluded that there are no grounds for concluding that government's position is flawed. But for individuals; some claim authority where they have none and also attempt to influence others.
1.10 This has been a complex investigation and several auditing firms were used, most of whom have reputable histories.
1.11 Angela Quintal (SAPA): Would they summarise the findings on Dr Richard Young in the light of their findings on Chippy Shaik.
1.12 Mr Baqwa said that an enormous amount of money had been spent on this aspect of the investigation and the Report speaks for itself.
1.13 Now it is up to Richard Young to pursue the matter further.
1.14 The process of trying to replace the navy's frigates began from 1980 during which time the needs of the SANDF had to be established.
1.15 Dr Young was a child of that process.
1.15.1 When the selection process started Dr Young offered his system, while his could have been compatible, the ADS system, produced by a competitor, was also considered.
1.15.2 This system had been tested internationally, but not that of Young.
1.15.3 Which is why the German Frigate Consortium was awarded the contracts.
1.15.4 There was a risk premium of R40 million.
1.15.5 They had to test whether the GFC had done the right thing.
1.15.6 Mr Baqwa said it baffled him that as soon as Rear Admiral Kamerman appeared at the public hearings to refute Young's testimony, Dr Young walked out.
1.16 Freelance Journalist: Is there any sense that there will be co-operation between the German and South African over the prosecution of Woerfel.
1.17 Mr Ngcuka said that so far the German government has not approached them.
2. Joint Standing Committee on Defence: Chapter 7
22 November 2001
2.1 Mr Ndlovu (IFP) proposed that the three investigating agencies as well as Armscor and the Department of Defence (DoD) be invited next week.
2.2 Adv Schmidt (DP) agreed, saying that the Committee needs to hear from the three agencies, DoD and Armscor before submitting a report.
2.3 Mr Smit referred to 18.104.22.168 (c)(iv) that relates to non-conformance to critical criteria and asked why the legal opinion given to Mr Van Dyk was not considered.
2.4 Mr Oosthuizen referred to 7.1.7. The value systems for the technical evaluation, NIP (National Industrial participation), DIP and the financial evaluation were each scored out of 100. It states that the Navy was only involved in the technical evaluation. Was the Navy involved throughout the process? It his view, and he hoped it is wrong, that the Navy was only involved until 1998 and thereafter did not play a role.
2.5 Mr Mabeta (UDM) said that it was not clear how the different roles played by Mr Shaik related to one another. He referred specifically to 7.1.8 and 22.214.171.124 (a) and (b).
2.6 Mr Theron referred to the various roles played by Mr van Dyk as head of Armscor Countertrade, overall supervisor of the three DIP evaluation teams and chairman of another team. The Report states that these roles are incompatible. This concerned Mr Theron and he wanted to flag this.
2.7 Mr Ntuli (ANC) wanted to know the exact powers delegated to Mr Shaik and details surrounding the delegation.
2.8 Adv Schmidt commented that non-conformance and various deviations have been pointed out. Under 126.96.36.199 Bazan is the only bidder that meets the minimum technical requirements yet GFC (German Frigate Consortium) was selected as the preferred bidder.
2.9 Ms Kota referred to 188.8.131.52(c) and also identified the multiple roles of Mr Van Dyk as being problematic. Further she wanted to know who negotiated the price reduction referred to in 184.108.40.206.
2.10 Mr Oosthuizen looked at 220.127.116.11 (a)(iv) that states that Mr Shaik referred the investigators to the technical evaluation team. He asked if the team mentioned is the Navy, the team that Mr Van Dyk co-ordinated or the team Mr Shaik co-ordinated.
2.11 Ms Modise explained that it is the Committee's right to ask who is responsible and accountable. It would be strange if the DoD and Armscor could not provide this list. The Committee is not accusing these people of anything but it is important because of the multiple roles they play and the authority and powers given to them.
2.12 Mr Ngculu wanted to flag the instances where the investigators say that documents were missing or that they had never had sight of it.
2.13 Mr Theron said the procurement policies need to be looked at and why it was so easy for Mr Shaik and Mr van Dyk to contravene policies. He commented that these individuals surely have bosses who are accountable.
2.14 Mr Mabeta said that where important decisions were made, discrepancies did exist and did influence the process and the decisions that were made.
2.15 Adv Schmidt commented on Mr Bloem's assertion that Cabinet has the final say. He said that tender rules and procedures must be followed and it makes no sense if Cabinet can just make a contrary decision because of strategic reasons. Mr Bloem's comment is not in line with recommendation 7.8.1. In the recommendation it says that once the evaluation criteria and instructions have been compiled, compliance therewith should be enforced. The principle contained in the recommendation should also apply to Cabinet and this is contrary to what Mr Bloem is saying.
2.16 Ms Modise asked the Committee to defer the debate on the performance of the Cabinet and the way decisions were reached by it. To assume something and make conclusions about the Cabinet at this stage is premature especially since the substance of the Report shows glaring discrepancies that DoD and Armscor need to come and account for. The Chair wanted the Committee to rather focus for the moment on what the Chapters are saying and make deductions later.
2.17 Mr Ngculu said that the Committee needs to demand the names of who is accountable. He said that the buck stops with the DoD and Armscor. He mentioned the incompatible functions of Mr Van Dyk and said that they need to ensure that this does not happen in the future.
3. Joint Standing Committee on Defence: Chapters 10 and 11
27 November 2001
3.1 Mr Mashimbye replied that the Minister of Defence had addressed a letter to himself and Ms Modise which stated that the DoD and Armscor had placed all the information they had before the Joint Investigating Team (JIT) and that the JIT would be the ones who could best clarify any issues. A reason given was that JIT had access to all the information from all the various Departments and from outside government that DoD and Armscor had not seen. The Minister in his letter said that Cabinet has accepted the recommendations and will implement them as soon as possible. The Minister indicated that DoD and Armscor would make themselves available to attend at a latter date when the information around the implementation of the recommendations is available.
3.2 Adv Schmidt replied that the Committee must study the Report and write its own report thereafter. Now the Department - a key figure in the Report - is saying that they cannot inform the Committee. He asked how the Committee could give an opinion on the actions of a department that did not want to come and account to the Committee. He questioned how the Committee could properly account to the public.
3.3 Mr Ngculu (ANC) added that the correct procedure would be to add to the recommendations.
3.4 Adv Schmidt pointed out that the Department of Trade and Industry had appeared before its relevant Committee. At the beginning, the DoD and Armscor had been put on the programme and the Committee had implicitly agreed that it was necessary for them to come before the Committee. Now the Minister had decided on behalf of DoD and Armscor that they are not going to attend. To him, this added to the allegations of an alleged cover up. He asked what was wrong with them coming. The Committee is not accusing them of anything but they need to assist the Committee. He indicated that the DP would have to reconsider its position in participating in the drafting or adopting a committee report. It is not acceptable that the department involved in the process, through the Minister, says that it is not coming.
3.5 Ms Modise (ANC) said that Adv Schmidt is correct that the Committee had agreed that it was necessary to have the DoD and Armscor clarify certain issues. The Report had been tabled and unpleasant things have been uncovered. The Committee must deal with the Report and express an opinion.
3.6 Mr Mashimbye said that there is nothing that obliges the Committee to table a final report. The report is continuous and the interaction with the Report is continuous.
3.7 Ms Modise said that the Committee had been given three weeks to complete its report. There is no way that all the issues can be covered in this time. Nothing stops the Committee from tabling a report and stating that there are certain outstanding issues. The interim report should aim to do this. This is the best that the Committee can do. The outstanding issues can be dealt with next year.
3.8 Adv Schmidt said that the matter had been discussed and he would present a considered view. He pointed out 10.2.4.5 and 6 state the following:
3.9 "10.2.4.5_The entire process pertaining to the abovementioned instances, from soliciting through to adjudication of the relevant tenders can be criticised. The facts and circumstances show that the project teams and senior personnel in the employ of Armscor and DoD played a significant role in these instances of the selection of subcontractors, apparently because of technical and strategic considerations. Complaints were lodged by the competitors against the process followed for the selection of these subcontractors. Another such instance, the selection of the subcontractors for the supply of the SMS and NDSS, is discussed separately in chapter 11 of this Report.@
3.10 Para. 10.2.4.6: _Strategic considerations in some cases also led to Programme Managers having to accept technical values that were lower than the parameters set in the user specifications and which carried higher risks. For example, the Turbomeca engine posed more risks and was more expensive than the engine proposed by another bidder. Armscor and DoD, however, considered it strategically more important for Denel Aviation that Turbomeca should get the contract."
3.11 Adv Schmidt said such paragraphs show that DoD and Armscor can explain things that were under their control and that only they can explain. The Minister's argument that DoD and Armscor cannot clarify anything further, holds no water. There are many such examples in the Report where only the DoD and Armscor have the answers.
3.12 Adv Schmidt said that he had now shown how DoD and Armscor can explain their own dealings and actions. If DoD and Armscor do not come to the Committee to explain, then it would amount to a disregard of the Constitution or close to that. All that he requests now is that the Committee draft a letter to the Minister informing him of the constitutional obligation to attend.
3.13 Mr Ndlovu pointed to 10.2.1.5 and said that it seems as if Armscor had a relationship with the subcontractors. He wanted to flag this because it was contrary to the principle that Armscor did not have any relationship with the subcontractors.
3.14 Mr Mohlala said that 10.2.2.1 must be read with 10.2.1.5 to highlight the point Mr Ndlovu made. In sub (a) it is stated that bidders were required to submit a list of the subcontractors they proposed to use to Armscor for approval.
3.15 Ms Kota asked that 10.2.4.2 be flagged. It states that Armscor did not expressly impose a requirement of fair, open and competitive procurement process on the main suppliers to ensure that there was fair competition between subcontractors.
3.16 Mr Ndlovu and Mabeta raised 10.2.4.5 and more specifically the many references to decisions made because of technical and strategic reasons. They did not know what this meant. They wanted to know the real reasons for decisions because using such vague language is typical of a cover up.
3.17 Mr Mashimbye flagged all the incompatible functions of Mr Shaik in 10.4.1.2.
3.18 Mr Ngcula commented that he was worried about the comment from Admiral Simpson Anderson who said that Mr Shaik properly recused himself when there is evidence to the contrary.
3.19 10.4.2.3 deals with the % shareholding in various companies and the sale of shares. Ms Modise said that it was necessary for an expert to come and explain the technicalities.
3.20 Mr Ndlovu suggested that the Committee not discuss the conflict of interest because this was sub judice. He suggested that the Committee move to the findings and recommendations.
3.21 Mr Ndlovu wanted to know what was meant in 10.5.3 where it is stated that DoD and Armscor nominated subcontractors. He also wanted to flag 10.5.4 where it is stated that Mt Shaik did not recluse himself properly.
3.22 Mr Mabeta flagged 10.5.2 were it is stated that fair and competitive procurement procedures were not followed.
3.23 Mr Ngculu flagged 10.5.5. Mr Shaik had no security clearance. The member wanted the DoD to check if this only applied to one individual or if more persons were not cleared.
3.24 Ms Kota referred to 18.104.22.168. Cabinet approved the Defence Review in 1997. 4 Corvettes and 6 helicopters were to be acquired. She said that now the 6 helicopters referred to are not being bought. She said this was a deviation and wanted it flagged. 22.214.171.124 makes mention that the combat suites were not sourced locally. She wanted to flag this because it was agreed that the combat suites would be sourced locally.
3.25 Mr Ndlovu picked up on the above point and said that there was a certain policy so why was it changed and who changed it.
3.26 Mr Ngcula said that in 11.5.1 (d)&(e) it is stated that no minutes of the Joint Project Team (JPT) can be found. He wanted to know why people dealing with billions of rands cannot keep minutes.
3.27 He continued and said that the Project Control Board (PCB) just ratified the decisions of the JPT. The JPT played a crucial role and this needs to be flagged. In 126.96.36.199 (j) the JIT states that it is clear that DoD and Armscor is incorrect in alleging that they had nothing to do with the choice of the subcontractors. The member wanted to flag this as well.
3.28 Ms Kota flagged the conflict of interest relating to Mr Shaiks role in the selection of the combat suites because his brother had a direct interest as a director of ADS and Thomson.
3.29 Ms Modise commented that Mr Shaik did not disclose all his interests. He just disclosed the facts relating to ADS not Thomson and Nkobi.
3.30 Mr Oosthuizen referred to 188.8.131.52 (i) and wanted to know what the parameters of the JPT mandate was. He also referred to 184.108.40.206 & 220.127.116.11 and said that what is raised here seems like insider trading. He wanted to flag this. In sub (8) ADS put in a high bid and a competitive quote was only obtained from C2I2, who was not nominated, to reduce the high tender.
3.31 Ms Modise said that what was outlined in 18.104.22.168 is despicable. She continued and asked who were the JPT members referred to in 22.214.171.124 (i) and why they played two roles when dealing with the subcontractors.
3.32 Mr Ngcula pointed to 126.96.36.199 and 188.8.131.52 and said that no records can be found, tender processes and procurement policies are not followed. This type of deviation is coming up all the time.
3.33 Mr Smit agreed with Mr Ngcula and pointed out 184.108.40.206 as another example and said that all such deviations found in the Report should be flagged and the Committee must get answers.
3.34 Ms Modise commented that there is a deliberate non record keeping. She said that it was the same as in the old days. No evidence must be left behind. It is probably the same people that use to procure for the old government. It seems that the old state of mind took over during the process.
3.35 Mr Ndlovu said that this was a new dispensation but a notion still exists that law breakers will not be caught.
3.36 220.127.116.11 states that the Navy and Armscor had a lack of effective control over the tendering process. It goes further and states that that the acquisition of the combat suite was conducted outside the Armscor's and the Navy's normal tender provisions. It is unclear who authorized this. Mr Ngcula said this was a serious statement that needed to be flagged.
3.37 Mr Oosthuizen commented that all the deviations in the appointment of subcontractors had to be flagged because this was a golden thread running throughout the Report.
4. Joint Standing Committee on Defence: Defence Portfolio Committee: Joint Meeting
28 November 2001
4.1 The Chairperson, Mr Mashimbye, started off by re-accounting the previous day's meeting where the Democratic Party had walked out of the meeting. The Chair explained the reason for the walk-out: the Minister refused to let the Department of Defence come before the Committee to shed light on certain aspects of the Report. The Minister pointed out that the Department had made its view on the matter public knowledge and had already provided additional information on the matter. Adv Schmidt and the other DP representatives felt that this was contempt of Parliament and that the Department was obliged to come before the Committee if it so requested. The DP had suggested that a letter be written to the Minister of Defence to let him know of the Committee's view of the matter. The Chair did not indicate whether or not he had refused to write the letter as requested but he went on to say that the DP members had said that until the Committee had written a letter to the Minister, the DP would not participate in the consideration of the Report. The reason for this was that they refused to participate in a process that was made out to be transparent and fair but was not.
4.2 Chapter 11 Allegations/Complaints by C2I2 Systems
4.3 Mr H Smit (NNP) referred to Point 18.104.22.168 where the Report indicated that the "SA Navy accepted some of the risk with respect to Category C products." Mr Smit asked what this meant and specifically what this 'risk' was. Next he referred to Point 22.214.171.124 where the Report indicated that investigation team did not have access to a document, namely the Detexis proposal. He asked why this was so.
4.4 Mr G Oosthuizen (ANC) felt that the whole matter in Point 126.96.36.199 would have to be revisited. It stated that it was obvious that at the time when the GFC presented the Detexis proposal, it was in possession of the C2I2 proposal.
4.5 The Chair directed the Committee's attention to Point 188.8.131.52 where he said that the evidence was contradictory. This would need to be explained.
4.6 Mr Oosthuizen moved on to Point 184.108.40.206 where the Report made mention of two versions of a report on the Diacerto Bus, a short and a long version. The Committee as a whole seemed to take issue with the fact that were two reports. The most prevalent argument was that the interviews of witnesses were done on the basis of the short summarized version of the report which would skew the results of the interviews.
4.7 Mr M Mabeta (UDM) added that the paragraph implies that there could have been a substantive difference between the two reports.
4.8 The Chair told the Committee that the subject matter was extremely sensitive and that it might be better to consider the topic at a later date, once the court had concluded its consideration of the matter.
4.9 Mr Smit stated that during a Pretoria visit, the Committee had received a briefing on the risk premium. At that briefing the risk premium had been quite low and for this reason he was quite impressed. He referred to Point 220.127.116.11 which stated that "a risk premium of some R42 million was added". Mr Smit said he was no longer impressed but very much unimpressed and added that he would like to know how they arrived at this figure.
4.10 Mr Smit referred to Points 18.104.22.168, 2 and 3 saying that he would like to question the Department of Trade and Industry about unfair business practices. He commented that he would not conduct business with people who behaved in such a manner.
5. Joint Standing Committee on Defence: Question Formulation
29 November 2001
5.1 The role of Mr Shaik as Chief of Acquisitions and as the Chair of the Armament Acquisition Control Board. The Committee wants to know if this is normal and the impact thereof.
5.2 The role of Armscor in the selection of subcontractors.
5.3 They want to know if other people in the process have conflict of interests.
5.4 They will question the JIT on where all the people are now that played key roles in the procurement process. More specifically what they are doing and who they are working for.
5.5 The JIT finds that no individuals influenced the selection process. The Committee wants to know how this finding is reached when there are so many deviations and in the light of the other findings in this Chapter (6).
5.6 Chapter 7 B Selection of Prime Contractors: Corvettes. The issue of the performance guarantees will be raised.
5.7 The legal opinion ignored by Mr Van Dyk will be brought up. The Committee wants to know what reasons he gave for ignoring it. They want to know if the JIT considers Mr Van Dyk's evidence to be truthful. The Chair indicated that she wanted to be brutal on these issues and question the competency of Mr Van Dyk.
5.8 The Committee wants to know why Bazan was not chosen when it fulfilled all the requirements.
5.9 The Committee wants to know what the exact policy of Armscor is in connection with subcontractors.
5.10 The Committee will focus on conflict of interest issues.
5.11 The Committee wants to know what the JIT findings on C2I 2 are and whether JIT intends to revisit the failure to select C2I 2 especially since the government spent a huge amount of money on developing C2I 2.
5.12 The Committee raised issues of insider trading. Members said that in paragraphs like 22.214.171.124 where C2I 2 was used to reduce the tender of ADS made it seem as if there could be insider trading that took place. Certain companies benefited and the Committee wanted to know if the JIT was doing anything about this.
5.13 In 126.96.36.199 it is indicated that no records were kept and the tender procedures were not adhered to. The Committee wants to know how this impacted on the investigation.
5.14 Questions will be raised on the risk premiums. Why is it found that the risk premium was not unreasonable? Was it implemented to exclude C2I 2. Explain the formula used to arrive at the risk premium. The Committee will ask if the JIT is justified in arriving at the conclusion that the risk premium is not unreasonable despite the fact that the JIT did not have access to GFC documentation and had to rely on the version of DoD.
5.15 Questions on the issues raised above will be fleshed out and drafted fully. The questions will be given to Mr MJ Mahlangu, the Chair of the Chairpersons Committee, who will pass it on to the agencies.
5.16 Armscor must be able to explain itself about its position on various matters, including dealing with Sub-Contractors.
5.17 Chapter Four - Selection of Prime Contractors ALFA and LIFT. Scores of Companies were changing every now and then. Why? The Company that was supposed to win the contract ended up losing the bid. The Company last on the list ended up being the one who has a contract.
5.18 Formulas were changed while the process was going on. Who decided these changes and why? At the end better Companies, offering Best Value; Military Value and Industrial Value were rejected and Best Value equally to Military Value plus Industrial Value over Financing Index.
5.19 The BAE was chosen without NIP while others were not chosen. Why?
5.20 The role played by the Chief of Acquisition is questionable in the Chapter.
5.21 Cheetah Fighters had a life span until 2012 - why then the rush to buy Gripens now when we have time to shop around or negotiate more.
5.22 In the findings the words: Unusual, Unlawful and Irregular are used in one sentence, create confusion.
5.23 The Evaluators had known things before, which made them biased to decide what to choose.
5.24 Chapter Six - Selection of Prime Contractors - Submarines : The press conference held by the Minister before leaving office was done to drive the process somewhere else.
5.25 The legal opinion that was sought was not conveyed or communicated to SOFCOM. Why? Is it because GSC had failed materially to meet the essential requirements of the DIP?
5.26 Mr V Pillay of DTI has influenced the selection process.
5.27 These names appear: Rear Admiral JEG Kamerman; Right (sic) Admiral AN Howell and Vice Admiral RC Simpson-Anderson.
5.28 The Spanish Company Bazan complied with all the minimum technical performance criteria but did not win the bid.
5.29 Remember Mr van Dyk - Team Leader, Co-ordinator, Mentor for all three evaluation teams.
5.30 Mr van Dyk and Mr Shaik made GFC win the bid on top of others after the legal opinion was not considered.
5.31 Mr van Dyk adjusted amounts and Mr Shaik approved that without the bidders knowledge and confirmation.
5.32 No Value System used and scores were not kept for everybody to see.
5.33 Different amounts presented to Cabinet for approval. Why?
5.34 Only one signature found in most documents - Mr van Dyk.
5.35 Chapter Ten - The Selection of Subcontractors and Conflict of Interest
5.36 The clear position of ARMSCOR is not certain.
5.37 The involvement of senior personnel from ARMSCOR and DOD in selection of sub-contractors.
5.38 The position of Mr Shaik as Chief of Acquisitions and his involvement. The declaration of interest.
5.39 The position of Vice Admiral Simpson-Anderson in these matters.
5.40 Who else did not declare his/her conflict of interest and why?
5.41 Chapter Eleven - Allegations I Complaints by C2i2 System (Pty) Limited
5.42 Who is C2 I 2 , where does it receive its funding from?
5.43 Defence Review position and requirements - did it go together or not?
5.44 The establishment of Joint Project Team which complicated matters and did not keep records.
5.45 JPT wear two hats - they were the deciders and pickers and choosers of sub-contractors as they wished. Right (sic) Admiral Kamerman was in charge.
5.46 No tender procedures were applied.
5.47 C2 I2 was asked to quote why (sic) [while the] JPT knew that they would not award the tender to them? JPT used C2 I2 to further their aims.
5.48 Mr Shaik participated in all meetings knowing very well that he had a conflict of interest. Vice Admiral Simpson-Anderson backed him up.
5.49 Mr Nortje and Rear Admiral Kamerman. Have they been checked on their interest in this matter?
5.50 ADS was given the opportunity to lower its tender using C2 I2's quotations. Why was that?
5.51 The effect therefore was that R2,6 billion contracts were awarded without normal ARMSCOR or State Tender Board procedures being applied.
5.52 Who was the State in this Chapter which decided not to award the contract to C2 12?
5.53 How can the State spend R22 249 592.42 on developing C2 12 and not award the contract to it?
5.54 C2 12 was a local company. What was the reason not go give the contract to it?
6. Public Accounts Standing Committee; Defence Joint Standing Committee; Defence, Trade & Industry, Justice & Constitutional Affairs, Public Service & Administration, Finance Portfolio Committees: Joint Meeting
4 December 2001
6.1 Ms T Modise (ANC) asked if the Auditor General's office had done a background check into the financial and shareholding activities of Thomson-CSF.
6.2 Mr Fakie pointed out that no background check had been conducted during the public and forensic phase of their investigation. The National Director of Public Prosecutions is currently conducting such a background check.
6.3 On the question of Mr Shaik's role, the Auditor General stated that Chapter 14 does make mention that Mr Shaik had incompatible duties. It also notes that he also sat on various committees. The investigation did however not find that he specifically influenced the process.
6.4 Mr Fakie stated that SOFCOM is not a decision making body. It is purely a co-ordinating body. On page 61 it states that SOFCOM function is to consolidate evaluation results. It however does have the ability to make recommendations. He noted that the report does make mention that Armscor and the Department of Defence played a role in looking at some of the subcontractors and making recommendations to the primary contractors. He personally believed Mr Shaik to have played a part in making these recommendations.
6.5 Ms T Modise (ANC) felt that a background check into the finances of Thomsons-CSF should have been done. It is after all public funds that are being spent. Did the lack of documentation at the disposal of the investigators affected the investigation adversely. Was the lack of documentation deliberate? If so has action been taken against the guilty parties?
6.6 Is Mr Shaik was the only person under investigation for conflict of interest. If there are other persons being investigated, what are their names?
6.7 Mr Fakie did not wish to comment on the issue of Mr Shaik.
6.8 Mr Z Madasa (ACDP) said that evidence has shown that the Executive had knowledge of Mr Shaik's conflict of interest. Mr Shaik made crucial recommendations that must have influenced the process. How can it be said that he did not influence the process?
6.9 Mr Fakie stated that no evidence had been found to prove that Mr Shaik had influenced the process. Having a gut feeling that he influenced the process is not good enough. Hard evidence is required.
6.10 Adv Schmidt said that given the irregularities, from a legal point of view the result of the tender process should have been set aside. Who is to decide on the fairness of the process, Parliament or the investigating agencies?
6.11 Mr Shaik preferred it that Parliament decides on the matter.
6.12 Mr B Kannemeyer (ANC) also noted that there are numerous examples of deviations from the procurement policy yet no qualifications are given in the report's findings that they have not influenced the awarding of prime contracts. He made the following references of possible deviations: Chapter 4 page 110 para 4.12.1, Chapter 5 page 147 para 5.7.3 and 5.7.4, and Chapter 6 page 191 para 6.8.1 and page 192 para 6.8.8.
6.13 Ms De Lille (PAC) referred to 10.1.2 that indicates SCOPA's response to the Special Review of the Strategic Defence Packages (SDP) on the finding by the AG that government had no influence in the appointment of subcontractors. She referred to 10.2.1.3 where it is found that Armscor was not precluded from contracting subcontractors directly. Lastly she referred to 10.2.2 that deals with Armscor's requirements imposed on the main contractors. The member asked if the JIT found any evidence that government was involved in appointing subcontractors. She asked how the JIT distinguishes between Armscor and government when the Board of Armscor reports to the Minister of Defence. She asked if Armscor is autonomous and to whom they were accountable. She asked for clarity on the role of government in the appointment of subcontractors.
6.14 Mr Waters (DP) referred to 10.4.5.3 where Mr Erwin testified that Mr Shaik was asked to recuse himself. In 10.4.5.5 it is stated that nonetheless Mr Shaik still participated in the PCB meetings and disobeyed the instruction of two Ministers and the President. The member asked the Public Protector (PP) why Mr Erwin was not questioned if the recusal was enforced and if he was not aware that Mr Shaik was still participating in the meetings.
6.15 He referred to 10.5.5 that finds that Mr Shaik never had the necessary military security clearance. The member commented that surely the Minister of Defence should have ascertained this. He said that there is no accountability and the executive is not being held responsible. He asked if the AG was going to investigate this further.
6.16 Dr Koornhof (UDM) said that Mr Shaik had many conflict of interests. He asked if this resulted in contracts being awarded where they should not have. The member submitted that Mr Shaik continued to play an important role on the PCB and continued to take part in the process and also signed the minutes. The member asked what effect this had on the awarding of contracts.
6.17 Mr Smith (ANC) referred to the finding in 10.5.2 that translates into the recommendation in 10.6.1 that states the need for the guidelines in the Defence Review that relate to the selection of subcontractors must be followed to ensure that a open and fair process is adhered to. He asked if this recommendation was for the future or if the selection of subcontractors should be revisited.
6.18 In response to Ms De Lille the AG said that 10.2.1.3 must be read with 10.2.1.5. The general condition in the main contract is that the subcontractor is responsible for the performance of the subcontractor. DoD and Armscor did recommend certain subcontractors but the main contractor had the prime responsibility of the appointment of subcontractors.
6.19 Armscor has its own board, is a separate legal entity and is the procurement arm of DoD. The relationship between Armscor and DoD is contractual and DoD expects a certain level of service from Armscor in the procurement process.
6.20 The JIT agrees that government had nothing to do with the appointment of the subcontractors. There were a few examples where Armscor did advise the contractor on the appointment of the subcontractor. This was more a monitoring role. An example of Armscor involvement is where they advised the contractor that there was too little competition for a particular contract. There was never a unilateral decision where the contractor had to select a subcontractor so that they would get the contract.
6.21 In response to Dr Koornhof the AG said that no evidence was uncovered that indicates a contract should rather have been awarded to another company. The question of conflict of interest does however go beyond this and the JIT investigated whether information was given to companies to put them in an advantageous position and become the preferred bidder. The JIT could not prove this. There are elements of this and it is being investigated by the National Director of Public Prosecutions.
6.22 In response to Mr Smith the AG replied that the recommendation is for the future.
6.23 Dr Koornhof said that the report provides a list of companies that Mr Shaik or his family had interests in. He asked if the JIT found any evidence that information was passed to these companies.
6.24 The AG replied that the investigation uncovered no such evidence but the companies are still being investigated and evidence might come up.
6.25 Mr Mashimbye (ANC) wanted clarity on why the Navy did not use the R20 million retention product.
6.26 The AG replied that the finding in 188.8.131.52 explains that although the SANDF did not use the final product they still owned it.
6.27 Mr Kannemeyer (ANC) said that the combat suite had to have 60% local content and a 40% foreign content. In 184.108.40.206 it is stated that the preferred bidder entered a teaming arrangement to provide the combat suite. In 220.127.116.11 it is found that ADS became part of GFC that resulted in a situation where the main contractor for the combat suites was also a subcontractor. He asked if the teaming up was based on shareholding or if the procurement process required it. He also wanted to know if ADS is not regarded as a locally based company if GFC complied with the 60/40 ration.
6.28 Mr Theron (DP) referred to many paragraphs in chapter 11 that make it clear that there were no policies in place.
6.29 The PP further replied to Mr Mashimbye's question and said that it would have been logical for the Defence Force to use the technology but there could have been other factors present that would make the technology less desirable. The State had to avoid a situation where it would be impossible to sue the primary contractor. There was this issue of contractual liability and a problem with the compatibility with the user specifications. The technology is not however lost because the SANDF still owns it.
6.30 The AG said that ADS coming together with GFC had nothing to do with shareholding. The main issue here is that ADS was playing two roles. The subcontractors were supplying the information to ADS but ADS itself was also a bidder. This conflict of interest situation had nothing to do with Mr Shaik.
6.31 In response to Mr Theron the AG said that the raises a lot of policy questions but either there is a problem of understanding or members are just going through the motion of asking questions. The common thread in the report is that there were deviations and this has been debated extensively already.
6.32 The PP further replied to Mr Mashimbye's question and said that it would have been logical for the Defence Force to use the technology but there could have been other factors present that would make the technology less desirable. The State had to avoid a situation where it would be impossible to sue the primary contractor. There was this issue of contractual liability and a problem with the compatibility with the user specifications. The technology is not however lost because the SANDF still owns it.
6.33 The AG said that ADS coming together with GFC had nothing to do with shareholding. The main issue here is that ADS was playing two roles. The subcontractors were supplying the information to ADS but ADS itself was also a bidder. This conflict of interest situation had nothing to do with Mr Shaik.
6.34 Ms Taljaard asked how the evidence was tested and what mechanisms were used to go through all the evidence that enabled the JIT to meet the evidentiary burden and make certain conclusions beyond a reasonable doubt especially since the body of the report points to the possibility of corruption.
6.35 The PP replied that the whole investigation was a testing process. At one stage it was found that Simpson Anderson allowed Mr Shaik to stay in the meetings. The Admiral was asked why this was allowed. When Mr Shaik was asked to explain his presence the one answer confirmed the other. Mr Shaik was there to convey a communication from MINCOM. His only role was one of liaison. In this the credibility of witnesses were tested. Many examples like this can be given. It can be debated whether the evidentiary burden was discharged but it is submitted that it was discharged. No stone was left unturned.
6.36 The AG gave his assurance that in terms of normal forensic standards everything was done to get the evidence. Invitations were submitted to unsuccessful bidders and lengthy cross-examinations were held especially of Mr Shaik. 40 pages of questions were submitted to Mr Shaik and himself and his legal counsel gave detailed answers. The investigation was carried out in a thorough way and if anyone believes that the matter can be taken further they are welcome to do so.
6.37 Adv Schmidt referred to the last line of 10.2.2.2 which states, > depending on the extent and nature of any acquisition programme, Armscor reserved the right to require that a predetermined % of the contract value be subcontracted to enterprises owned and staffed by designated groups.= He said that it leaves little scope but to conclude that DoD, Armscor and the Cabinet are aware of subcontractors. He asked if the JIT would agree that the responsibility of DoD also lies with Cabinet.
6.38 Mr Jonkielsohn (DP) referred to 10.2.4.6 that states that certain decisions were made for strategic reasons. He asked if the JIT found out what is meant by strategically more important. The paragraph states that the Turbomeca engine posed more risks than those proposed by other bidders but that it was strategically more important for Denel Aviation that Turbomeca get the contract. The member also wanted to know how the risks were weighted.
6.39 Dr Koornhof gave his understanding of recusal as meaning non-participation at a meeting. He asked if any evidence was found that shows that Mr Shaik campaigned on behalf of Thomson and ADS.
6.40 Secondly, were there other persons besides Mr Shaik who did not have security clearance?
6.41 Thirdly there is no recommendations in Chapter 11 so the member wanted to know what this meant.
6.42 Adv Schmidt replied Armscor reports to DoD and DoD is headed by the Minister who is part of the cabinet. He said that this thread runs throughout the report.
6.43 The AG in response to Mr Jonkielsohn said that the strategic importance related to the support and maintenance of existing military equipment that Turbomeca could do. The AG replied that a risk analysis was done.
6.44 There are no recommendations to chapter 11 because it was a difficult chapter to deal with. Lots of money was spent to investigate the allegations in this chapter. In the other chapters recommendations related to DoD and Armscor but the investigation in chapter 11 was unique and it was difficult to make recommendations.
6.45 The AG said that the decision on risk category A, B and C was taken at a meeting on 19 August. There is a concern that the meeting was not properly constituted but this was difficult to establish. If the meeting did take place it was probably not properly constituted because many members were not there.
6.46 The PP continued and said that the Ministers signed the contracts. All the misdemeanors took place at lower levels where the contracts were not signed. If an official on the PCB does not recuse himself it cannot be said that the Minister is responsible when the Minister did say that the official must recuse himself. This is the basis upon which the distinction is made between government and the officials.
6.47 Still answering Ms De Lille, the PP said that he agrees that the government cannot be blamed on this vicarious basis. The persons that must be held responsible are the officials. He repeated the finding that the contract position is not flawed.
6.48 The AG commented that it was not pragmatic and practical to hold government responsible if the officials do something wrong especially if there are policies and procedures in place.
6.49 On the whistle blowing issue the AG said that he has not been approached to investigate their motives and he has never heard any comments to this effect. As a Chapter 9 institution allegations and complaints are received that are at times ridiculous and time is spent to see if they have any substance. So as an agency there are allegations with other agendas and without substance.
6.50 The PP commented that 14.1.1 does not exonerate government. All that it says is that no evidence was found to indicate that the contract position is flawed. All that is being talked about here is the contracting position. The investigation would have been flawed if a finding on this issue were not made. It could be said that it exonerates government but what is being dealt with is the contract position.
6.51 Mr Mashimbye commented that what the member was asking was if the JIT can be trusted.
6.52 The PP said that he was surprised that this is being raised now because the member already raised it at the beginning of the investigation. The PP said that the member is actually pointing out a strength of the JIT. The three agencies compliment each other. He said that the AG can make value judgments but lacks the power to take issues forward. This is where the NDPP came in who had the power to search and seize just to use one example. If the member is saying that the AG overstepped his mandate, this is not so because the agencies supplemented each other.
6.53 The different abilities of the agencies ensured that no stone was left unturned. The report is a foundation document and the JIT does not want to usurp the role of parliament. The legislature must take further action if it wants to hold the executive accountable. If the JIT thought that ministers should be followed up it would have said so as to point the legislature in the right direction.
6.54 It is the prerogative of Parliament to take the report forward but the JIT has said its say.
6.55 Mr Nair (ANC) wanted to clarify that the statement did not refer to whistle-blowers but to those who spread rumours about government's involvement.
6.56 Mr Jonkielsohn referred to the PP statement that government consists of three branches and said that the officials are responsible to the executive and those who to a large degree form part of the executive. Many officials and members of the legislature are being investigated and perhaps the wording of certain findings and recommendations are incorrect.
6.57 The deputy chair replied that the report is in the pubic domain and people can receive it as they please. One must accept the bona fide of the JIT in writing the report. It cannot be expected that the JIT must now say that they could have phrased things differently. It is outside the scope of this inquiry, it is an unfair question and should not be permitted.
6.58 Ms Taljaard referred to an earlier comment from the JIT that the executive made input on the format of the report. She asked if the executive had any suggestions on the key findings and recommendations.
6.59 To the second question he (the AG) said that the executive made no input in respect of the key findings and recommendations.
6.60 He explained that the final chapter was drafted in the following way. The team went through the report and identified key findings and recommendations. To make the report more user friendly to those who do not want to read the whole document and just want a quick synopsis. For the work of members of parliament the final chapter cannot be separated from the rest of the report.
.............................................................and there it all ended...............................................................