SCOPA Hearing on the Auditor-General's Special Report

Mr S. Fakie : Auditor-General : Auditor-General's Office

2003-08-20

[Chairperson] Welcome everybody to SCOPAís Hearing on the Special Report by the Auditor-General pertaining to allegations on the JIT ARMSDEAL Report. A word of welcome to the Auditor-General, members of the media, and Adv Anton Meyer who will assist SCOPA with any legal questions that may arise. For purposes of background and for record purposes it is just important again to highlight the following: SCOPAís oversight role in terms of section 42.3 of the Constitution read with Rule 207 of the National Assembly. The following documents have been made available to Members: the Special Report, the media reports, there was also a Report by Ms February for background information. Then I also want to remind Members that we should take cognisance of the two legal opinions that was provided by the Parliamentary Legal Advisors dated 3 and 9 June 2003 just for clarification. Then I must just indicate that we have obtained a legal opinion from Senior Council regarding the Special Report and we will make that available during the evaluation stage to assist Members. I think that will deal effectively with the issues as well. The purpose of the public Hearing is to give Members of SCOPA an opportunity to direct questions to the Auditor-General with regard to the Special Report, and more specially with regard to allegations that the JIT Report on the recent ARMSDEAL was substantially edited, and to give the Auditor-General an opportunity to respond to those allegations. Just a reminder, a report in the Business Day of 21 May 2003 contained the following allegations: "The JIT was heavily edited in that it omitted findings on gifts received by key players during the Arms procurement process and there were inaccuracies in the Defence Department presentation to SCOPA". Members should also take note that there are a number of court cases emanating from the ARMSDEAL and should exercise caution in the light of that with regard to the sub judicare rule. I must remind Members also from the outset, of the implications of National Assembly Rule 66 and adhere to that during the proceedings namely: "A Member may not reflect upon the competence and honour of the Auditor-General except upon a substantive motion in the House alleging facts which, if true, would in the opinion of the Speaker prima facie warrant such a decision". I just want to remind Members of that. With regard to the process to this morning proceedings the political parties represented in SCOPA agreed on the procedures to be applied. I want to remind Members of the letter of the Speaker dated 9 June 2003 in which she stated that it is within SCOPAís mandate for it in the light of the media reports to take the initiative and enquire whether and to what extent the information presented in the JIT Report and other evidence may have been incomplete or misleading. SCOPA then in due course should report to the House on the outcome of its enquiries and make such recommendations as it may consider appropriate. Moving to the Hearing the Auditor-General will follow with opening remarks. He requested to use his conclusion time now to give us the background.

[Mr S Fakie] Let me first take this opportunity to thank SCOPA for giving me the opportunity to present and elucidate on my Special Report. This opportunity is important for it is the correct public forum for me to put my side of the story, to clear my name, and to restore the credibility and integrity of the Auditor-Generalís Office. As we know this whole ARMSDEAL saga has been a very controversial issue loaded with politics, emotions, sensation, perceptions and often with innuendoes. I am hopeful that we will be able to deal with my Report on this topic in a rationale and objective manner and to bring this matter to finality so that we can continue to do our normal work. This Report has been prepared and tabled in Parliament principally to present the facts to Parliament to deal with certain unfounded allegations reflecting upon the integrity and dignity of the Auditor- General and my Office. Criticism against me or my Office is indicative that our democracy is strengthening and working, but such criticism has to be constructive and based on substance and facts, otherwise you undermine that very democracy which institutions like mine are supporting. It is for this reason that the Constitution offers these institutions protection and independence, so that we can function effectively as a constitutional institution supporting democracy free from interference and fear. This independence and autonomy of the Auditor-General is further entrenched by the provision of Rule 66 of the Rules of National Assembly. Since the start of the JIT investigation there has been numerous reports carried by the media where various individuals and interest groups are reported to have called the integrity of the Auditor-General and other Chapter 9 institutions into question. Recent media articles published during May 2003, which you referred to Chair, immediately after the release of certain documents to one of the unsuccessful bidders refer to editing and omission of certain findings in the JIT Report and paragraph 5 of my Special Report deals with this matter and my rebuttal of these allegations in detail. I also make reference in my Report to the irresponsible statements made by some Members of Parliament, and in my view there may have been a transgression of Rule 66 of Parliament. Chair, as you have also indicated about the legal opinion that you have got, I am more than willing to answer any questions pertaining to my Special Report. However, I have been advised not to entertain any question in circumstances where the question or my response may have a bearing on the current litigation that is pending on some of these matters. I rely on Parliament to deal with these facts which I have presented in my Special Report and which I will provide during the question sessions, so that the integrity and status of Chapter 9 institutions can be upheld. I take it that all Members present here, have gone through the Special Report, but just to highlight with the understanding that there are some new Members within SCOPA, I will just briefly take Members through the main or the highlights of the Special Report that I have presented. The first paragraph on page 1 and 2, which in my view is the most important aspects of the Report and which actually prompted me to table this Special Report stresses on the importance of allowing Chapter 9 institutions to operate independently and impartially and to respect and maintain the integrity and dignity of such institutions. The Auditor-General is a Chapter 9 constitutional institution supporting democracy and as such is subject only to the Constitution and the law. The Auditor-General is an independent and impartial institution, accountable to the National Assembly that must exercise its powers and perform its functions without fear, favour or prejudice. In terms of the Constitution of South Africa no person or organ of State may interfere with the functioning of the Auditor-General. The aforementioned independence provided to institutions created by Chapter 9 of the Constitution implies inter alia that an institution such as the Auditor-General should not be deterred while conducting or finalizing an audit by the conceivable reaction of the institution being audited or by the reaction of the recipients of those reports. This independence and protection does not mean that the Auditor-General is above the law and should not be accountable. In fact, Section 181. 5 of the Constitution clearly states that the Auditor-General is accountable to the National Assembly. This I do by way of the General Reports and the Officeís Annual Report which I table in Parliament .

If I can then draw the Memberís attention to paragraph 2 on page 4 to 6 which provides a background of the sequence of events that has taken place on this subject matter since my initial review which took place in September 2000. Paragraph 2.1 refers to the preliminary review that we did. Paragraph 2.2 refers to SCOPAís 14th Report, and the resolution that was taken by SCOPA in referring this matter to a combined investigation team. Paragraph 2.3, which I would like to elaborate on a little more, because the whole controversy that is currently emanating on this issue of this Report revolves around draft reports. I would just like to take a few minutes to elaborate on that which is covered in paragraph 2.3 of the Report which in effect talks about the finalisation of the JIT Report. The one issue that I want to highlight there, is that one has got to understand that the JIT Report was finalised over a period of eight months which if you look at the content of the Report and the issues that had to be dealt with is a fairly short period, but notwithstanding that, what is important is for Members to understand the process of the drafting of the Report. Firstly, a Draft Report is compiled based on audit evidence or the investigation evidence that we receive. The Draft Report is then discussed with the Management of the institution concerned to verify the factual correctness of the findings in that Draft Report. Any additional input received is then verified and considered. The Draft Report is amended with the verified additional inputs received from Management should it be considered necessary. Should the draft final report relate to anyone of the Special Accounts mentioned in Section 4(6) of the Auditor-General Act, a consultation process with the relevant Ministers and the President follows. This is done in order to comply with the current legislation. After consultation with the relevant Ministers and the President the same process takes place that any information that we get has to be verified. The Audit Report is then finalised. And it is the finalised Audit Report that is then tabled in Parliament. We followed this particular process in all our audit reports that we table in Parliament at the moment. All I want to mention is that in the JIT Report the same process was followed. There was nothing different done there. The other important thing that I would like to mention is that until a report is finally signed off by the Auditor-General, the report may change based on additional supporting evidence obtained after the drafting of the report in order to make the report understandable and to formulate the report in such a way that it is easily readable. It may also be necessary to make further changes in the format without affecting the substance. Therefore a report can only be viewed as a final report once it has been signed off by the Auditor-General. Again, this was exactly the same process and procedure that we followed in finalizing the JIT Report. I think it is important to put that context in, from a drafting of the report point of view, because there have been a lot of allegations around drafts being changed, etc, and for one to understand the process that one follows in finalizing any report. Having an understanding of the above process in finalizing a Final Report, I believe that it is unfair and unfounded, and perhaps mischievous in some ways as well, to expect that the Draft to be exactly the same as a Final Report and to conclude that the Draft was edited as a cover up. Notwithstanding this, I still stand by my earlier statements where I have stated that the Final Report has not changed materially in substance to the Draft Report. This will be borne out if one reads the complete Draft Report in Annexure A, which is the Report, the Draft Report that went through to the President and the Ministers, and the complete Final Report in Annexure B which is attached to my Report. If one reads that full Report you will see that in substance there has not been substantial material changes between the two, notwithstanding the fact that the drafting process will entail changes in any event.

If I can then take Members through paragraph 3, which basically deals with the tabling of the JIT Report and the referral of the Report to both SCOPA and seven other committees, it lists all the committees that the Report was referred to. On the 4th and 5th of December 2001 members of the JIT elucidated the Report to a combined standing committees to which certain sections of the JIT Report had been referred. During this session the members had the opportunity to interact with all the members of the JIT and to seek further clarity on the investigation and the matters contained in the JIT Report. The two-day interaction was an extensive process in my view and many questions and requests for clarification by various committee members during that sitting were responded to by the JIT.

I then move onto paragraph 4 on page 9 which basically highlights C≤I≤, one of the sub-contract bidders who were unsuccessful in one of the contracts. The important aspect here is that a lot of these allegations emanated shortly after the documents were released to C2l2, but suffice to say that, just trying to address the complaints that were raised by C≤I≤ the Office of the Auditor-General with the JIT Report has spend close to R I million of taxpayerís money just to look at the complaints of C≤I≤. The other aspect is that it appears that he was not satisfied with the finding of the Report that we have submitted and therefore there is a whole process that is taking place currently in terms of litigations etc.

I would like to then move on to paragraph 5 on page 13 relating specifically to the media allegations and my rebuttal of these media allegations. What is important here is to also understand that the article that have surfaced in May sometime, and the article that appeared in the Business Day was jointly written by a freelance journalist who worked for Mail and Guardian and there was a previous article in January that was published by that freelance journalist. I submitted a rebuttal of that article detailing the rebuttal on 26 May 2003 and that is attached as Annexure D to this Report. Unfortunately my rebuttal did not appear in the papers with the same level of vigor as the first article did. What is important is the claim that the Report was heavily and significantly edited, that is the claim that was made in the media article, that many important items had been removed from the Final Report as explained earlier. Editorial changes made to the draft are a normal process, as I have explained to you earlier, in any report finalisation process, therefore it is called a draft, but not only that, I was able to indicate that most of the allegations around the heavy editing were in actual fact contained in the Final Report Perhaps in different places, perhaps in different style and form, but it is there. That is a statement that I have made when I first presented my JIT Report clearly indicating there has been a change in the format and the styling of the Final Report, but not really in substance.

Then paragraph 6 on page 17 relates to statements and motions in Parliament that were made. I am not going to go through the details of this, except to indicate to Members of this House that the kinds of statement that has been made in Parliament relating to this and the way it has been dealt with - Chair I would like to refer Members to a previous incident where a similar transgression took place in the National Assembly on 18 June 1997 for which a Member of Parliament was found guilty of transgressing the then Rule 99 of Parliament which is now currently the Rule 66 of Parliament.

Paragraph 7 is basically some concluding remarks that I have made.

Then there is Annexure A which in effect is the draft JIT Report on chapter 12 relating to the non-selection of sub-contractor C≤I≤.

Annexure B is a final JIT Report on chapter 11 relating to the same topic. One can compare to what extend the Draft and the Final Report on this particular chapter has changed which is where the allegations emanate from.

Annexure C is a covering letter to the request dated 15 May 2003.

Annexure D is a press statement that I have made which was not carried with the same level of vigor in the papers.

Annexure E is a letter that I submitted to the Business Day expressing my dissatisfaction with the way they have dealt with this matter.

That in the main is the Report in front of us at the moment. I would like to thank you for allowing me the opportunity to take Members through the main aspects of the Report and I am now ready to take any questions if there are any.

[Chairperson] Thank you Mr Fakie. We now start with Mr B Nair with his questions.

[Mr B Nair] Mr Fakie has pre-empted me in a number of ways. For the purpose of the record I will put the questions forward. The Special Report is actually in response to a series of allegations that were made in the media as you pointed out already. Then words such as, the Final Report of the JIT was sanitized, doctored and materially changed etc was used. So much so that Parliament itself and SCOPA were actually mislead.

Is this fact or fiction?

Does the unedited version of the original Report differ from the report presented to Parliament?

Did the President or the Executive influence the heavy editing of the Report as one newspaper put it?

Mr R Young of C≤I≤ revert in his response to the statements that you have made through the media and arising out of the court action that he took against yourself. He said that the Draft Report actually stated that at no point in the entire tender process did the South African Navy indicate a preference for the C≤I≤ Information Management System (IMS). On the other hand, you have also stated in the Final Report, "it is the view of the investigating team that the C≤I≤ IMS was the preferred databus of the South African Navy at least up to a point". Now this was held by Mr R Young to be absent from the final finding Then he threatened to take action for perjury etc.

Can we have your comments on those?

[Mr S Fakie] As the Member has indicated, I think some of these things may have been touched on during my introductory comment. But to answer very briefly the issues that have been put on the table, the allegation of heavy editing and doctoring of the Report etc is a fact or fiction. My view is that it is not a fact, because I have been able to reference on all those allegations that indicated that those issues that were omitted from the Final Report were in actual fact included in the Final Report. I think the Member has made reference to one such an example where there was an allegation that the preference for the IMS system was in the Draft Report and not in the Final Report. It is in actual fact in the Final Report and the important thing there is that there was a preference up to a point. A lot of the other allegations also, and I am sure that there will be Members that may ask specific questions relating to that so I am not going to go into that detail, but the short answer to that is that it is not factually correct. Except for the fact that there was an issue around the gift which was in the Draft Report and is not in the Final Report. But again, if I can get an opportunity, because there may again be questions revolving specifically around the gifts and I may be able to respond as to why that was not in the Final Report But other than the issue of the gifts all the other aspects of the allegations that were contained in the media was in actual fact in the Final Report.

The question also refers to the unedited earlier Draft - does it differ fo the Final Report. Again, I say the same thing that I have said to the House when the JIT Report was presented, that in format and in styling, yes, it does differ quite a bit, but not in substance. The key findings that were contained in the Draft Report are there in the Final Report. So in substance I say it has not changed, but in format and styling, yes, it has changed.

The last question is that did the President or the Executive influence the editing of the Report as was alleged in the media? I want to say categorically no. They have not influenced it. It was a due process that we followed. They have provided us certain factual information. We had to verify those facts and only after those facts were verified then we considered the impact of those verified facts on the thing. There was no influence directly on editing or changing the Report directly from the President or the Executive. I think I have answered the Memberís questions. If I have left anything out I am sure it will be covered with other follow-up questions that may come through.

[Mr B Nair] Other Members would be dealing with other aspects, so I will not put those questions now.

[Chairperson] The next Member IS Mr L Chiba.

[Mr L Chiba] My focus area is the fact that the JIT investigation team did not actually investigate matters further in relation to certain issues regarding the IMS combat suite of C≤I≤.

In connection with the imposition of risk premium you state, in point 12.4.4.19, that the investigation team is of the view that it cannot be found that the imposition of a risk premium on the IMS of C≤I≤ was unreasonable. In the conclusion you repeat "the imposition of the risk premium was not unreasonable", but you also state that risk premiums were also placed on other sub-contractors. However, those sub-contractors were not consulted by the investigation team.

Why were other sub-contractors not consulted?

Do you not think that by consulting other sub-contractors regarding the imposition of risk premiums and establishing the reasons for the imposition of premiums and the extend of that imposition your own findings would then support, or not at all support, the investigation teamís conclusion that it was not unreasonably to impose a risk premium on the IMS of C≤I≤?

The second issue is in relation to whether or not C≤I≤ís commercial specifications were released to its competitors? You state that this cannot be conclusively proven for the simple reason that GFC (German Frigate Consortium) administered the tender process on the one hand and secondly, GFCís evidence was not obtained. The Committee notes that the JIT has actually submitted a questionnaire to GFC.

But why was the evidence of GFC not obtained?

Has there been a response to your questionnaire?

If so, are you in a position to update this Committee on that response?

On the other hand you state that it is obvious that at the time that the GFC presented the corrected proposal it was in possession of the C≤I≤ proposal.

Would you clarify this issue for the Committee?

[Mr S Fakie] Regarding the risk premium - the reason why we did not contact the other sub-contractors to look into the details of those risk premiums issues is that, based on the evidence that we have had we knew definitely that in actual fact there was risk premium that was placed on other sub-contractors. The issue that we were trying to verify or prove was that, was this risk premium only placed on C≤I≤ or was it placed on other sub-contractors as well? I think that was what we were trying to prove in terms of our review. And having got that confirmation that, yes, risk premiums were placed on other sub- contractors, therefore we came to the conclusion that the risk premium that was placed on C≤I≤ was not unreasonable, especially in the light of the fact that the product of C≤I≤ was not really tested. It was a product in design phase and conceptional phase etc. There has not been a track record and based on that it was our view that the risk premium was not unreasonable. I think having gone through, and especially when I spoke about the timeframes within which we had to work with and it was eight months, to the other sub-contractors would have basically reconfirmed that the risk premium was not unreasonable. It would have given us further evidence, but I do not think we had any doubt in the evidence that we had at hand to come to the conclusion that the risk premium imposed on C≤I≤ was unreasonable. If there was any doubt on that then we would have gone through and consulted with the other sub-contractors.

On the issue of the commercial specification and the questionnaire that we did send through to GFC - I think the Report does indicate that, and that is correct the way the Member has put it through, that we have send through a questionnaire. I must admit at this point in time I would have to check whether there has been a response to that questionnaire and whether we did any further follow-up on that I do not have that evidence here with me, but I can provide the Member and the Committee with the details. But broadly from what we have gathered, again, was that, there appear prima facie to be an indication that, yes, that information may have been made available to the competitor based on the way that the whole administration of that sub-contract was dealt with. And, again, the Report does make mention of that.

[Mr L Chiba] What we are concerned with is that you did not determine the extent to which the risk premium was imposed. Had you determined that then you can go and say look, the risk premium imposed on C≤I≤ IMS combat suite was R40 million, in other cases it was R38 million, and in that case the imposition of a R40 million risk premium on C≤I≤ IMS combat suite was reasonable or not reasonable. This is what I would like to know. You did not do so and all that we want to know is:

Why did you not do so?

And the question that I posed in relation to the second question - why was the evidence from GFC not obtained? We know that you submitted a questionnaire, but the evidence was not obtained from GFC and I think that was a shortcut.

[Mr S Fakie] In response to the first issue around the risk premium - basically we did consider whether we should try and look at whether those risk premium of R40 million was fair and reasonable. I think the Report very clearly indicates that, in the light of both the cost and time constraints that we have had, we did not think it would allow us to deal with that appropriately. Firstly, we had to get the service of an expert. None of us in the investigation team would have been in a position to be able to come to the conclusion without having an expert in that specific field to be able to give us an opinion on that. My concern was that once you start getting experts in that area and you get opinions that differ, it does create a bit of a problem. Also it would have been extremely difficult to quantify in detail exactly whether it should have been a R40 million or R100 million. That is why we have put in the Report very clearly that we did not look at whether the R40 million premium was reasonable or not in the light of the cost and time constraints that we had. I take the point that if we were given more time and had real experts in that particular area we may have been able to do that. A classical example is that we called in two economists to look at another chapter in the JIT Report, for argumentís sake, on the cost of the State. Again, we did not have the expertise to be able to do that evaluation. The two economistsí Reports did not speak to one another and then you as an investigator has got to take this report and make a conclusion. It was those kinds of things that prompted us to try and put a finding here that, firstly, we put qualification to the finding that we did not determine the extent of the R40 million, but there was a R40 million risk premium that was put in, and it was not unreasonable.

The second aspect to try and look at whether risk premium was put in other sub-contractors - it would be extremely difficult to do that, because you are not comparing apples with apples. If you have got to make that comparison you have got to make sure that you are comparing apples with apples. One has got to understand that this particular sub-contract was a mission critical sub-contract system within the Corvette programme. A lot of the other sub-contractors where premiums were placed we not such critical issues So you would not have been comparing apples with apples.

On the issue of the evidence from GFC- as I say, I do not have the facts available, but we may have subsequently got it. I take the point that the Member is raising. Maybe we should have got that before we finalised the Report. Speaking under correction and without the facts available, I think it was an issue of timing. We wanted to finalise the Report. We did not think that would have a material impact, but we will put that statement in the Report. There may well have been that evidence has come through subsequently. I will respond to you in that regard.

[Chairperson] We go to Mr S Blanche for his maiden question in SCOPA.

[Mr S Blanche] In Mr Fakieís opening remarks he referred to the Report as being heavily edited. I thought that I might have misheard what he said, that it was heavily edited, because coming afresh to this Committee that is what I expect. In making the First Report and the Final Report it seems to me that a totally different tone appears in the Final Report.

Did some other body of editors write the Final Report?

Why is it so much different to the initial Report?

My experience normally with the Auditor-General is that he is straightforward. He asks straight questions and in his First Report that appears to come through, but in this Final Report it seems as if a new draft has been drawn up by somebody else.

Which draft was accepted by the Auditor-General?

Were you involved in the Final Draft as well as you were in the initial Draft?

Why is there such a difference in tone between the First Report and the subsequent Reports and then the Final Report?

[Mr S Fakie] To answer the last part of the question - Yes, I have been involved throughout the process and therefore I have been involved quite extensively in the Draft that is here as Annexure A, as well as the Final Report in Annexure B. The one issue that the Member needs to understand, is that the Draft that we have here as Annexure A was a Draft that was prepared on the basis that the three investigating agencies that dealt with the JIT Report submitted their own Report. In other words, we submitted one Report with three parts to it Part A was the Public Protectorís section; Part B was the Auditor-Generalís section relating to a lot of the forensic work and Part C, which was a two page Report, in fact, from the NDPP (National Directorate of Public Prosecutions) indicating that his investigations are ongoing. So in the main when we submitted the Draft Report, in those three parts, there was a lot of repetition in terms of what the Public Protector said on a particular topic and especially around C≤I≤, because Mr R Young appeared in front of the Public Protector, as well as having given us evidence. There was a lot of duplication of what was contained in Part A of the Draft Report and Part B of the Draft Report. Annexure A in actual fact is chapter 12 of Part B of the Draft Report. When we relooked at this whole thing and, in fact, one of the comments that came through from the President and the Executive was that this Report is not very easily readable, because you are repeating a lot of the stuff that you indicate in Part A, again in Part B, and also there are statements that are hanging in the air that needs to be concluded on. So when we looked at these things we had to relook at what was contained in Part A of the Report, incorporate that, consolidate that with Part B of the Report relating to the same subject matter. What we did in that process and that exercise is re-arrange the Report by subject matter, and hence that is mainly what happened as a result of that final drafting process. Personally I do not believe that the tone has changed, but that could be a view that you have. I do not believe that the key findings in the Draft Report have in any way been watered down substantially or in any way in the Final Report. It is just the way we had to try and make it flow and make it more user friendly and make sure that we deal with topics by heading. So you would find that something in the' Draft Report was contained under A section and when we came to the Final Report we put a heading. We thought that, that particular element was more appropriate to fall in that section of the Final Report, and so we re-arranged things like that.

[Mr S Blanche] Could the Auditor-General give me information on how many reports there were and what dates were they submitted to the Cabinet if there were more than one?

[Mr S Fakie] There were a lot of earlier drafts, but the only draft that went to the President and Cabinet is what is contained here as Annexure A. That was the only draft which was submitted to the President and the Ministers for their input and comment. They were given, if I remember correctly, five or seven days to give us their response to that because of the time constraints that we had in finalizing that Report.

[Mr S Blanche] How many drafts were there before you then submit it to the President?

[Chairperson] Mr P Gerber will ask his questions now, but we will give the Auditor-General a chance to respond to that.

[Mr P Gerber] Mr Fakie, based on your Special Report on page 11 I would like to quote the following: "Once the aforementioned common understanding had been reached steps were immediately taken to comply with the order. On 15 May 2003 two files of documents were dispatched by courier to the request of attorneys under cover of a letter explaining how the search was conducted."

Could you indicate to this Committee what percentage of the documents has now been handed over to C≤I≤?

Do you have any idea of what percentage of the documents that C≤I≤ has in their possession they have actually worked through?

How many documents do they still need to get from the Office?

[Mr S Fakie] At the time of finalizing the Special Report that statement that there were two files that were submitted is correct That was the first release that we have made. That release was based on a very specific search that we did in terms of the court order relating to all the working papers that we had on the chapter 11 of the Final Report, which is the chapter relating to the non-selection of the C≤I≤. In a broader interpretation of the court order it would appear that maybe the chapter relating to the Corvettes could have also fallen into the order, as well as the chapter relating to the conflict of interest, for this particular chapter on C≤I≤ did have a section relating to conflict of interest. If you look at chapter 11 and 12 you will find there is a paragraph relating to conflict of interest. But if one looks at the JIT Report, I think it is under chapter 10 or 11, you will find that there is a more detailed chapter relating to sub-contractors and conflict of interest. So in the second search that we did we looked at files relating to the Corvettes, as well as to the conflict of interest in the other chapter. We have also looked and handed over all the drafts, in other words, even the working drafts that the junior clerk would have put in at the draft paragraph relating to his initial finding. We photocopied that, as well, and released that as part of complying with the court order. I want to report that it was very early in August, and maybe towards the end of July, that we have released an additional 34 files to C≤I≤ of which approximately 27/28 of those files contained copies of Draft Reports and very early drafts as well, and working progress reports that we have released to them.

To answer the last part of the question - it is our view that based on the search that we currently did and our interpretation of the court order, we believe that we have released whatever documents that he is entitled to. We know that Mr R Young is still busy perusing through the documents that we have released to him during the latter part of July, early August. His attorneys have requested to indicate his needs in respect of time. Basically I do not know exactly where he is in terms of what percentage he has read. From our side, all I can say is that based on the court order we believe we have released everything to him. There is an enormous amount of documents that we have there. If there are anything specifically that he feels that he has not received we are more than willing to go and look at that as well.

[Mr P Gerber] Based on your answer and the fact that your Officeís integrity has been attacked, we have heard other examples of attacks on your Office such as the previous Director-General of Public Works and others, yet those did not warrant a Special Report by you. We had other criticisms, for instance, against judges that did not warrant Special Reports. Similarly other institutions have been attacked which did not warrant Special Reports. Yet you chose to bring out a Special Report while knowing that the company involved still has about 34 files that they still have to work through.

Could you tell this Committee here today that to your knowledge there is nothing in the documents that still has to be worked through by this company which could again surface in the media that could cast the same perception again against your Office, which will again force you to bring out another Special Report?

Should you not rather have waited with this Special Report until this company has worked through all the documents that have been subsequently released by your Office?

Because Chair, ironically this ARMSDEAL has become the most transparent ARMSDEAL in the history of our country. We have never spoken about the ARMSDEAL as much as we have in the past couple of years. It is because of this that I think the public out there is getting tired of it. I am sure your Office, Mr Fakie, is also tired of this ARMSDEAL. I do not think any of my colleagues would differ from me that we are also sick and tired of this ARMSDEAL. Maybe it will be good if we can file this ARMSDEAL once and for all.

[Mr S Fakie] First the question of why I filed the Special Report and as it has not been done previously - I cannot talk for the other institutions that have been attacked and why they did not.

Relating to the example of the Public Works - one has got to take a measured view in this regard and turn around and say, to what : extent has that kind of attack really brought the integrity, dignity and name of the Auditor-General into disrepute. I know that the issue has been raised with the Director-General of Public Works. It was dealt with predominantly within SCOPA and there has been one article in the papers subsequently. The question is does that warrant a Special Report? I do not believe so. That is my personal view. Why did I put out a Report here? This particular aspect has been going on for quite a while. I think if you look at the veracity of the issue that is bringing the Auditor-Generalís name and dignity into disrepute, actually prompted and warranted a Special Report to be brought to the attention of Parliament. Secondly, there were various discussions and debates taking place informally through motions and so on within Parliament by Members of Parliament on this very subject matter. I thought it would be appropriate not to deal with this matter through the media, but rather to file a Report in Parliament so that Members are presented with the facts and my side of the story. I also like to remind the Member that, and I made reference to a previous incident where Rule 66 was contravened, and in that particular case it related to the SFF Association and a Member of Parliament making certain statements relating to the dignity and honour of the Auditor-Generalís Office and there was a Report that was filed in Parliament at that time as well. So it is not the first time that we have done this. I do not think that every time someone makes a statement in the media that it necessitates a Special Report to Parliament. I think one has got to look at the veracity and the significance of the matter at hand.

[Chairperson] The next Member is Dr G Woods.

[Dr G Woods] I think I have been very conscious of the Rule 66 issue as it has been raised by the Auditor-General in this Report. I went to Parliament yesterday to approach an official and got an opinion and it was a very restricted opinion, and somehow it seems to compromise this occasion, if I can say so, that it is a strange situation when a Report by the Auditor-General appears before us, and as the Auditor-General has said the Report is essentially to defend his integrity that we are cautioned on how we question the way he defends his integrity, because otherwise we fall back into the Rule 66 trap. So hopefully the occasion is not going to just simply amount to a damage control exercise on behalf of the Audit&-General. Those limitations, together with the limitations of time, mqkes it very difficult to construct any lines of questioning.

I would like to have challenged the Auditor-General on the way he has incorporated Members of Parliament statements here. I think he is very incorrect on his assumptions over responsibility and unfoundedness, but hopefully the parliamentary process will in due course give us an opportunity to take those issues up.

I would also liked to challenged the Auditor-General on the narrow way in which he has taken up the differences and discrepancies that have been detected between the first set of documents he released regarding the First Draft and the Final Report. I think observation and example given by Mr Peter Bruce in the Business Day, I think certain trends which emerge where findings in the First Report sort of dissipated into the body of the Reports. It would also have made interesting questioning.

It would have also been nice to refer to the more recent releases that the Auditor-General has made to Dr R Young and to ask why strategic issues are tipp-exed out, pages are taken out, and there is even a great array of discrepancies which would have made interesting discussion. Because of the time limitations I will just stick to the two very broad issues.

The one is, before issue and if there is time I would like to get to the after issue.

The before issue, and I am sure we all agree, the reason why we sit here and why this Report is issued, and why all the questions and suspicions is because, the Auditor-General submitted his Report to Members of the Executive. The Auditor-General has offered us two essential reasons, sometimes interchangeably, but I think both need further elaboration. On the first one regarding the division in the relevant Act, I would have wondered why the Auditor- General was not cautioned by the constitutional court who said whenever there is old apartheid legislation, and in this particular case we are talking about specific provision created to serve some very sordid and sinister past of apartheid and clandestine arms dealing where in those days the Cabinet use to want to hide things. I do not think, and one of the colleagues across the way said a moment ago that this deal has been transparent upfront, the transactions we were all told about. So I am not sure what it was, that we thought the Executive might have been trying to hide. I do not believe that there were anything that would have come through the Special Defence Account (SDA) that would have been hidden.

And perhaps a bit more discretion might have been appropriate here concerning the fierce public interest and the size of money involved. Maybe a constitutional opinion, maybe the advice from Parliament on a dilemma he might have had?

The second reason is that the Auditor-General says he followed the normal process. I am not sure that, that is correct. In fact, I conferred with one of the larger auditing firms just yesterday, one of the biggest in the world, who agree that they would not consider that normal process. It is partially normal process in a normal routine audit, but in an investigation, especially of a forensic nature, and I think more especially in this case considering the size and the public interest etc, once again, that maybe one would have thought a bit more carefully about whether the process that might apply to a normal audit would have been appropriate here considering there were already suspicions in the media about Executive interventions and compromising of the Auditor-Generalís independence. I think on the issue of normal process, if he had taken the proper normal process, which as I say is questionable or whether it is appropriate, there would have been a Management letter which I think would have sorted out a whole lot of problems if he had gone that route, and it would have been a document that he could have put on the table which would have reconciled issues that he had raised from the First Report in writing and how the Executive have responded. We have not seen that document. I do not know if there is a Management letter in this case. That would be the first issue that I wish the Auditor- General to comment on about deeper reasons than he has given thus far on his submission of the Final Report to the Executive. I am afraid to say that it was done in a very secretive way. SCOPA was not told and even when we tried to query why the Report was delayed by a further eight weeks, part of an answer emerged this morning, but up until then, and the records of SCOPA will show it, that we were basically left in the dark. I would like a response to that.

[Mr S Fakie] I will try and respond sensibly to the issues that have been raised. Firstly, around the consultation with the Members of the Executive, and specifically reference to section 4(6) of the Auditor-General Act, and the fact that it was an old apartheid legislation - that may well be so, but the Auditor-General Act was amended in 1999. Members of Parliament had the opportunity to, in my view, consider some of these provisions, and it was before my time, provisions that are currently contained in the Auditor-General Act and whether it was relevant in relation to the new dispensation or not. As we sit now, unfortunately that is what is contained in the Act and I have got to comply with the Act if any payment of any expenditure is incurred out of the Special Defence Account. On this matter I want to say that even our Act currently is being amended. As we sit now our Act is in Parliament looking at amendments We believe that this provision is relevant in the current dispensation as well for it puts an enormous amount of responsibility on the shoulders of the Auditor-General, without the provision of this particular section in the Act, we have done, I would not say extensive, a preliminary sort of research in terms of saying does other Auditor-Generals in other countries have similar provisions, and the answer is yes. I do not know to what extent. We are busy with doing a far more extensive research in that regard, but preliminary findings are that it is not something that relates to an apartheid sort of clad stone provision. I say that because it is impossible for an Auditor-General to know exactly what government-to-government dealings on certain matters are. What are issues that relates to the public interest? I mean you have got to be dealing in a lot of matters to have a full appreciation of these issues. If you do not do this you could very well be reporting on matters that could at some stage or the other have serious consequences for the country etc. I am saying there is provisos in section 4(6) that says, and I would like to read that, that anything that is unauthorised is not so limited. It is only relating to issues broadly around national interest that the Executive needs to demonstrate very clearly that this matter is of a national interest issue, and the Auditor- General then has to apply his mind like he does with everything else.

The question that evolves around here - do people have the trust in allowing the Auditor-General to be able to deal with these matters in the way he deals with any other report or not? For if there is not that trust then this provision then it must be taken out. For if there is that trust I do believe that this provision is still valid and even in current times as well.

The second is that in the light of the public interest on this matter and the issue of the fact that the press was very skeptical around some of the issues - was it proper or normal process for the investigation team to have consulted? As my Report indicates, I believe, and I make reference to that in paragraph 2(3) on page 4, where I said that the normal process of planning, execution and reporting as followed during audits, remains the same whether it is a regularity audit, whether it is a performance audit, or whether it is a forensic audit, or any special investigation. It is my view, and I would like to be proven wrong or otherwise, that this is a normal process. We have had people from the big firm as well assisting us as sub-contractors on this and they also told us that it is normal process. So there is a difference of view that is coming through from the Member who now says that some firm told him it was not normal. I believe we followed normal process. I believe it is important for the credibility and integrity of that Report in terms of factual accuracy to go through this process, for we could very well find that based on our interpretation of a paper that we come to certain conclusion, but that is not the whole story about the whole thing. Therefore this process is important so that proper perspective is given to the piece of paper. The issue is that the Auditor-General has to be independent, look at additional evidence that has come through, evaluate that, and that is what I have spoken about in the drafting process. And unless one has fear that the Auditor-General cannot be trusted in that process and would be influenced unfairly, then I feel that there is a question not with the process, but there is a question with the trust and the integrity of the individual.

Regarding the last issue that this was done very secretly - I take exception to that statement for our Final Report very clearly states that we have done that. If it was done secretly we would never have made that Report public, we have done that, an! that was never something that we have put in because of whatever circumstances that occurred.

Secondly, that SCOPA was never told - I do not come through every day to tell SCOPA what I am doing next and that I am going to do in the next day or two to get SCOPA's consent. I think there has been a trust and a responsibility placed on the work and the functioning of the Auditor-General. I think it is my duty to come through and put a report on the table. I think if the report is flawed, and you can provide substance on what basis the report is flawed or the work that I have done is not correct, then I think that matter needs to be dealt with on that basis. But for me to come through during the course of my audit process every time and report to SCOPA, I do not think it is a fair comment. Notwithstanding that, if I speak correctly, I have had two or three engagements on SCOPA giving some indication of where we are on the finalisation of the Report. To some extent it was the pressure that have brought to bear, because of the delays that was taking place, and the fact that we changed our mind from submitting a Progress Report or a First Progress Report to SCOPA, in actual fact finalizing the Report that caused the bulk of the delay. It was not this consultation process. It was principally because initially we were planning to put through an Interim Report to SCOPA and later decided that there was not going to be much between the Interim and the Final Report and rather let us wait and do the Final Report. That I have communicated to SCOPA.

[Chairperson] Mr R Mofokeng will ask the next questions.

[Mr R Mofokeng] It has been alleged that inaccurate statements were presented to SCOPA by the DoD and in particular Mr Chippy Shaik. The allegations are that this information was omitted from the Final Report. I think that would be the question that I put to the Auditor-General.

If so, can you explain to this Committee why this information was left out of the Final Report? Did the Cabinet sub-committee chaired by the President influence you in removing this out of the Final Report?

If not, can you show us where this information is contained in the Final Report?

Why was the format of the Final Report changed? Whilst we expect that a drafted document will change before it becomes a final document, in your view has there been significant change between the Draft Report and the Final Report?

Let me say that I would like the Auditor-General to substantiate this critically, and substantiate if it is the view of all of us that the Office of the Auditor-General was accused indirectly of perjury.

[Mr S Fakie] Some of those questions have been dealt with, so I am not going to go into any detail on those ones, but make reference to some of the statements that we have made earlier.

The first part of the question was, was this issues that inaccurate statements that were made by members of fhe DoD (Departmenf of Defence) were left out of the Final Report - my answer to that is no.

In terms of the allegation, and as the Member rightfully say these were "alleged inaccurate statements" - and these are allegations that have been in the media. There were principally two or three issues, if I have it, that really the media indicated that were contained in the Draft Report regarding these inaccuracies that were not contained in the Final Report. The first one revolved around the ownership of ADS (African Defence System), and the second one that the SA Navy did not indicate its preference for the C≤I≤ IMS product. It is claimed that this information was edited out of the Final Report. I think I made that reference to that aspect earlier as well. So without going into the detail, but I will just make reference.

The ownership of the ADS - It appears in the Final Report. If one goes to the Final Report on Chapter 11 of Annexure B, Page 293, item 11.1.3.1(d), and which also has been related to another relevant passage in the Report, is the following and the important issue here, is when was this ownership of Thomson CSF, when did it acquire the 50% share in ADS? It is clearly stated in there that in April 1998 Thomson CFS acquired 50% of Altech and the remaining 50% in February 1999. What in actual fact happen during the SCOPA Hearing - members of the DoD sort of gave an inaccurate statement saying no, the shares were acquired afterwards. This statement very clearly indicates when those shares were acquired. Further elaboration on that is on page 316, paragraph 11.6.6.19 which states that again this has not been read in the context of the rest of the Report that failure to submit the said Report on the detectoral bus to the PCB (Project Control Board) has a bearing on the abovementioned statement to SCOPA, that the PCB verified the selection of the detectives, coupled with this, is the fact that the PCB was not informed of the Thomson takeover of ADS. So the issue of the Thomson takeover of the ADS relating to these inaccurate statements that were left out, there is two references in the Final Report which clearly indicate, firstly, what date that takeover took place, and secondly, the fact that this statement does not concur with the statement that was made to SCOPA.

The other aspect related to the C≤I≤ being a preference of the product - again, if I can just very quickly refer the Member to page 309, paragraph 11.6.4.2 which clearly again states that from the investigation it appears that up to a point C≤I≤ IMS was the preferred databus of the SA Navy. So to turn around and say that it was omitted from the Final Report is not correct. There was an issue around the PCB meeting as well. Again, there is reference to that in the Final Report. So clearly the issues around the statements that were made and the allegation that it was not in the Final Report, in my view, is clearly incorrect. Maybe in different parts, not in the same area, but we have gone through the reformatting.

The second part regarding did the President or the Ministers influenced us - I think I have answered that, that they have not influenced these changes between the Draft and the Final Report. While the format of the Final Report was changed, I gave quite an elaborate explanation around consolidating the Reports and so on as to why the Final Report was changed. Basically, and it is in my view, and I have said that right upfront, I do not believe in terms of key findings there are any significant changes between the Draft Report and the Final Report. In terms of format, style and layout I do believe there are changes.

[Chairperson] The next Member is Mr G Madikiza.

[Mr G Madikiza] One of the sensitive issues around the JIT Report is the editing of the Final Report from the original draft

How does the Auditor-General think SCOPA could comfortably arrive at a conclusion that indeed there had been no editing of the Final Report, or if there had been any editing there was no substantial or material difference between the two documents without SCOPA having compared the original draft to the Final Report?

I am asking this question because at the preliminary meeting the Auditor-General indicated that it is near impossible for these to be released to SCOPA, because of the amount of the paper work involved, and also due to other reasons like State security and confidentiality. Having due regard to that, how could we comfortably say there has been none when we have not actually make the physical comparison between the two documents?

[Mr S Fakie] What you have before you in the Special Report is in actual fact the issues that gave rise to the allegations in the media that the Report was edited. What we have also presented in this Report for SCOPA to make that call is Annexure A, which is the Draft Report, and Annexure B which is the Final Report relating to that chapter which gave rise to the allegations in the media. So based on the Draft and the Final Report that are here as Annexures A and B, I do believe, and emanating out of these Reports which gave rise to the media allegations, that SCOPA currently has those Reports to make that comparison and make a call, that based on that do they believe that the basis on which the media allegations that came through was fair or not? Or do you believe that the Draft Report has substantially changed to the Final Report? It is here. What I think I refer to in the discussion last week was if you want to call all the Reports, all the chapters from A to Z, that would have been an enormous task for me to give to you. The Draft and the Final Report that is here it is here for SCOPA to make that call, because it is this Draft and it is this Final Report that is here as Annexure A and B that actually gave rise to all the media allegations.

[Mr G Madikiza] It does seem to me that there are a number of unanswered questions and perhaps some unconsidered factors regarding this ARMSDEAL.

Would it be a worthwhile exercise if this investigation was re- opened? I am referring now to the double dipping by the ADS in that they won the contract for the combat suite and as well competed for the sub-systems contracts. Also the fact that there was the offset principle which was built into the contract which I take as an inducement for the Government to have entered into this contract for these arms. Have this been investigated in depth and if they are part and terms of the contract at the end of the day?

[Mr S Fakie] I guess what the Member is referring to is perhaps all the new allegations that have now surfaced all relating to the ARMSDEAL and whether my view is that whether the investigation should be re-opened? I think it is for the Members of this Committee to make that call in the main. I am not in a position to make that call. For all I have been privy to up until this point in time are the media articles. I have not had any evidence or any hard documentation proving one thing or the other. My broader understanding is also just looking at the media articles and I must say it is from the media articles that a lot of the issues that are currently surfacing revolves around matters of a criminal conduct. And as we have indicated in our Report here, any matter that was of a criminal conduct we have at this point already referred that to the NDPP. The issues at hand that surface are currently being looked at by the NDPP. I think it is up to this Committee in the main to look at the facts that are available. From the Auditor-Generalís point of view I do not have any supporting evidence to be able to turn around and say that I can play a role in terms of re-opening any of these matters.

Regarding the off-set principles - what we agreed to in this Report, and it has been reported in here, there is a specific chapter relating to the off-set deals. It is chapter 12, it relates to the NIP (National Industry Participation) and DIP (Defence Industry Participation) sort of arrangements. We were able to conclude more decisively in the JIT Report on the DIP aspects of the commitments. On the NIP aspects of the commitment, which is the bigger part of the commitment, I think it is about 70% of the commitments from NIP, and only 30% was on DIP, we were not able to conclude decisively. The NIP one revolves around the DTIís role in terms of dealing with the NIP commitments. What we agreed to do and what we committed during our interaction on 4 and 5 December with the committees, was that as part of my normal audit we will follow-up on this. If you look at the DTI Annual Report for last year 2001/2002, we actually got comments on the follow-up we did relating to the NIP commitments at DTI is in that regard. The Report that we have just finalised for 2002/2003, again, we have done some follow-up on that. So our commitment and my role as an Auditor-General relating to those NIP commitments, I do believe we can very easily incorporate it into the actual audit process, rather than to open up a new investigation. It is left to this Committee and 1 think you must make the call in the main.

[Chairperson] We then continue to the next Member Mr B Kannemeyer.

[Mr B Kannemeyer] We have sard when we adopted the Fourteenth Report of SCOPA and I quote "amongst the numerous allegations and assertions that arise which reflected common ground to a significant degree". It is on the basis of this and the Committeeís expectations of the other issues raised in this Report, as well as the need to prove or disprove once and for all, the allegations which cause damage to perceptions of the Government that the Committee recommends an independent and expert forensic investigation. In doing so we have identified a number of agencies, and I think it is common cause now that one of the agencies needed a presidential proclamation and because of that it was not part of the process. Throughout that process and when we made that decision we did it with a firm believe that the Chapter 9 institutions that we have called upon together with the National Director of Public Prosecutions , possess exactly those qualities that we were looking for in an agencies to investigate this matter, namely expert and independent. The area of my questioning pertains mainly to the need to ensure that indeed we had that in place in our democracy, institutions that the people of this country can depend on, on its independence and integrity in holding Government to account. My questions, as nice a person the Auditor-General is, has got nothing to do with the person of the Auditor-General, but the Office that he holds currently. Therefore it is important that when the questions had been dealt with in the media that relate to something, when we are sitting down here to continue, and I think I differ slightly with my colleague Mr P Gerber that as much as this process is irritating I think it is important, but then there are a number of roleplayers that all have got equally responsible roles. I get extremely irritated when the actions we sometimes interact on impacts or impedes the integrity and independence of the very institutions that we need to uphold and defend our democracy. The Auditor-General in his Report is calling on Parliament to assist him. On page 3 of your Report you are saying "I rely on Parliament to deal with these facts appropriately so that the integrity and status of Chapter 9 institutions can be upheld". The Constitution in section 181.3 says "other organs of State through legislative and other measures must assist and protect these institutions to ensure the independence, impartiality, dignity and effectiveness of these institutions". Now certainly for us to be able to do that we need to be assured of the integrity also of the individual that holds that particular position, because for us to mount that defence and protection that should be beyond and above any reproach the integrity of that current holder of that Office. Therefore I want to put the following question to the Auditor-General.

During the entire investigation into the Strategic Defence Procurement Package (SDPP) have you in any way breached your constitutional mandate in doing your work as you were called upon to do by Parliament? Apart from the integrity of your own Office, because this was a joint investigation there was another Chapter 9 institution involved, the Public Protector and the NDPP. We are also aware that you have made use of private sector, either audit or legal firms.

If you did surrender to pressures from wherever, would it have been possible for you to do so without the other two partners in the investigation or those legal or audit firms that worked with you on the investigation being aware of areas where you have deviated substantially, materially or otherwise from what the findings have indicated?

Could you also for the record indicate those firms that you did make use of because, I think, definitely in my opinion in any case it should be difficult, but let me allow you to answer?

[Mr S Fakie] I would concur and agree with the opening comments that were made by the honourable Mr B Kannemeyer regarding the importance of the integrity, dignity and independence of the Institution. More importantly of the Institution, because the officeholder comes and goes but, I think, it is the Institution that we need to be mindful, that continues. To answer Mr B Kannemeyer directly regarding the first issue that during the investigation did in anyway I breach my constitutional mandate. I want to categorically say no, that at no stage during the investigation did I do anything or participate in anything that would have breached any of my constitutional mandates that has been entrusted on me. Nor did I breach any of the mandate and responsibility that I have to Parliament as well.

Regarding the second aspect yes, I think, it is an important sort of perspective that needs to be brought to the issue, because in the main the spotlight has been on me and me personally in the last good couple of months, perhaps more recently on my colleague, Mr B Nqcuka, but on a separate related matter. The importance is that when it comes to the JIT Report a lot of the spotlight has been on me. The important thing is that one has got to understand that it was a joint report agreed to, signed off and finalized by the investigating agencies, which was myself, the Public Protector and the NDPP. The point that gets raised is quite important that if anything was to be influenced there had to be a major collusion between, firstly the three of us to be able to take anything out of the report or to influence any major editing that had to take place. Secondly, the point that gets made is that in addition to the heads, there has been quite a big team that worked on this assignment. I cannot speak exactly for the other agencies in terms of the staff, but I do know there were quite a number that came through from there. At a point in time we probably had an excess of fifty to sixty people that worked on this assignment that were involved in various chapters of the assignment. What we had was a project coordinator who coordinated these teams. It was a project coordinator that interacted with us as the heads of the various agencies. The teams reported to the project coordinator on a weekly basis sometime even on a daily basis. There was a lot of backward and forward movement that took place between the project coordinator and the team members, which we as heads were not even aware of, but that was part of the normal process that took place the way we structured the team. When a report reached a certain stage of finality then it came through to us as the heads, for reviewing and any inputs that we may have had. To answer Mr B Kannemeyerís question that yes, there has been a lot of people that has been involved and the firms that I had to contract in to assist me with this investigation, because of firstly, the time constraints, the expertise that was required for the assignments to be brought from my side, there was a firm from Price Waterhouse Cooper, in fact, the project coordinator was from that firm. There was members from Ernst and Young that were also appointed, but a fairly small team from there. There was a member from a fairly small firm, but who did, and he worked in the Office many years ago, exceptionally well in the forensic accounting auditing exam at the University of Pretoria. He has got a small firm Pather & Singh, I think, it was. We have contracted him in. There may have been, I think, Ramate & Co was contracted. I think there was in total four to five firms that were contracted in to assist us with the various aspects of the assignment.

[Ms. K Mothoagae] I think my question was asked earlier on by Mr G Madikiza, because it was on monitoring of the offsets as far as DIPS and NIPS is concerned. The Auditor-General has indicated that the 2001/2002 Annual Report has kind of captured this continuous progress.

I just want to check with the Auditor-General as to whether these targets are going to be met as was recommended?

There was a recommendation in the main report the one that was tabled in Parliament that, DTI and DoD should obtain legal opinion pertaining to controls in respect of their effective implementation of NIPS and DIPS programmes to ensure that the prime contracts billing meet their obligation as contained in their relevant agreements. I am attaching that to the earlier response that there is a progress report.

Are we on target?

Are we happy with that, Auditor-General?

[Mr S Fakie] My memory is really being tested here in terms of all the reports that we issued, but I will try and respond to Ms K Mothoagae appropriately. If I remember the 2001/2002 DTI Report relating to the NIP issues identified some weaknesses in the structure and the role that they need to play from a monitoring point of view. They have indicated that they will get their structure right. There was no significant milestone that had to be delivered in the 2001/2002 year that we tested. A lot of the issues revolved around whether DTI has the right structure and mechanism and systems in place to be able to monitor these commitments that are made in terms of the NIP contracts. The 2002/2003 Report which has just been finalized says, that the first lot of millstones are starting to kick in the 2003/2004 year. So we will be able to measure the performance against milestone during the next audit, not the audit that just got finalized. The Report also indicates that a lot of the systems and processes and capacity problems that DTI has had that we reported about in the 2001/2002 financial year in the main has been addressed. There were, I think, one or two issues that were still outstanding that we have reported in the 2003 year. I cannot remember what the issue was, but the legal opinion could be one of the issues that is outstanding.

[Mr B Bell] Certainly when we look at the Special Report we also look at the Draft Report. in Chapter 12 it is mentioned that a list of allegations has been handed over to DSO.

Perhaps the Auditor-General would like to tell us what was that list?

What were those allegations of fraud and possible criminal charges?

Perhaps he could list that? To give us the actual list of who was handed over?

[Mr S Fakie] If one looks at the actual JIT Report a list of the allegations that we have received as well as the SCOPA concerns that were given to us when we started the JIT Report is contained on pages 20, 21 and 22 of the JIT Report. You will find that the list of the allegations and the agency that is dealing with it, especially on page 22 of the JIT Report, indicates all those that the NDPP is busy with at the moment.

[Mr B Bell] It would appear, perhaps, in earlier drafts and the one that actually appears in the Special Report where part of the index it actually listed a heading called "(12.14)" and it talks about the Cabinet being misled. Also further on in the actual Draft Report that we have received it talks about a long list of inaccuracies that were handed over to SCOPA, listed those inaccuracies that SCOPA was presented with at the time of our original Hearing. These two index items seem to have disappeared, certainly the Cabinet being misled has disappeared.

Perhaps you can explain to us why that was taken out?

It does seem to be that even in documents that are now available it has actually been tippexed out in the actual body of the earlier Draft Report. The other thing that we would like to know is -

If fifty odd people had been involved, then who made the decision as to take things out like this Cabinet being misled, who actually made the decision to remove it from the Final Report?

Who actually made the decision not to list the inaccuracies to SCOPA, but just to put in a couple of lines indicating that SCOPA was misled?

[Mr S Fakie] Let me just try and answer this question, because it is a question relating to the second release of documents which only at this point Mr R Young is privy to, because we have handed it to him. There have been some questions relating to this that has come through the media, I would imagine that is where you got your information from relating to this particular section of the inaccuracies of information from Cabinet. Basically, there is two issues there -that particular draft is a very early draft, in fact, it is a status report. In actual fact if you can get to the next page of that particular Draft Report you will find that there is a whole lot of witnesses that are still outstanding to be interviewed. That particular information that was contained in that draft was very preliminary. It was a very preliminary finding. I guess that with other witnesses that got interviewed that were outstanding and subsequently it impacted on this particular preliminary sort of finding that was there. I have particularly followed this section up, I was asked this question a couple of days ago, in fact, last week by the media as well and I did do some follow-up. Basically, this particular paragraph was removed by one of the investigators, because it was a status report that was submitted. It was a very early draft saying this is what we preliminarily found, but these are the witnesses that we still need to interview. These preliminary findings will be effected, in fact, if you can get a copy of the draft and I am prepared to make that to you, it says that this pertinent findings based on the evidence at our disposal the following pertinent finding were made in respect of the issues set out in our mandate, but it is subject to the interview still being conducted with the outstanding interviews. That was a section that was removed by the investigator himself. Before it even came to the project controller it was removed as a result of that.

Relating to the second part of the question from Mr B Bell, relating to the specifics around the inaccuracies that has been listed here in the Draft Report, in Chapter 12. There has been a list of inaccuracies, if one goes to page 167 on Annexure A, paragraph 12.4.10 you would see that the inaccuracies revolved around the ownership of ADS and, I think, I have responded. One of the earlier members asked that question. I have responded to that. That in actual fact is contained in the Final Report. The 50 % shareholding which took place on 24 April 1998. The other inaccuracy that was made mention of was whether the C≤I≤ IMS was at any stage a nominated or preferred supplier, we responded to that before tea. It is contained in the Final Report. It has a lot of paragraphs, but it relates in principle to those two issues.

The third aspect related to the issue of the bearing of the risk for the IMS of C≤ l≤ was taken by the Chief of Navy who chaired the meeting of the Project Control Board. This particular one is also contained in the Final Report. I have got to find the specific reference. I am prepared to do that, but I can assure Mr B Bell that it is there in the Final Report, in Chapter 11 where it clearly indicates that, that meeting was not chaired as stated here. In fact, it clearly states that this was incorrectly, stated, if one goes to Annexure B, which is the Final Report, pages 316 and the top of page 317 you will see that the minutes firstly, show that Mr Shaik was the chairperson. There is no indication that he at any stage handed over the chair to the Chief of Navy. The minutes therefore, do not support the statement to SCOPA that the Chief of Navy chaired this meeting. It is very clear in the Final Report. I know there are a whole lot of other issues, but all I can tell Mr B Bell is that every single one of these things that are contained as inaccuracies are contained in the Final Report somewhere. If you want specifics I can find them, but I have not looked at the rest of the stuff here, but it was mainly relating to the chairing of the PCB meeting, the ownership of the ADS and the C≤I≤ IMS being the preferred supplier. Those were the three key areas.

[Mr B Bell] If we look at paragraph 12.4.10 in the Draft Report that you have given to us and we see that there are fourteen items.

Are you saying that all fourteen of those items that you felt important enough to put a paragraph in, had been somewhere or other placed, in the Final Report? I think this really does make it very difficult for anybody attempting. You thought it important enough to have inaccuracies in the presentation to SCOPA which obviously was a very important aspect as far as we are concerned. Yet when it came to the Final Report that became little items all over in the Final Report.

Who made that decision to do it this way?

You mentioned earlier the fact that there is an A and B draft and also a two page from the NDPP.

Should that not have been part of this draft that you are talking about here?

If that was the document that was sent to the President should not you then have given us the A and the B Report and that single page and then you given us the final draft which we could have then tried to marry all three of those into what you have classed now as the Final Report.

[Mr S Fakie] If I can just respond to the first part of this follow-up question - what we did is for example, if you look at the Final Report there is a heading called "ADS". Under the heading of ADS we dealt with the ADS issue and the ownership of the ADS. You will find that it is not under the "inaccuracy" heading of SCOPA. We thought that these inaccuracies covered three or four areas. There was one area here covering the conflict of interest, for argument sake on Mr Shaik that was under the heading of the "conflict of interest" in the Final Report. It was rearranged in that way, but if you look at this fourteen points that is here, effectively if you read that there is a whole lot of information, but the crux of those points are the ownership of ADS and when that ownership changed hands, whether C≤I≤ IMS was a preferred or nominated supplier, that is the crux and the key issue in this fourteen points and the last one was - who chaired the PCB meeting. I think the Final Report very clearly indicates that. Though the substance there has not been lost there maybe some details that is lost, but not the substance, in our view.

On the issue of this Draft Report is only the Draft Report of part B of the listing. You must remember that the public phase of the investigation is a public document and it is a huge draft. Maybe we should have again, with the benefit of hindsight put it in here, but it covered a lot of areas. It covered the International Offers Committee (IONT) and it was not done in chapter form like the way it is here. It is a public document and I can make that available to you if the Committee requires that. You have got to go through that report in quite a bit of detail to be able to find out what aspects relate to C≤ I≤. It was not done in this chapter. It happened the way the Hearing took place. That was one of the difficulties of the way that report was laid out, but that can be made available.

Regarding the part C to the Report - in the main whatever was in part C is contained in the Final Report. There has not been any difference between what was in part C of the Report to what is contained in the Final Report, because it was a status report saying that we following up a lot of the issues and the ongoing etc. There was nothing in there that would shed more light on this particular aspect or this chapter that we currently have.

[Mr N Bruce] In the Annexure A of your document on page 159 you deal with the question of the awarding of the contracts and the procedures of the State Tender Board. I wonder just as a hypothetical question if you would just tell us today that: -

If you came across a situation as the Auditor-General in any Government entity which was tendering for business, not necessarily to do with the Arms Deal and the tenderer was allowed to change his tender after the closure of the tender and was then allowed again to increase his tender what would be your attitude?

[Mr S Fakie] My normal approach to that is to firstly report that irregularity, and bring that irregularity to the attention of Parliament by way of our reports.

[Mr N Bruce] I have a letter here on African Defence Systems (ADS), a notepaper. It has on it at the bottom the 10th May 2001, an Auditor- General Report stamp. The letter is to Capt. J Kamerman and to Mr F Nortjť. I am just going to read you one paragraph of it "in removing the VSS," I hope you will not get stumbled over the acronyms in this, "from the SMS as per the RFP, we neglected to omit the VSSILS costs consequently the true price for the SMS is not R32 479K, but R29 647K, please find attached updates to the SANS spreadsheets etc." If you turnover the page the opposing company was quoting a figure of R26 426K. If you add onto that a thirteen percent management fee you get to a figure of R30.4K.

Do you know about this incident?

Can you explain how it actually happened? Can you just draw my attention please, as to where is a reference to this matter in your first report or in your second report or?

Whether it is, in fact, been referred to that long twenty-two page of the JIT Report?

[Mr S Fakie] I do not have any recollection of that particular letter Mr N Bruce is referring to. The question is quite a detailed question as well. I can only turnaround and say that if Mr N Bruce can make that particular document available to me I would took into the particular question that Mr N Bruce has asked and I will have to then respond to you based on that. I do not have that kind of detailed knowledge to respond to that particular question.

[Mr N Bruce] The document comes from your Office, Auditor- General. It has got your stamp on it. That is where it comes from and it is part of it. It just seems to me that something as important as this, something which actually could invalidate certain parts of the deal of the purchase of large amounts of naval equipment, is not contained in any of your reports- Is it an oversight? I cannot believe that something like this is an oversight. I cannot believe that you do not know anything about it. It is a critical letter. Sure, I will make this copy available. I should not have to, there is various references on it. Nonetheless, to my mind Rule 66 has no application in a matter like this. This is a prima facie case for something, which could be criminal, which is overlooked and yet it is not in either your first Draft Report or in your second Draft Report. I think we deserve it. We are all constricted with time here. I think we are entitled to a more detailed answer now.

[Mr S Fakie] I want to say that if I signed that letter and I do not know what the date of the letter is, I think, it is a bit unfair for me to have that kind of detailed recollection of exactly what is contained in that letter and the detail sitting behind where and how that issue has been dealt with in the Report. All I am asking is that I am not sure if I signed that letter. I am asking if I can get a copy of that letter and we will give a proper and detailed considered response to the question at hand. It will be a factual response as well. I cannot respond based on the knowledge that I currently have

[Mr N Bruce] I just wanted to correct something. This is not a letter with a signature of the Auditor-General on it. As I have said when I prefaced my remarks it IS from the ADS and the purport of the letter is that the price for the contract was too high. They made a mistake and after the contract date they were allowed to reduce the price that they were tendering for. By all means yes, I will let the Auditor-General have a copy of this letter. It just seems to me if your contention is that you took these many drafts of reports that you had and in order to make them more readable they were edited.

Fifty or sixty people being involved in the editing of something does not seem to me to indicate, and I have done some editing before, that you are making reports more readable. There must have been one person who did the drafting of the second report.

Can you tell us who that person was?

Can you tell us whether anybody was involved with the drafting of this report that was not employed by your Office or employed by any of the accounting firms to which this work was sub- contracted?

I want to know if there were people who were not necessarily well schooled in the facts who were later brought in to produce this draft?

[Mr S Fakie] I would like to confirm that the drafting of the report was not outsourced to anybody. It was done by us as a joint team. The process that I have described to you earlier is exactly the process that we followed right up until putting the Final Report on the table. The process was that the individual investigators together with the people working under them prepared various paragraphs that led to drafts. Those drafts were reviewed by the project controller. The project controller then put various chapters together and brought that to us as the heads of the investigation agencies. Certain matters, and a classical example was the kind of question that was asked earlier relating to why is the questionnaire from GFC have not been received yet, or what are we doing to follow that thing up, those are the kinds of issue that we as heads would have chased up in terms of the drafts that were prepared for us, what are the outstanding issues that we still need to look at, this particular paragraph does not come across very clearly, do we still need more work to be done etc? Then the drafts were then finalized on that basis and the Final Report was then finalized based on the explanations that I have provided earlier where that consolidation process also had to take place between the three parts of the report into one.

[Mr N Bruce] Your contention is that you made these editing changes simply to make it more readable. In your original report you have three and half pages on gifts. There is hardly anything in the Final Report. That was three years ago. The men who received gifts does not seem to me to matter although the reference was made to the fact that it was handed to them in public. It does not matter. They received gifts. I do not understand how this makes anything more readable. You are dealing with a very serious matter. It is necessary to be prolix. You are not confined by newspaper publishing space or anything like that. We are dealing with a very serious matter. These need to be spelled out. From three and a half pages to nothing of serious allegations and three years later nothing has happened.

How does one explain this?

It seems to me that there is more to this than just making a report more readable.

[Mr S Fakie] On the matter of the gifts the way I have it and I do not know which Draft Report Mr N Bruce is referring to, but the draft in front of you is on page 166 of Annexure A of the Auditor-Generalís Special Report. The issue of the gifts received is not three pages or three and a half pages, it is three paragraphs. I do not know which draft he is referring to, but it is three paragraphs, in fact, it is two paragraphs. The last paragraph says that "the DSO and PP will pursue this aspect." In actual fact the issues around the gift revolves around two paragraphs. I think this Report is very explicit that this matter was referred to the DSO to pursue further. Our Final Report very clearly on quite a few places indicated and I would like to refer members to Annexure B on page 290, the first paragraph of the Auditor-Generalís Special Report which is headed "allegations complaints from C≤I≤ Systems PTY LTD". Round about the middle of that paragraph it says clearly that those allegations, and this is now the Final Report in the public domain, "those allegations that point to criminal conduct formed the subject of an investigation by the DSO, the contents of which for reasons explained earlier, is not discussed in this Report". It was not that this thing was just taken out of the Report. There is reference made to it and the fact that this particular matter on the gifts when we looked at it the worst case scenario that we picked up based on the evidence that we had, was that, was it disclosed in the gift register or not? We do know that there were other allegations involving these two individuals that the DSO was pursuing. What we did during the course of the investigation is that we agreed that we would hand this particular finding that we have had up until now to the DSO and ask the DSO to pursue some of the other allegations they have around this people. The DSO has confirmed that. In the media articles that appeared the DSO have put out the press article saying that the investigation is ongoing. I do not know where they are and, I think, it is a question that maybe this Committee would like to ask them. They have confirmed with me that the investigation is ongoing.

[Mr D Gumede] Because of the process of the questioning and the Hearing, some questions have been asked so I will just ask the main question and the second one. The first question is around the question of the gifts. From our resolution on the JIT our conclusion was that, wherever there is something that was criminal, it should be pursued by the relevant competent independent expert agencies. In as far as the issue of the R7000 and R4000 gift is concerned, page 15 of the Auditor-Generalís Special Report says that "since these allegations have been made the National Directorate of Public Prosecutions (NDPP) has issued a media statement to confirm that the investigations in these matters are still ongoing". These investigations are already with the Scorpions. The Scorpions are competent, they have the necessary resources, they have the necessary capacities, skills and expertise which Parliament cannot match. I just would like to ask the Auditor-General-

In his experience whether he thinks that SCOPA or any committee formed by Parliament have the necessary resources, capacities, independence and expertise to investigate such a matter?

[Mr S Fakie] I am just not sure. I really think that if one looks at the remit and the terms of reference for committees and particularly SCOPA, I cannot speak for the other committees, because I do not know their terms of reference, I have read the terms of reference for SCOPA, it is within their powers, without a doubt for them to be able to investigate. That is the issue that SCOPA and its members need to decide as to whether you have the necessary expertize, because some of these investigations and I am not referring specifically to the issue of gifts, does require quite a bit of expertize to be able to deal with it appropriately. The answer to the member is that I do believe that SCOPA has the powers, I think, that you need to take stock and say do you have the expertize and I do not want to pronounce on the expertise of SCOPA members in investigation, because I do not have all the backgrounds and the qualifications and so on and so forth. In a way I am saying that I am not sure how to answer to that. Definitely, you have the powers within SCOPA to be able to deal with it

[Mr D Gumede] Given the way the issue of the gifts was dealt with they were presented as a matter of public affair. They were done in the open. Nothing was hidden about them On page 166 of the Auditor-Generalís Special Report the three paragraphs that another member referred to before, they talk about them being reflected in a gift register.

Exactly what is criminal that the Scorpions are investigating?

Is it that this was not reflected in the gift register?

What are the allegations?

What is the investigation about?

[Mr S Fakie] Can I just say that in terms of the allegations that we received during the course of the JIT investigation, the allegation was that gifts were given to these two individuals and the view was that those gifts would have influenced their decision-making. In looking at those allegations we were able to confirm that yes, gifts were received. What was difficult for us to do was to confirm that those gifts that they received influenced certain decision-making. What we have done is that in the earlier drafts we have identified and as you can see we have reported that the value of the gifts that was received etc, but in the meantime the DSO has also been receiving a lot of allegations and through their investigation processes that they were busy with, there was leads and I do not have the details of the issues, because the NDPP does not discuss all the details of exactly who are they investigating, even during the Investigation, that was something that they dealt with. There were aspects that we coordinated together and there were clear indications that the NDPP was following up on certain aspects that could be possibly criminal on those two individuals. It was our view that it is better to give this matter to them and then for them to deal with the other issues that they were following up together with this and package the whole investigation finding based on that. In our finding here, the worst-case scenario that we could have come up with, was the issue of whether it was disclosed in the gift register or not. There was a bit of a debate within the department for there were, if I may call it, sections gift registers, and there was an official gift register. We could not find it in the formal official gift register, but the response was that it was in the sections gift register. So there were sub-gift registers that eventually went into the formal one and there was a debate around those aspects on this and we did not think that it was really going to be that significant, because it was on the listing. Our view was that it was a matter that was worth noting and taking over to the DSO for them to follow-up as part of the other investigation that they were dealing with.

[Mr D Gumede] Did you in your investigations find that the JIT Resolution that was adopted by Parliament that criminal investigations would be allowed to continue, find any deficiency in trying to pursue any matter as far as corruption is concerned?

Did any part of the Resolution present a constraint on your part in your work, either as part of the JIT, Scorpions, the Auditor- Generalís team or the other part of the JIT?

[Mr S Fakie] I just want to get the clarity. Is the Mr D Gumede referring to the fourteenth report Resolution of SCOPA, in other words, before the investigation started? Or is he referring to the Resolution after the JIT Report was tabled in Parliament?

[Mr D Gumede] It is the Resolution after the JIT Report was adopted.

[Mr S Fakie] Basically, after the JIT Report was adopted, as I have indicated the only follow-up work that I have been involved in was relating to the NIP issues which I have reported on the DTI Report. I have not been involved in any further investigation emanating out of the JIT Report. All the further investigations that are coming out are issues, which the NDPP is pursuing. I do know whether the Resolution is creating any impediment to his work at all.

[Ms C Dudley] In terms of the contract of loan agreements, have these been scrutinized by Parliament or any independent body?

What are the penalty clauses?

What do they mean?

How bound is South Africa?

Are we able to get out of agreements and at what cost?

What truth there is, in the fact that we bought helicopter engines from France at a premium compared to other offers?

Could you explain why this was omitted from the Report, if indeed it was omitted?

With reference to allegations that British Aerospace paid Osprey to be their agent - have in your opinion, allegations that money ended up in political party coffers been adequately addressed since perceptions can be as damaging as actual corruption?

[Mr S Fakie] On the first part of the questions relating to the loan agreements, I think, there is a chapter in the Final Report, which deals with the contracts, and I would like to refer Ms C Dudley specifically to chapter 13, which relates to the drafting of contracts. It was a chapter that looked at the various contracts that was entered into which included some of the loan agreement contracts that was entered into. Principally what we have done, with this is that, I have used the expertise of the Public Protector, because of his expertise in that area, I do not have the expertise in scrutinizing, contract and determining whether it is a good, bad or indifferent contract unless it is blatantly wrong. The Public Protector had expertise and coming from a legal background was able to bring that expertise to that particular task. In the main, what we looked at is the process Government followed in actually finalizing a contract. We said, did they just decide one night and just give it to some person to draft the contract or did they follow quite a vigorous process in finally coming to a contractual arrangement with the contracting party. Our view was that the process that they followed, they involved the State law advisors, etc, was reasonably sound. The Public Protector had a quick look at the terms, conditions, contract and the findings of that particular aspect is covered under Chapter 13 of the JIT Report.

The second question relating to the issue of the helicopter, again I know it is here in the Final Report. It is a fairly small section. If Ms C Dudley can just give me a bit of time, I think, it is under Chapter 10, page 265 of the JIT Report. There has been mention made around the issue of the helicopter engines being bought from a different supplier and we have indicated that it was done so for strategic reasons. If you go to page 271 of the JlT Report; paragraph 10.2.4.6 it reads as follows for the records "strategic consideration in some cases also led to programme managers having to accept techical values that were lower than parameters set in the user specifications and which carried higher risks, for example the Turbomeca engine posed more risk and was more expensive than the engine proposed by another bidder. Armscor and DoD however considered its strategically more important for Denel Aviation that Turbomeca should get the contract." The issue around the helicopter reference is definitely made in the Final Report relating to the issue that Ms C Dudley has just raised.

On the last question relating to the BAE and the current allegations as to who was paid how much and whether the money went info the coffers of the political parties, I must admit it is a new allegation that surfaced. It was not an allegation that was at out disposal during the period when we did the JIT investigation. It is a new allegation that has now currently surfaced. That is all I can say at this point in time on that.

If you got a bit of time, I think, there was a question that was raised earlier by Mr N Bruce. In actual fact I found a section in the Final Report that deals, I think, withthat letter that you have referred to. If you go to page 302 of the JIT report perhaps starting with paragraph 11.5.2.6 and continuing on page 303 you would find that aspects of that letter where someone was asked to come and tender two or three times. Eventually, on this particular aspect notwithstanding that fact that this company was asked to tender two or three times, my understanding is that C≤I≤ was a successful bidder at the end of the day on this particular one. The conclusion that we came to here is that the nomination, because originally they nominated a single supplier which was, I think, ADS to tender for it, and ADS submitted a very high quote, I think, of R64 million on the first half and they said no, we are not happy with the quote you have got to re-quote for that. When they re-quoted they asked C≤I≤ to also submit that quote. On this particular product C≤I≤ was a successful sub-contractor for that particular product. It is covered in the main. If it is not I would like to still get access to the letter, as I have promised I will give a written response to that.

[Mr V Smith] The very first sentence in your Special Report says to us that "the purpose of this Report is to deal with unfounded allegations reflecting on your integrity and dignity of yourself and the Office". The third paragraph talks about the constitutional requirement of protecting the independence of the Auditor-General and that no person Organ of State may interfere with the functioning of the Auditor-General. If you turn the page this is further entrenched by Rule 66 of the National Assembly Rules. I want to refer you to page 16, Chapter 5.5 of the Special Report in that Chapter you allude to the fact that Mr B Holomisa called for your resignation on Jacaranda radio. You allude to the fact that "Cape Talk on 22 May 2003 - Dr G.G Woods gave credence to Mr R Youngís and cast aspersions on the Auditor-General". On Radio 702, Ms R Taljaard did a similar thing. On page 17, the very last sentence there again you refer us to Dr G.G Woods indicating that the Auditor-General, together with everybody else held an inappropriate meeting with the President and the Minister of Justice and Constitutional Development. I am referring you to those things, because for us it is very important to have had this engagement with you, because part of our building of democracy as Parliament is to hold you accountable and, I think, that you have done that today. I think similarly part of this democracy is for us as members of Parliament also to have an obligation to abide by the Constitution and the rules of Parliament. What you are saying here is that maybe these individuals did not do that. That is what you are saying here. The question that I want to put to you because, I think, we think as Scopa at the end of this process we want to assist you if you need assistance in terms of protecting not the individual, but the Office of the Auditor-General and Chapter 9 institutions and to ensure that these things cannot be abused in future and that their integrity remains intact. It is to that background that I want to ask you -

What is it that you think is driving Mr R Young specifically, from C≤I≤ to go to such lenghts to take this matter to court?

What is it that you think is informing people like Members of Parliament that I have just alluded to, to do the type of things that you alleging them to do?

It is important for SCOPA to know that, so that if Parliament must play itís role, then Parliament must understand why is making this. The media, I guess also, has a role to play in ensuring that this young and fragile democracy is not threatened by anybody. For us it is important to know. Why individuals are doing this because if it is about you and your integrity then we must deal with you and your integrity? If it is about other individuals then we must deal with those individuals who are members of Parliament and are perhaps contravening the rules of Parliament If it is the media then we need to engage with the media so that collectively we can work to ensure ultimately that this democracy that we fought for is in shape. That is the reason why I am asking -

Why do you think these things are happening to you?

Why are they happening at this juncture?

[Mr S Fakie] I would hate to speculate on some of these matters for I do not have facts to be able to respond appropriately in terms of exactly what is driving some of the behavior and action by the various members. What I can say is that on the first part of the question around the issue of C≤I≤, right from day one Mr R Young has been very unhappy with the outcome of the awarding of the tender process and I guess that is what perhaps is driving him, that I know. Other than that I would be speculating in terms of saying what is driving other members so on and so forth. Suffice is to say that what Mr V Smith has mentioned, notwithstanding what is driving this behavior, attitude and action, it is causing damage and harm to an institution, which is quite critical to support the democracy of this country. Really, as I have indicated in my Report I am looking up to Parliament to try and do something to be able to actually restore and uphold that dignity and integrity that the institution requires. If I have done something wrong in my personal capacity or if I am not the right person for the job then, I think, Parliament must then deal with it appropriately. I think we need to take cognisance of the fact that the damage is being caused to the institution which is there to support democracy. That is the biggest concern to me.

[Mr V Smith] My final question, and I think, that you did allude to it when you were responding to earlier questions. For us at SCOPA it is very important that we in our own minds are able to make a judgement on the integrity of the Office and on the integrity of the individual, because you are probably the key stakeholder in all the other businesses we do, not only the Arms Deal. Most of our work is informed by the reports that you give us. Therefore, for that reason for SCOPA, it is very important that we can walk out of here today and say we think that you are the appropriate or not the appropriate individual, or that the quality of your work is of such a nature that we can confidently deal with it or not, and the question I want to ask I is for the clarity on those reasons.

During the course of the Arms Deal investigation, in particular and all your other departmental reports that you submit to us generally -

Have you behaved in a manner to justify question marks being put alongside?

When I say your name, I am saying the name of the Auditor-General, because that is what is happening. When people say that the Auditor- General must go it means that they are putting question marks around your name. I want to know, sir for the record -

In your dealings with SCOPA since you were appointed Auditor-General is there anything that you have done that could justify that type of question?

[Mr S Fakie] I want to give this House and Mr V Smith the assurance that, in my dealing or in fulfilling my constitutional responsibility as an Auditor-General, both in relation to my normal work and the reports that I present to Parliament and the JIT Report, I have acted in utmost good faith and with due regard to the constitutional mandate and responsibility that I have. This a categorical assurance that I wish to give both the House and Mr V Smith who raised the question.

The question around the ARMSDEAL, the behavior and the manner in which I behaved. My personal view on this is that, and as I have indicated in my opening comments, that the whole issue of the ARMSDEAL saga has been fraught with controversy from day one. There have been elements of mistrust that came through. How and why it came through I still do not understand. In the main, I must admit that my broader observation when things really turned in terms of the behavior or the credibility of the Office was when the proclamation for the Special Investigation Unit (SIU) did not come through and SIU excluded as part of the Joint Investigation Team (JIT). Yes, I have written a letter before to, the then SCOPA Chairperson asking the Chair to try and prompt and speed the proclamation, because we believed that there was a contribution that the SIU could make to the investigation. I did not say that if the SIU was not included that we would not be able to do the investigation. All that I have indicated in the letter and the letter is there on record for SCOPA is that we do believe that the contribution that would be made by the SIU could help the investigation. The proclamation is not a matter for me to decide on. The proclamation is a matter for the President to decide on. The President made a decision not to give the proclamation to the SIU. Ever since the SIU was excluded out of the Investigation Team there was a whole lot of mistrust and there was speculations and I think that was the turning point. In my broad observation that is when things really went horribly wrong as far as this is concerned.

[Mr B Nair] When the Auditor-General says that things went horribly wrong do you mean the entire investigation?

[Mr S Fakie] Maybe I should correct that. Thank you for that. I mean as far as the way the three investigating agencies, including the Auditor-Generalís Office, I think the response relates to the question - is there anything that I did or behaved that caused this mistrust and the way the Chapter 9 institutions were attacked and I think my response is relating to that attack on the Chapter 9 institutions that, things went horribly wrong as far as the attack on the Chapter 9 institutions is concerned. that.

[Chairperson] The Chairperson is the next one. Auditor-General, thank you very much for answers. I will give an opportunity for closing remarks to the Auditor-General and then a short closing remarks apart from one or two questions. Then we will evaluate in Committee as usual. I think my own approach has been since becoming Chair of SCOPA to look from a legal perspective at issues, especially this one. I have commissioned senior councilís opinion on the Report. I will ask the Secretariate to make it available. It is quite clear, as members will see, that, in actual fact most of the allegations made in the media reports were wrong. The main issue this morning is oversight and accountability. The paper that was made available to SCOPA a week or ago by IDASA, the role of SCOPA and the important role of the Auditor-General and the role of Parliament in monitoring issues like the Arms Deal is pointed out. I want to ask the Auditor-General the following question if you can respond - In the fifteenth report that was adopted by Parliament on 12 December 2001 there was certain, let us say, recommendations about the role of Parliament. Two of the recommendations were that the Committee, that means SCOPA, together with other committees of Parliament will interact on an ongoing basis with the relevant departments and parastatals to monitor proper implementation of the recommendations made in Report of the JIT. Ongoing criminal investigative work is being conducted by the relevant agencies that will report to Parliament in this regard in terms of the legal mandates and through their normal lines of accountability. These are issues that, I think, we as a Committee will discuss in our evaluation but, I think, maybe to get your perspective you have indicated earlier today, that, on the one hand in the DTI Audit Reports you have made comments with regard to the processes the offsets. As we stand now two years down the line - What is your own opinion on the role of those committees and even SCOPA itself in terms of monitoring the process? Do you think maybe in terms of our discussions today and some of the recommendations in the IDASA Report, is there maybe room and scope for additional focus from the side of the Parliamentary Committeeís, but also from the Auditor-Generalís side even in the Annual Reports on focusing in on that I monitoring because, I think, two years down the line it is quite important for us also as a Committee to know whether we have followed up those recommendations?

[Mr S Fakie] My view on this is that the key role of Parliament is to oversee the activities of the Executive. I believe that, that role must not be underestimated or watered n in any way. I believe that all the respective committees in Parliament have a responsibility in terms of that. What is also important and therefore, relating specifically to the matters that are here I do believe that there are aspects that need to be monitor by the Committee. I would also like to exercise a bit of a caution relating to that. My caution emanates predominately from our own method of work within the Office. We get a lot of allegations that comes through on our table. The question is how do you as a Committee deal with allegations. I think that is something that is important that you need to consider. You need to adopt a method of work of how you deal with allegations. Our method of work within the Office is that when an allegation comes through we look at the merits of the allegations, we unpack those things a little bit, even if it means that in initially we would do a preliminary to see if there is any substance to those allegations before we go about doing everything in terms of that. On the other side of the coin is that, we are spending an enormous amount of taxpayerís money in this process. A classical example I have just given you is that we spend over a million rand looking at a complaint from an unsuccessful bidder on this particular aspect. We spent an enormous amount of taxpayerís money. You need to balance in my view the responsibility that you have as Parliament from an oversight point of view and on the other hand to make sure that in doing that there is no waste of taxpayerís money in the process. I do not have a straight answer, but that is my response to the question that you have raised.

[Chairperson] The ongoing criminal investigations, maybe with hindsight now regular reports to Parliament, maybe the appropriate committees - In your own assessment do you think it is a satisfactory at this stage if we look at the time lines?

Could it be improved?

What would be your suggestions?

[Mr S Fakie] I do believe that maybe the different committees need to look at those time lines and the issues at hand. It is a bit of a difficult one for me to answer because, I think, in the main the committees need to make the call regarding whether they are playing an effective role in that regard. I think just as SCOPA has an evaluation process, I think, many of the other committees need to consider that process to turnaround and say are we effective in our oversight role as Parliament. Relating to the matters at hand one has also got to understand that yes, as much as Parliament may want a progress report, maybe, if I may call it that way and that is important just to get to know what is happening out there. I think it is quite dangerous in the light of the investigation that is taking place to come and disclose certain details around where one is with those investigations. In fact, that was one of the critical problems that we encountered during the JIT Report and our engagement with SCOPA during that period. To make sure that, that kind of details does not in actual fact undermine the very investigation that one is busy with. Again, there is a bit of a fine line - where is the investigation? If it is nearly completed and it is not going to impact on you getting feedback on what is happened, what the outcome was and what is taking place, I think, that is fine. I think while the investigation is ongoing and in a sensitive stage of the investigation to come and engage with members of Parliament around the details of that investigation could, in my view, undermine that investigation as well. I think members of Parliament in the main need to make that call.

[Mr B Nair] I wanted to draw the attention of the House to the fact that various portfolio committeesí have committed themselves and they have been assigned tasks by Parliament, because of their own commitment, to actually oversee a number of processes, among others, for instance, the tendering process. I think a number of issues that were discussed this morning arose out of proper tendering. This has been hopelessly lacking. The emphasis was also given by the Auditor-General and the JIT Rep about this serious short come. The Defence Portfolio Committee committed itself on that score Similarly with NIPS and DIPS and so on. They should actually be pressuring the Department of Trade and Industry (DTI) to submit their reports, similarly, with other like for instance, Justice on the issue of the investigation into fraudulent activities, prosecutions etcetera. The crucial issue of the allegations -when for example, Mr N Bruce standing up in Parliament and letting this fraud etcetera ... Do we as SCOPA pick this up and ask the JIT to actually deal with the issue or if there are valid allegations they have got proof of it should this not be referred to the Scorpions, to the Director of Public Prosecutions and so on, instead of burdening SCOPA with spurious allegations and we have to now abandon our work. Dr G.G Woods is here, he was one of the actors here. Interview him and he would be able to verify this We wasted a whole eighteen months or so in activities that really belonged to the JIT and others. I am just thinking that SCOPA is being burdened, not that we are afraid. Anything that falls within the ambit of our work, yes, we carry out. To just simply make the allegations burden SCOPA.

[Chairperson] These are issues that we are going to discuss at the evaluation so, I think, we are preempting the debate here and we will definitely look at all those issues rather than debating now, if we can maybe then just stick to the programme. I am going to give an opportunity to the Auditor-General for closing remarks.

[Mr S Fakie] In my closing remark and I have been reminded during the tea break, perhaps I will take this opportunity also to just cover one of the questions that I have not covered appropriately and that was by Dr G.G. Woods who indicated or made mention of why we did not issue a management letter as we normally do and made the Draft Report available to the Executive. I want to say that none of these processes involved a management letter. We went straight into the Draft Report format. In actual fact there is very little difference between a management letter and a Draft Report, because you can call it whatever name you want. One is in a letter format and the other one is in a report format. The issues and the findings will be exactly the same, whether it is in a management letter report format or a Draft Report format. I thought I would just make mention of that in my concluding remark. If one considers the facts that are presented in this Report and my comments thereon, I am concerned and, I think, the issue of concern has come through from other members as well, that there has been an effort from certain individuals to discredit me and my Office. These allegations were based on insufficient and inconclusive evidence during the period when sensational reporting by the media was rife. If one considers the performance of the Office regarding the auditing of other departments and more specifically the Department of Defence (DoD) and the issues that had been placed before Parliament in the past, it is clear that the taxpayer has been well served. However, as indicated before, despite our best efforts we will never achieve perfection. There is always room for improvement. In this specific case I have not been able to identify any case where I have failed in any material way to do my duty to Parliament and the taxpayer. As I have indicated earliglr I have always acted in good faith and with an uncompromising standard of integrity. Based on the evidence at my disposal I stand by the JIT Report that I have tabled in Parliament, in November 2001. It is under these circumstances that I now rely on Parliament to protect the integrity and honour of the Office of the Auditor-General as a constitutional institution. Those are my closing remarks to this House. Thank you.

[Chairperson] Thank you to the Auditor-General and to the members for attending. Thank you for members for your preparations. Thank you for providing us with a Report. I think it is quite important and maybe a first for SCOPA to have such an interaction with the Chapter 9 institution. Therefore, it is in a certain sense important that we create and develop the right procedures, approaches and ensure that principles of accountability and transparency are adhered to. It is also quite important that SCOPA in terms of the 2001 resolutions of Parliament and other resolutions taken, plays its role, as an Oversight Committee. Two weeks ago we as a Committee referred certain allegations directly to the Director of National Prosecutions. From that perspective we have been proactive in dealing with it effectively and, I think, it is important that we also as a Committee on a multi-party basis decide on the way-forward. On the one hand, how do we deal with this matter and also matters referred to regarding the status of the Auditor-General. On a day-to-day basis, in terms of the work of our Committee it is important that the status and the integrity of the Office of the Auditor-General is held in high esteem. From that perspective, thank you very much everybody for attending.

[Mr S Fakie] I just want to confirm there were two issues that I made a commitment to come back to the Committee on - one was the issue around the German Frigate Consortium (GFC), which Mr L Chiba raised. The other one was the issue around the letter which Mr N Bruce raised, but I just need, if the Committee is going into deliberation if you can also come back to me and indicate whether those sections that I have referred to is adequate for Mr N Bruce or whether I still need to give a written response. It would be really appreciated.

[Mr N Bruce] This particular matter, the contract was not won as the Auditor-General has indicated. Would you please ask him if he would respond to the letter in due course?

[Chairperson] Thank you very much for attending.