South African Arms Deal

Patrick, what do you know about the following ?

The AG weighs South Africa’s arms deals and finds some lacking

3 October 2000

South African Defence Minister Mosiuoa Lekota says the country’s Cabinet will discuss a report on the nation’s strategic re-armament programme later this month. Last month he forwarded Auditor-General Shauket Fakie’s special report on South Africa’s controversial R30 billion arms deal to Cabinet for further action. At the time he said the report “help(ed) clear the air”, continuing that he found it significant that Fakie had established that the goalposts in the technical evaluation of the bids for the lead-in fighter trainer (LIFT) had been moved.

Fakie, in a report tabled in Parliament in mid-September, said among other things that there were problems with the technical evaluation of the bid for fighter trainers. The contract was ultimately awarded to BAE SYSTEMS. He found that a non-costed option was used to determine the successful bidder and that this was a material deviation from the originally adopted value system. “This ultimately had the effect that a different bidder, at a significantly higher cost, was eventually chosen on the overall evaluation,” Fakie said.

Lekota would not say whether this would open the government to a legal challenge by the unsuccessful bidder, saying it would be up to Cabinet to consider the consequences. Britain’s The Guardian newspaper reported this week that taking into account cost, the Hawk LIFT came third in the technical evaluation and second in the overall evaluation. But it was awarded the contract after the Armaments Acquisition Council insisted that cost should not be taken into consideration, the paper said. A BAE SYSTEMS spokesman denied any impropriety, saying: “We meticulously abided by the rules. It was one of the most rigorous negotiating processes we have encountered.”

The AG’s office (similar to the US Congress’ GAO) also recommended a special forensic audit be conducted into the subcontracts that fell outside his original terms of reference. Some of these have been the subject of repeated corruption claims. Lekota says government cannot be held responsible for any problems at subcontracting level. “Correctly speaking, it is not in the arena where government can be faulted … The prime contracts are our responsibility. With regard to subcontractors, that cannot be our responsibility.”

The SA Press Association also reported that Lekota was asked whether he believed that government officials involved in the deal might be involved in corruption. Lekota answered that he had yet to see evidence that particular individuals may have acted in bad faith.

The South African government last year signed contracts totalling R30.3 billion to modernise its defence equipment, which included the purchase of corvettes, submarines, light utility helicopters, lead-in fighter trainers and advanced light fighter aircraft. A decision to purchase maritime helicopters was deferred to a later date. The offsets in industrial participation (IP) commitments has been put at about R104 billion, with the creation of more than 65 000 jobs. Fakie warned that the guarantees underpinning the national IP (NIP) commitments were on average only about 10 percent of the contract price. He fears this might be inadequate to ensure delivery and could undermine the counter-trade element of the arms deal.

Fakie also recommended a forensic audit into a complaint lodged with his office by the Cape-based CCII Systems. In July the company objected to France’s Thomson-CSF’s Detexis subsidiary winning the sub-contract for the integrated management system (IMS) to be fitted to the Navy’s four Meko A200SAN corvettes. The IMS is the “brains” of the ship, linking weapons, communications and vessel control systems.

CCII had developed an IMS in conjunction with Armscor with SA Navy (SAN) funds and had been selected by the service. Thomson-CSF also owns local company African Defence Systems (ADS), which was appointed to drive South African participation in the “fighting” components of the corvette programme. ADS is one of a number of firms that have raised eyebrows about their role in the acquisition process. A key director is Schabir Shaik, brother of the chief of the Departmental Acquisitions and Procurement Division (DAPD) in the Department of Defence, Shamim “Chippy” Shaik, the man who has “driven” much of the arms deal. Chippy Shaik’s wife also works for the marketing department of ADS. The DAPD chief says he recused himself from the decision- making process because of a potential conflict of interest, but CCII has raised concerns about the timing and nature of this recusal.

In a letter to the AG, CCII director Richard Young said his company had come to the conclusion “that there are vested interests behind our de-selection and the most obvious of efforts to ignore our valid concerns. In particular, we are concerned that ADS have family and business links (at least indirect) with Shaik, who was also chairperson of the project control board, the body responsible for final decision-making on the corvette and other programmes. Shaik has frequently publicly declared his recusal from the deliberations and decisions of the project control board, but we have been advised on good authority that Shaik’s supposed recusal could hardly be described as formal recusal.”

Young also said that a report by the corvette project team, shortly before the decision was made, clearly recommended the use of the CCII management system in preference to the Thomson Detexis system, which he claimed was technically inferior. Shaik said in an interview at the time that CCII had been passed over because its system was “new technology” and that CCII had been unwilling to provide performance guarantees. As a result of this ‘risk’, ADS had added a 100% mark-up (about R40-million) to the CCII tender, forcing the navy to accept Detexis. Young denies that CCII had been asked to provide a performance guarantee and says his company was never approached to do a risk assessment on their system. In fact, he said, the system had exceeded development and performance benchmarks set by Armscor, and Thomson-CSF of Belgium had selected the same intrinsic CCII technology for a new generation of Nato aircraft

Meanwhile, The Star newspaper reports, Pan Africanist Congress Parliamentary chief whip, Patricia de Lille, has called on Judge Willem Heath’s anti-corruption unit to investigate allegations about corruption and nepotism in the multibillion-rand deal, by asking for a presidential proclamation to investigate. De Lille says she was in particular concerned by Fakie’s opinion that “the aspects of independence, fairness and impartiality could have been addressed more significantly” – a reference to Shaik. De Lille said he should now be thoroughly investigated, as should former defence minister Joe Modise, who was also alleged to have become involved in companies linked to the arms deal soon after resigning as minister. Modise has refused to comment on the allegations. De Lille was instrumental in making the allegations public. She forwarded these to the Heath unit last year. The Heath unit “acknowledged the gravity and sensitivity of the allegations” but suspended investigations pending the auditor-general’s report. De Lille says they should now proceed.

Fakie’s report will next be discussed by Parliament’s watchdog committee on public accounts. They have already scheduled hearing for next month. The arms deal is also the subject of investigation by the Justice Department’s investigating directorate for serious economic offences.