The Arms Procurement Commission wrapped up at the end of June, after closing arguments had been presented by the interested parties that testified. In this three-part series, we summarise closing arguments from the evidence leaders, the government departments involved, and the arms dealers.
By Lee-Ann Alfreds
British arms manufacturer BAE may have paid kickbacks in return for being awarded the multi-billion rand tender to supply fighter jets to South Africa – and should be investigated.
In their closing arguments to the Arms Procurement Commission, evidence leaders Tshepo Sibeko, Simmy Lebala, Moss Mphaga and Mahlape Sello argued that “BAE may be regarded as an entity which may have unlawfully influenced the award and contracting in respect of the Lift (Lead Infighter Trainer) and Alfa (Advanced Light Fighter Aircraft) programmes in the SDPP, which require further investigation”.
They also argued that:
- Trade and industry minister Alec Erwin had deviated from the terms set out in the contract when evaluating the industrial development participation criteria;
- members of the Strategic Offers Committee (Sofcom), which was co-chaired by Department of Defence acquisitions chief Chippy Shaik, were liable for “having improperly influenced the award of the submarine to the GSC (German Submarine Consortium)“; and
- there was a “suspicion that a member of the GSC may have acted in an unbecoming manner in influencing the award of the submarine tender”.
The commission – which is investigating allegations of graft and corruption in South Africa’s multi-billion rand 1999 arms deal – heard closing arguments at the end of June. The commission’s official final day was Tuesday 30 June. Commission chairman, Judge Willie Seriti, has until 31 December to submit his report to President Jacob Zuma.
The evidence leaders fingered former defence minister Joe Modise as the person who “influenced the award and the conclusion of a contract regarding the Lift programme to the BAE Hawk”, but said there was no evidence that suggests Modise “may have been induced to do so”.
All of the witnesses who testified before the commission rejected suggestions that the members of the inter-ministerial committee had acted in a corrupt manner in recommending the BAE Hawk over the MB 339 for the Lift programme.
“Having said the aforegoing, however, a bitter taste is left in the mouth if one has regard to the various documents that were presented before the commission regarding the plea agreements that were concluded by BAE Systems plc during 2011 with the US Department of State Bureau of Political Military Affairs, in respect of charges relating to ‘causing unauthorised brokering, failure to report the payment of fees or commissions associated with defence transactions, and the failure to maintain records involving ITAR – controlled transactions’,” they argued.
Investigation into offsets mooted
The evidence leaders also suggested an “independent” audit be conducted into the National Industrial Participation programme (NIP) – or offsets as it was known – that required that successful bidders invest in South Africa and create jobs.
They singled out former trade and industry minister Alec Erwin for deviating from the terms and conditions, thereby allowing successful bidders to receive undue credit for their bids.
If the government signed off those NIP terms, did that give the authority for any minister of the executive to change those NIP terms, without the authority of the cabinet, they said, adding that in their view that minister would not have the power.
“The evidence that has thus far been led, is of a residual power, supposedly located in some or other policy. But … firstly, no such policy has been presented to this commission, to demonstrate that the minister of trade and industry would have the power to amend a contract concluded by the government of South Africa. Secondly, if it constituted an amendment, considering a contract of that magnitude, one would have respected a formal written and signed amendment. None of that sort has been presented to this commission. On that basis, therefore, we argue there was not an amendment in the strictest sense of the word, on the NIP terms. There was a deviation from the NIP terms by the Department of Trade and Industry,” they concluded.
Hints of corruption and improper conduct in the submarine deal
Regarding improper influence in the submarine contract, the evidence leaders argued that while no evidence of wrongdoing had been presented, information in the Debevoise and Plimpton compliance report – which was prepared in 2011 in respect of Ferrostaal, a member of the German Submarine Consortium – raises the suspicion that there was improper activity in influencing the award of the submarine tender (to Ferrostaal).
“In that report, it appears that Ferrostaal acknowledges that bribes of at least €37-million were paid to Shamin (Chippy) Shaik, the DoD’s chief of acquisition at the relevant time, a certain Tony Georgiadis; Tony Ellingford and Others.”
The Debevoise and Plimpton report could not be considered classified as Ferrostaal and some other parties had argued, they said. “Whatever privilege may have attached to it was lost when the document came into the public domain.”
The evidence leaders also argued that Sofcom acted improperly when it accepted GSC’s bid despite the consortium not complying with requirements.
“Despite a legal opinion furnished by Armscor suggesting that the GSC and the other entities ought to be disqualified for their failure to comply with the requirements aforementioned, it appears that Sofcom, without having the authority to do so took a decision to allow the non-compliant proposal to be evaluated and for the bidders to remain in the competition.”
It would appear, then, that the GSC, had the procurement rules – especially the DIP evaluation requirements – been properly applied, would not have been awarded the tender to supply the three submarines, at worst and, at best the tender would have been re-advertised subsequent to which they would have been required to comply strictly with the terms of the tender.
“We submit that as the Sofcom constitution, which was never adopted in the first place, did not give it any authority to make any decision, the decision purportedly made by it to allow the non-compliant proposal to be evaluated may be regarded as an improper conduct that influenced the award of the submarine tender to the GSC, when it was not, by right, still entitled to be participating in the evaluation process.”
The evidence leaders said that in their view, those members of Sofcom who made the decision would be liable for having improperly influenced the award of the submarine to the GSC.
Purchase of equipment was not irrational
They however argued the purchase of the arms – which arms critics concluded was unnecessary as South Africa was not at war and had more pressing social concerns – was not “irrational”.
“The total defence expenditure from 2000/01 to 2013/14 amounted to R46 666-million and this expenditure had been accommodated within the overall defence budget which had remained at 1.5 % and less throughout the years except in 2000/03.”
Furthermore, defence procurement did not affect the other social and development priorities. “In the 2002/03 year defence expenditure was at its peak but it only amounted to R6 342-million. In the 2003 budget review the government expenditure for 2002/03 was reflected,” they argued.
Equipment is being used
They also contended the arms were being used despite critics’ contention that they weren’t.
“In our considered view the Strategic Defence Procurement Packages intends to define our success as a country and they do so. The Strategic Defence Procurement Packages reminds our country to flex its muscles in the interest of peace within our own borders, stability in our region of SADC; harmony in our continent Africa and global peace.
“There is no doubt that the arms and equipment is used not only to benefit our military but it defines the success by our country by the chances we give to others anywhere in the world, especially those who have dreams and determination like us … it is through this arms equipment that our military shines where it can.”