But the process was not without flaws and prosecutions chief promises swift action against offenders, maybe as soon as today

Political Correspondent

Government sought to end three years of public speculation about the probity of its R43bn arms deal yesterday, by welcoming the result of the inquiry as vindication.

The simmering scandal around the arms deal has bedevilled President Thabo Mbeki's determination to be seen to be running a clean and efficient government.

While the report on the arms deal rejected allegations of widespread corruption and cleared government and cabinet ministers of any improper or unlawful conduct, it did find evidence of wrongdoing by officials when it came to subcontracts, including that some officials received gifts from bidders.

Despite the overall exoneration, the possibility still exists that losing bidders might take legal action against the state.

The report by Auditor-General Shauket Fakie, national director of public prosecutions Bulelani Ngcuka and Public Protector Selby Baqwa uncovered conflicts of interest, deficiencies in procurement procedures and cases of fraud and corruption which would be the subject of a continuing investigation, Ngcuka told Parliament.

The Scorpions would take action against those who allegedly used their positions to gain undue benefit in the next 24 hours, he said.

An investigation is also under way into whether an important roleplayer in the acquisition process told several bidders that they would have to come to an arrangement with SA subcontractors if their bids were to succeed.

The Democratic Party staged a walkout from the National Assembly in protest against what it said was a public relations exercise stage-managed by government to exonerate itself. The party objected to the tabling of the report the day before the parliamentary recess, which it said prevented proper debate. It also objected to being briefed by the three investigating agencies without having had time to absorb the report.

A controversial finding of the report was that the economic model used to assess the affordability of the arms package did not include all relevant costs, such as price escalations and negative foreign exchange movements. However, the agencies believed the affordability team had taken adequate measures to present government with "a scientifically based and realistic view".

Ultimately the decision on affordability was a political choice, the report said.

The agencies confirmed government's decision to change the evaluation criteria to include a noncosted option for the lead-in fighter trainer programme which ultimately resulted in a different bidder, Hawk/Gripen, being awarded the contract. They said this was cabinet's prerogative, although they pinpointed procedural deficiencies.

No evidence could be found of improper influence in the selection of Augusta for the light utility helicopters contract. However, procurement practices in the selection of the German Submarine Consortium for the submarine contract were flawed and "fair and competitive procurement practices for the selection of subcontractors were not followed in all cases". SA National Defence Force chief of acquisitions Chippy Shaik, seen by some to be the scapegoat of the probe, was found to have acted with conflicting interests and failed to properly recuse himself from discussions involving companies in which his brother had a stake. But former Defence Minister Joe Modise was cleared of wrongdoing.

Ngcuka said conflicts of interest in the procurement was a matter of great concern and had to be addressed legislatively.

However, Defence Minister Mosiuoa Lekota, Finance Minister Trevor Manuel, Trade and Industry Minister Alec Erwin and Justice Minister Penuell Maduna stressed at a press conference that the conflicts of interests arose only in relation to the subcontracts, which were not government's final responsibility.

"The decisions of the acquisition process stand there will be no further review. We welcome this vindication of government's standpoint," they said.

"In the light of the damage to our country, caused by unfounded allegations of massive corruption on the part of government and reputable international companies, government will institute its own investigations to ascertain the source of these allegations and the purpose they sought to achieve."

Lekota was not convinced action should be taken against Shaik as it had not been proved that the conflict had resulted in a crime.

Erwin said the public service rules were vague as to what should be done once a conflict of interest was declared. He said irregularities in the relationship between prime contractors and subcontractors were matters for courts to resolve.

Erwin conceded a finding of the report that the rules and systems for contracts were inadequate and needed to be tightened up and said his department was busy with this. The importance of proper documentation was also crucial to permit thorough audit trails of decisions taken and this too needed to be improved but the deficiency identified in the report did not alter the validity of the contracts.

The cabinet has already decided to introduce a "cooling off" period for ministers, preventing them from taking up related private sector activities once they left government. Maduna said a draft bill dealing with bribery which would tighten up existing legislation on corruption was in the pipeline.

Fakie assured MPs the executive had not made substantive changes to the report.

With acknowledgement to Linda Ensor and Business Day.