The Democratic Alliance will launch a national petition today, calling on the Government to cutback and contain the escalating cost of the Arms Deal. This can be done legally, and without damaging South Africa’s international reputation, if Government simply chooses not to exercise the optional parts of the purchase agreements. This includes the second and third tranches of the Hawk/Gripen contract. This decision must be taken as a matter of urgency, as the deadline to cancel the second tranche of the Hawk/Gripen contract is 31 March 2002.

For ordinary South Africans – taxpayers and people living in poverty – the most shocking finding of the Arms Deal report is not evidence of flouted tender procedures, bribes or conflicts of interest, but that there is no final price tag.

In July 2001, the Democratic Alliance reviewed its support for the Strategic Defence Procurement in light of the spiralling costs and allegations of corruption. We believe that the cost of the total package is no longer affordable. Optional tranches of the contracts should not be exercised. This money could be better spent on social delivery. In addition, the DA believes it is premature for the Joint Investigating Team to announce that Government’s contracting position is not flawed in any way.

Government could save as much as 29% of the total cost of the Arms Deal by cancelling optional tranches. This was indicated in the Cabinet statement of 15 September 1999:

“If the option to procure additional equipment is exercised, the total equipment cost will rise by R8,5bn to R29,9bn over 12 years.”

That’s equivalent to the entire health and welfare budget of the Eastern Cape. Or the entire national education budget for 2002/03.

The second and third tranches of the Hawk/Gripen contract are the most significant potential saving, at an original cost of R8,086bn[1]. Factoring in a 34% premium to be paid on the first tranche (R7,83bn) in the event of cancellation, a saving of R5,4bn is possible.

For the original cost of the extra 12 Hawks and 19 Gripens, Government could:

• Double the number of police officers to protect South Africans against crime.

• Provide 4,5 million destitute South Africans with a basic income grant of R100 a month for one year.

• Provide every child raped in South Africa since 1994[2] with immediate medical treatment, counselling, a 28 day course of anti-retrovirals, check-ups, HIV testing, a change of clothes and a teddy bear (R1bn) – with enough money left over to double the amount spent annually by provincial hospitals on treating Aids patients (R4bn).

• Save the lives of more than 53 000 babies born to HIV+ mothers[3] and prolong the mother’s lives to allow them to care for their babies, by providing 10 years’ supply of triple therapy anti-retroviral drugs.

• Provide housing subsidies for 337 500 homeless families.

The total cost of the Arms Deal has escalated exponentially as the Rand falls. The original price, in 1999, was R29bn. When the Rand was “7/11” to the dollar and pound at the beginning of this year, the cost escalated to R43,8bn. Now it is far higher. The Department of Finance is unable or unwilling to release information needed to estimate the cost of the deal at the current exchange rate of R10.58 against the dollar, R9.40 to the Euro and R15.04 to the pound. We can assume that the savings made possible by cancelling optional tranches of the contracts have also escalated.

Cabinet must urgently commission a new affordability study – before 1 March 2002, to give it time to make an informed decision on whether to cancel the second tranche of the Hawk/Gripen contract. On Budget Day, Finance Minister Trevor Manuel should announce: a revised estimate of the total cost of the Arms Deal; an estimation of the current value of the optional tranches of the purchase; and a recommendation to cancel the second and third tranches of the Hawk/Gripen contract and to exercise any other possible options to contain the spiralling cost of the Arms Deal.

The report of the Arms Deal investigators states that “ultimately, the decision on affordability was a political choice”. It involved considerable risk. Finance Director-General Maria Ramos said on Monday that “hindsight is perfect vision”. But with hindsight comes responsibility for the future. It is time to re-evaluate this political choice, and make a plan for “damage control” in light of the falling Rand. The DA will distribute the petition through party structures in the next three months. The petition will be presented to President Mbeki and to Finance Minister Trevor Manuel before Budget Day.

[1] National Treasury Statement on the Costs of the Strategic Defence Procurement Programme, 3/12/2001: p.3
[2] SAIRR Survey 1999/2000 rape figures for children under 18, projected to the end of 2001 amounts to approximately 107 000 reported cases
[3] Calculations based on the methodology developed in Skordis and Nattrass (2001)

With acknowledgement to Tony Leon.