Publication: Business Day Issued: Date: 2003-06-13 Reporter: Tim Cohen Editor:

SA Pays As Much for Peace Now As It Did for War in the Past


Publication  Business Day
Date 2003-06-13
Reporter Tim Cohen
Web Link www.bday.co.za

 

Is SA's R53bn arms procurement package affordable? This may seem like an odd question to ask long after the contracts have been signed and the equipment is in boxes waiting to be unpacked.

The original contracts for the four Meko patrol corvettes, three submarines, 24 Hawk, 28 Gripen aircraft and 30 Agusta helicopters were originally signed at the end of 1999, costing about R30bn or $4,5bn at the time.

But it is only now that the full public debate on the issue is becoming possible, as bits of information slowly leak out about the process of buying the arms. One example is the interview with a finance department official, Roland White, who had the unenviable task of answering this exact question: is it worth it?

The interview, submitted as part of the arms deal investigations, was conducted by officials from at least three different departments and the auditor-general's office, all investigating the arms deal for different reasons. White must have felt he was being pounced on by a pack of wolves, and several times during the interview he indicated his discomfort, even anger, at the process.

It is impossible not to feel sympathy for White. He was in the most unenviable position. What do you do if your boss asks you to draw up a report which is most likely to come to a conclusion contrary to the desires of a whole range of powerful people, all of whom hold the keys to your future?

By all accounts, White did the best he could. He identified the problem and put together a team of people capable of addressing the question. They set about establishing a methodology and furnishing a report.

This report has still to be seen in public, despite attempts to get it revealed. But the transcript of the interview with White provides some crucial hints about the methodology and nature of the affordability committee and its work.

The team included an economist, Stephen Gelb from the Development Bank of SA and representatives from Warburg Dillon Read; it used research from Stellenbosch University's Bureau for Economic Research; it even included an international legal firm, White and Case.

Much of the interview consists of questions around the methodology of the study. A question was raised about whether it was advisable to begin formal negotiations when the affordability study was not complete.

There were questions about why the head of procurement, Chippy Shaik, attended the meetings of the affordability group. There were questions about the effect that a decline in the rand might have on the procurement exercise. There were questions about why worst-case and best-case scenarios were not plotted. There were questions about why financing costs were not included in the cost estimates provided to cabinet.

White bravely threaded his way through these minefields. But at one stage he apparently completely lost it. An economist asked why, even though the acquisition costs were set out, there was no assessment of the longterm effect on the military budget, including the operating costs and the costs of extra operating personnel.

Fair question, one might have thought. But White interrupted the questioner, saying the economist was entitled to his views, but he added firmly: "I am happy to clarify matters with respect to these documents, but I am most reluctant to get into a discussion which is your voicing criticisms and me responding to them."

So, as is the way in the dynamics of meetings, the questioner backed off .

And where the tyre hit the tarmac, White kicked for touch. Like the auditor-general's report, he does not make a specific assessment about the affordability of the procurement exercise. At one point, he says: "Affordability is an entirely subjective term. Affordability is ultimately a question of political choice. This is a job cabinet is paid to make. That is their job."

How extraordinary. This is the head of the team designated the task of deciding whether the arms procurement exercise is affordable. The best he can do is say it is not his decision. Cabinet must make this call. And ultimately, it did.

The result is that until 2012, SA will be paying between R1bn and R8bn a year for this military hardware. The result is that the defence budget increases from R10bn in the 1999-2000 budget to R20bn in the 2003-04 budget. Compare this to the safety and security budget, which rises from R14bn to R21bn over the same period. Should SA not be spending a lot more on police than it does on defence ?

As a proportion of the entire budget, defence has declined from 10% in 1992-93 (when the country had a huge conscript army and was practically on a war footing) till now, when it is about 8%.

That does not seem much of a drop. As a proportion of the total budget, it seems much higher than most countries at peace which spend about 3% of their total budget on defence.

But please, bear in mind, assessing affordability is not my job. Affordability is an entirely subjective issue.

With acknowledgements to Tim Cohen and the Business Day.