Zuma investigation stirs dormant party and empowerment tensions

The Scorpions' multipronged probe into arms deal corruption was running out of steam even before the latest political furore erupted over the unit's fraud and corruption investigation of deputy president Jacob Zuma.

With big-hitters in the ANC trading blows over competing interests in the R50bn arms package, and President Thabo Mbeki casting doubt on the Scorpions' future, unit head Leonard McCarthy has admitted that after two years of investigation he is still not able to say whether he has a case against the deputy president.

"We are not there yet. We will only be able to clarify our position after we sit down in a lock-up' later this month and sift through all the facts," he said. His boss, national director of prosecutions Bulelani Ngcuka, wants the investigation concluded by the end of August.

Zuma, under investigation for allegedly trying to solicit a R500 000 bribe from French arms contractor Thomson CSF, has said he will respond to a set of 35 questions from the Scorpions by about mid-month. His financial adviser and close friend, Schabir Shaik, a subcontractor with Thomson for the R2,6bn computerised nerve centres of the SA Navy's four new corvette warships, is also under investigation.

The Zuma case is one of three linked to the arms deal and is the one in which the investigators have invested most resources. McCarthy admits the probes have strained the unit's budget.

The two other investigations - into whether former defence minister Joe Modise received kickbacks from primary contractors, and whether BAE Systems, supplier of Hawk fighter-trainer aircraft to the Air Force, had paid bribes - are far from conclusion, McCarthy admits.

The BAE case stems from a British parliamentary probe into UK arms exports which has questioned the validity of payments and grants the company made to agents in SA and possibly to ANC-linked institutions.

Meanwhile, the Scorpions have been shaken by the resignation of the unit's lead arms deal investigator, Gerda Ferreira, who is joining Nedcor next month to head the bank's forensic investigation team. McCarthy admits her departure comes at "a bad time", but says she has undertaken to help the Scorpions conclude the Zuma case.

Ferreira led the prosecution in the Scorpions' only (partially) successful prosecution to date: the fraud conviction of former parliamentary defence committee chairman Tony Yengeni. But Yengeni was not convicted for arms deal corruption, only for misleading parliament about a heavily discounted Mercedes-Benz he had received from Michael Woerfel, the suspended MD of German-owned European Aeronautic Defence & Space. The corruption charges were dropped against both men.

The Yengeni, Woerfel and Zuma cases show how difficult it can be to turn prima facie evidence of corruption into prosecutable cases. Sceptics says that's because the corruption claims are overblown. Critics argue that the lack of progress is due more to political pressure and executive cover-up than to shortage of resources.

It is startling how little redress there has been around corruption claims. Aside from the unconcluded cases, just two state officials have been fired: Vannan Pillay, who chaired the department of trade & industry's industrial participation secretariat, for receiving a discounted Mercedes, and Chippy Shaik, the arms acquisition chief, for conflict of interest in his brother Schabir's bid for the corvettes subcontract.

The case of Ian Pierce is instructive. He is a director of Futuristic Business Solutions and African Defence Systems, both subcontractors in the corvettes deal, who was found not guilty last December of failing to produce financial records that the Scorpions hoped would help their case against Zuma and Shaik.

Magistrate David Makhoba observed that there was no possibility of conviction unless Pierce "enters the witness box and incriminates himself". In other words, if you can't find a clear paper trail, you won't get a conviction.

The Zuma probe has unpicked long-dormant tensions between competing streams inside the ANC - streams roughly aligned with different black empowerment interests in the arms packages. That's why the arms deal is inseparable from politics.

In November 2001, the investigative periodical Noseweek identified one stream as having developed out of the old ANC intelligence network that ran Operation Vula, the pre-1990 programme to set up ANC leadership and financial networks inside SA. It is led by such figures as Zuma, the Shaik brothers and former transport minister Mac Maharaj (now also under investigation for receiving gifts from Shaik in exchange for lucrative contractual favours).

The other stream, aligned with Mbeki, senior Umkhonto we Sizwe cadres and powerful members of the black establishment, also has strong empowerment interests in the arms industry. Mbeki's brother, Moeletsi, for instance, is partner in a 25% empowerment stake in Alvis OMC, formerly Vickers OMC, which this week won a R32,4m armoured car order from Armscor.

A controversial element of the empowerment company DGDT's buy-in to Alvis is that it was partly funded by an Industrial Development Corp (IDC) loan issued while DGDT's head, Diliza Mji, was chairman of the IDC.

"Empowerment and fundraising bedevil our cases," acknowledges McCarthy. Yet they form an integral part of the corrupt fabric of the arms deal.

The more such cases persist, the longer the scandal will drag on. And investigators will find it increasingly difficult to uncover the claims of corruption across the spectrum of strategic arms contracts and subcontracts.

The Zuma case is relatively narrow in scope, involving contracts and subcontracts worth barely 5% of the total arms package. How much more fierce and intractable will the political infighting be as, or if, investigators begin to implicate more party luminaries in a wider set of crooked or shady deals?

With acknowledgements to Peter Honey and the Financial Mail.