Denel's lawyers are vigorously reviewing all contracts the arms company has ever entered into, Denel's chief executive officer Victor Moche said on Tuesday.

"... a whole host of very bad contracts were entered into that we have to find our way out of now," Moche told reporters after briefing Parliament's defence portfolio committee on his company.

He said many of the contracts -- some signed as long ago as 1992 -- were poorly drafted, were largely not in Denel's favour, and had to be rewritten.

"We are continuing that [rewriting] exercise in Denel vigorously and I dare say that [some] of the busiest lawyers in South Africa is the Denel legal team."

Denel reported a R377,5 million net loss for the year ending March 2004.

Moche said Denel's financial problem arose because the company was run by civil servants, administrators and engineers who had no business acumen.

These people were given the right to run the company "without being given the necessary support", he said.

"We had lease contracts for instance for helicopters where people would not sit down and discuss with us.

"So we just... cancelled the leases because they were all loss-making," Moche said.

He said the contracts were now re-negotiated on the basis of having been cancelled.

"We will proceed to do the same with any party that refused to sit with us."

He said contracts entered into by Denel and the so-called Defence Industrial Participation (DIP) -- foreign firms which agreed to invest in South Africa as part of the government's multi-billion rands arms deal --were fundamentally flawed *.

"The fundamental flaw in the contracting on the DIP has been that the companies executing DIP were not involved in the original contracting. This was done by Armscor.

"The result has been that a whole host of factors were not taken account of in terms of the operations of those companies. As a result the majority of the DIP contracts are inefficient and loss-making," Moche said.

He said investments from DIPs were coming in but not sufficiently as the basis on which most of the "operational issues were calculated were essentially projections, and the reality has turned out to be different, at least in the case of Denel".

"Up to 80 percent of the DIPs in Denel are not profitable. We are not only talking to government about it, we are talking to the entities concerned themselves.

"We have revamped, rewritten, modified some of the contracts that we have," he said.

With ackowledgement to Moffet Mofokeng and Sapa.

* But the whole reason behind the Arms Deal was the counter-trade (DIP and NIP). Most of the NIP is an unmitigated disaster, worse than the DIP. But the JIT's Joint Report into the Arms Deal concluded that the government's contracting position was not flawed. Sounds very flawed to me, just on the DIP angle.

But the DIP angle pales into legal insignificance compared to the irregularities and corruption angle.

The ex Head of Government Business (now Deputy President) (Big Fish 1) of the country was receiving bribes firstly to swing the business the way of Thomson-CSF (Corruption Count 1).

Then the by then Deputy President of the country received a bribe to protect Thomson-CSF from investigation (Corruption Count 2).

But this is all still relatively small cheese.

The ex Deputy President (now President) (Big Fish 5) was having clandestine meetings with the very same French company, Thomson-CSF, during the middle of the contract negotiation process along with the Chief of Acquisitions, the brother of the very man who facilitated the bribe to the Deputy President and who had formally (on the record) declared his conflict of interest regarding his brother and his links to the self-same French company.

The Chief of Acquisitions had by this time also informally declared his conflict of interest to, inter alia, the following persons :

then Deputy President, present President (T. Mbeki)
then Minister of Trade and Industry, present Minister of Public Enterprises (A. Erwin)
then Minister of Defence, presently dead (J. Modise)
then Chief Negotiator, presently successful businessman (Jayendra Naidoo)

Also, along with then then Deputy President and the Chief of Acquisitions, at one of these clandestine meetings, were the Minister of Defence (Dead Fish 1), the Arms Deal Chief Negotiator (Jayendra Naidoo) and the SA Ambassador to France (Barbara Masekela).

Neither Mbeki, nor Modise, nor Erwin, nor Naidoo prevented their Chief Acquisitions directly engaging in multifarious on and off the record negotiations with Thomson-CSF.

Normally, it would be impossible to provide a reasonable explanation for such lapses in contracting regularity.

But in this abnormal situation the then Deputy President and now President was engaging directly with Thomson-CSF with a view to guaranteeing them the Corvette Combat Management System and the Combat Suite sensors. It seems that this happened on or soon after 10 February 1998.

All the time, the present President, the present Minister of Defence, the present Minister of Public Enterprises, the present Minister of Finance have all very loudly proclaimed that the Government had nothing whatsoever to do with the Arms Deal sub-contracts.

Ministers Alec Erwin and Mosiuoa Lekota confirmed this under oath.

They are all lying.

There is no excuse for ignorance.

But just what was in it for Thabo Mbeki to guarantee to Thomson-CSF the contracts for the Corvette Combat Management System and the Combat Suite sensors?