New minutes of a crucial meeting of cabinet ministers and senior defence force personnel in 1998 show in detail the haphazard and chaotic way in which a crunch decision was taken that was to prove a turning point in SA's R30bn arms deal.

The meeting, and the disputed set of minutes discovered in a file marked "secret", came to light recently in draft documents of the joint report into the arms deal.

The arguments around two sets of minutes for the same meeting reveal much about the convoluted and circular logic that explains why the arms deal exploded in value, and also reflects much about the often conflicting characters involved.

The meeting that the disputed minutes purportedly cover took place in Durban in late August 1998.

At that stage, the procurement process had narrowed down the possibilities to two aircraft, the BAe-made Hawk and the Italian-made Aeromacci MB339FD (two other planes were listed but were clearly out of the running).

The cost of the aircraft was listed in a table distributed with the minutes. It lists the total cost of $517,6m for the MB339 while the Hawk would cost $1 159,0m; more than double the price.

Attached to the graph was another that neatly summarised the "industrial participation", or what has become known as the industrial offset programme, intended to result from each of the two deals. For the MB339, the total value of industrial participation was 430,9m; for the Hawk the total was 1 277,9m.

Consequently, in the circular logic of the process, the more expensive aircraft were more attractive from an industrial offset point of view precisely because they cost more. From this perspective, it made sense to spend more: the more that was spent, the more one would get back.

Interestingly also, the value of the industrial participation in both cases was far more than the cost of the jets themselves, which justified a "spend-more" approach.

At the meeting, dissenting voices were heard. Former secretary of defence Pierre Steyn remarked that the Hawk doubled the cost for an increase in performance of about 15%. But also voluble was the defence minister, the late Joe Modise.

Discussing the large hole the cost overruns would cause in the defence budget, he said the following: "From the very beginning we knew we did not have the funds to pay for the packages. That is why we opted for the way we have been operating not though a normal tender process *1, but through the option of partnership in which the participating countries empower us through investments and favourable deferred payments to buy their aircraft".

Modise said he did not want to leave office known as the minister who plunged the country into debt.

He wanted to be known as the minister who, in difficult financial circumstances, managed to find the means of not only arming the defence force but also supporting industry.

And so was born the idea that the arms deal was not a debit, but, amazingly, a credit. But Modise did not apparently go so far as to specify a final decision, suggesting the final decision should be the cabinet's.

A "political decision" was necessary, said Modise, because government had to decide if it wanted to the enter the European market, and if so through which partners. "We must not prejudge let the politicians decide *1." Yet despite this cautious approach, a dispute arose about whether a clear recommendation had in fact been proposed.

The distributed minutes said "after a discussion it was decided by the ministers present that the Hawk option should be recommended as the preferred option", based on "national strategic considerations". These minutes were signed by chief of acquisitions Chippy Shaik.

This time Steyn's objection was more fundamental. When these minutes were distributed, he said in a memo: "I cannot recall that a decision was made", only that the merits were discussed. The Hawk was not in fact the "best option from a military point of view", he said.

The "secret" minutes, which were signed by senior Armscor official Erich Esterhuyse and discovered later by investigators, appear to support Steyn's view. They mention the consideration of only "two options".

Shaik is adamant that his version of the minutes is correct, saying " Five cabinet ministers were approached afterwards, and they all agreed with me."

It was simply a case of the selective memory of people who did not like the answer that came out, he said.

Whatever the case, the cabinet decided in October that year to go with the Hawks. But did they rely on a bogus recommendation of the military?

Reflecting on the events years later, Steyn said at the weekend he was "terrified" at how events had transpired. There seemed to be a blind reliance *1 on the countertrade opportunities.

Overall, from a financial point of view, the package was "patently irresponsible" in the sense that the country was at that stage joining the ranks of peaceful nations.

With acknowledgements to Tim Cohen and the Business Day.

* 1 This is almost surely unlawful in terms of Section 217 of the Constitution, the provision of the DoD's and Armscor's acquisition policies and the Public Finance Management Act.

Although I'm not and probably never will be a constitutional court judge, I would take a contrary view to that of the Auditor-General in the final JIT Report that this decision was :

"although unusual  in  terms  of normal procurement practice,  this  decision  was  neither  unlawful,  nor  irregular  in  terms  of  the procurement process as it evolved during the SDP acquisition".

I would say that the decision was both unlawful and irregular in terms of the existing statutory requirements for procurement for any level of government as stipulated by the Constitution of South Africa Act of 1996, which when I last read it, was binding on all its citizens, including Cabinet ministers and even Chiefs of Acquisition.

Section 217 requires that there be a formal system of acquisition in place for the procurement of goods and services by any level of government. Once there is a such system in place, which there surely was (or was meant to be) for the SDPs, it is difficult to accept that this can evolve during the process as espoused by their Learned Lordships (a chartered accountant and two advocates), the three stooges who signed the JIT Report.

But maybe the Auditor-General and his fellow signatories have better legal minds than me - so I could be wrong.