Issued by: THINT Holdings

Attention: News Editors
For immediate release

24 June 2005

Sapa
PR-ARMS-DEAL-THALES

On Wednesday the 22nd an honourable member of parliament, made a statement whereby it was hinted that the President might, at the time of the arms deal, have had unethical behaviour with regards of Thales (then Thomson-CSF).

We would like to strongly deny any such wrongdoing.

Besides it is to be underlined that, at the time indicated, our company was not part of the tendering process yet *1. The documents referred to were, as far as we know, only stating that there were no fundamental objections for our local subsidiary to bid at a later stage and, possibly, be a winner.

It is also time to emphasize that our bid when it happened, has been thoroughly examined by the relevant authorities, our price break-down put on the table and bench-marked *2 upon their request. At no time was the contract "guaranteed" and we have had, as any bidder, to accept all the requests put to us. In particular we have been obliged to commit to huge offsets far more than originally requested in the tender documents. These commitments are kept with as can be seen in the regular reports issued by the DTI.

Thales, through its local subsidiaries, has widely contributed to the employment and the survival of the local industry, if only through the Corvette Programme which is the only one with such a large local contribution (over 60%) *3. Moreover, Thales has invested in South-Africa and is willing to carry on *4.

Since the enacting of the O.E.C.D. rules *5, Thales has produced a code of Ethics that reflects its commitment to anti corruption policy and to which it adheres.

For local contact: THINT Holdings
012 460 8446

With acknowledgements to Think and Sapa.

*1  Nonsense, in September 1997 the SA Navy issued the Element Costing and Description for the Corvette Combat Suite. This nominated ADS as the coordinator of the combat suite and supplier of the combat management system. In early 1998, Thomson-CSF purchased 50% of ADS. In May 1998 the German Frigate Consortium specified ADS as the coordinator of the combat suite and supplier of the combat management system. In November 1998 the GFC was announced as preferred bidder for the Corvette, including its combat suite. Thereafter the negotiation phase commenced between Armscor and the DoD on the one part and the GFC, Thomson-CSF and ADS on the other part for both the corvette platform and the corvette combat suite, however these were handled separately. In December 1998 the Deputy President met with three senior Thomson-CSF executives on Paris to discuss the Corvette combat suite.

Meanwhile, on 28 November 1997 the head of Thomson-CSF South Africa, Pierre Moynot, has indicated by means of another less famous encrypted fax to his superiors in Paris, Messrs Michel DEnis and Bernard de Bollardiere, that their agent "had obtained assurance from the Deputy President that we (Thomson-CSF) would be awarded the combat system and the sensors".

*2  The SA Navy Element Costing and Description for the Corvette Combat Suite stipulated a ceiling price of R1,47 billion (1997 Rands) for the Corvette Corvette Suite.

By 1998 the ceiling budget had justifiably escalated in terms of rate of exchange variation and inflation to R1,9 billion.

Yet the contract price for the Corvette Combat Suite was signed by the DoD and Armscor with Thomson-CSF and ADS at R2,599 billion (in 1998 Rands), this being a price increase of just R699 million of the ceiling price.

This caused the total price of the Corvette to increase from the cabinet-approved R6,001 billion to R6,873 billion, an amount of some R872 million. Of this R699 million was directly attributable to the increase in the price of the combat suite and the balance was due to programme management costs which had not been included in the previous amount.

This happened because Thomson-CSF and ADS had been guaranteed the combat suite and the sensors by the Deputy President and Chairman of the Ministers Committee.

Apart from the combat suite integration and combat management system, Thomson-CSF also received the contracts for the search radar and hullmount sonar, i.e. the sensors, just as had been promised to them.

The French company Aerospatiale, also received the contract to supply the surface-to-surface missiles. Aerospatiale and Thomson-CSF have an equity relationship.

Thomson-CSF also received the contracts to supply the IFF system and the internal communication system. In all these cases other companies were bidding for these sub-system contracts or had been nominated to get them. Yet Thomson-CSF got all of them.

A further tragedy is that the corvette project officer and programme manager described the Thomson-CSF/ADS offer as one representing "reductions of scope of supply (quantity) or performance (quality)" from what the SA Navy had originally specified and costed at R1,47 billion.

*3  `The local component of the combat suite gave Thomson-CSF 60% Defence Industrial Participation without even having to try.

*4  Is this the kind of investment South Africa wants and needs?

*5  The Service Provider Agreement between Thomson-CSF and Nkobi Holdings was a mechanism to facilitate the conduit of money from Thomson-CSF to Jacob Zuma in order to bribe him for their protection and ongoing support of their multifarious business activities.

The Service Provider Agreement was put in place specifically to circumvent the OECD's Anti-Bribery Regulations.