Publication: Sapa Issued: Johannesburg Date: 2006-07-04 Reporter: Benita van Eyssen Reporter: Reporter:

German Probe Re-Ignites SA Arms Deal Spat

 

Publication 

Sapa
BC-FEATURE-CORVETTES

Issued

Johannesburg
Date 2006-07-04

Reporter

 Benita van Eyssen

 

The controversy surrounding South Africa's biggest arms acquisition deal has resurfaced with allegations that a leading German company paid bribes to senior South African government officials or an official to secure contracts.

That prosecutors in Duesseldorf at the weekend confirmed a probe into allegations that a German ship-building consortium supplying four Corvettes for the South African navy handed over bribes proves rather embarrassing and comes at a bad time for the two nations.

Germany and South Africa are preparing for a highly publicized handover ceremony as Football World Cup host nations later this week with President Thabo Mbeki and senior government officials expected to be in attendance.

South African prosecutors on Monday said they had not been informed or approached for assistance with the German probe.

"I do not know if the matter is on the radar screens or not," an official at the National Prosecuting Authority was quoted as saying.

The latest allegations related to the arms deal also come as sacked deputy president Jacob Zuma prepares to defend himself in court against charges of, among other things, soliciting a bribe from a French arms supplier in exchange for his influence in the arms deal.

Zuma became the second South African politician charged in relation to the arms deal when his friend and financial adviser Schabir Shaik - the brother of a senior government figure in the arms acquisition deal - was convicted of fraud and corruption last year.

The former ruling African National Congress parliamentary chief whip is currently appealing his conviction on charges of accepting a discounted vehicle from a company linked to European arms supplier with links to the arms deal.

Opposition politician Patricia de Lille, among the first to raise questions over kickbacks for ruling party officials - even before the arms deal was approved in 1999 and after a government inquiry found no wrongdoing within its ranks - was on Tuesday portrayed in some media reports as "vindicated." For many South Africans who believed that the government finding had been a "whitewash," especially after further evidence pointing to corruption around the country's quest to upgrade its defence capability was heard in the Shaik trial, the German investigation signalled some hope for justice.

In June, raids on the offices of companies involved in consortium led by Thyssen Krupp and involved in the supply of the corvettes and German-built submarines were conducted by investigators in various Germany cities, according to German news magazine Der Spiegel.

Documents were scrutinised or seized as part of the investigation at the offices of consortium partners Blohm and Voss in Hamburg, HDW in the Baltic port of Kiel, Thyssen Rheinstahl Technik and MAN Ferrostall in the western city of Essen.

Prosecutors suspected the equivalent of 15 million euros (19 million dollars) may have been paid in bribes and concealed in the shipbuilder's accounts as "expenses." Possible charges included bribery and tax evasion, prosecutors said.

German authorities were initially keen to probe allegations of corruption related to an arms deal with Saudi Arabia and the affairs of an allegedly corrupt liberal who was accused of shady dealing before his death in 2003.

But their findings related to money paid to South Africans detailed in Der Spiegel have implications for South Africa.

"The company Thyssen Krupp did not deny that money was paid. The question in Germany is not if bribes have been paid, but when *1," said Markus Schmidt of Monitor, an investigative television programme broadcast in Germany that also covered the expose.

In February 1999, Germany outlawed payments classed as "useful expenses" that often amounted to nothing more than bribes.

Schmidt said prosecutors had acted in part on a letter received from an unnamed source in South Africa in 2002 in which it was alleged that unspecified millions had been paid to a single individual from South Africa on behalf of the Corvette suppliers via a bank account in Switzerland.

The South African arms deal was approved by parliament in September 1999 amid controversy.

Arms suppliers from Germany, Sweden, Italy and Britain were selected to provide defence equipment and systems that would effectively replace ageing and outdated systems and modernise South Africa's army, navy and air force.

Although German arms suppliers began courting South Africa in the mid 1990s, the prospects of doing business with the post apartheid state did not look good shortly before the deal was approved.

Shortly after it became obvious that German bidders would not be included in the deal, Mbeki made a surprise announcement that the issue remained wide open.

Der Spiegel said that Germany then moved to the front in a complicated tendering procedure and an order for the four warships was signed on December 3, 1999.

For Germany, the case involving allegations of bribes for South Africa is a part of a complicated puzzle related to the nature of dealings of its mighty arms suppliers abroad.

In South Africa, many will follow developments in Germany that might reveal the identity of the person or persons with the fat Swiss bank account who cashed in on the young democracy's first big shopping spree.

With acknowledgements to Benita van Eyssen and Sapa.


*1  From the German perspective, this is the crucial question in law.

If the bribes were authorised before February 1999 then they were not unlawful under German law, if they were authorised after February 1999 then they were criminal offences under German law.

From the South African perspective, this is both a crucial question of criminal law and contract law.

If the bribes were indeed paid and received then they were unlawful under South African criminal law and a criminal sanction of up to 16 years incarceration applies.

Additionally, the Corvette Contract has a clause governing remedies in the case of bribes. The RSA government can cancel the corvette contract with the supplier, ESACC and/or claim 10% of the total escalation contract value in liquidated damages. This would amount to a paltry R1,2 billion or so in 2006 Rands.

Furthermore, if any of the recipients of the bribes were government or main contractor parties involved in the deal itself, then their actions might amount to dolus or fraud against their potential sub-contractors which would be grounds for delictual action.