Publication: Guardian Unlimited
Issued:
Date: 2007-11-13
Reporter: Chris McGreal
| Publication |
Guardian Unlimited
|
| Date |
2007-11-13
|
|
Reporter |
Chris McGreal |
|
Web Link
|
www.guardian.co.uk
|
The ANC is not known for its fondness of
multinationals but it has made an exception on a grand scale in the case of BAE,
writes Chris McGreal
A Gripen fighter jet - the supply of such aircraft to South Africa under a
contract with BAE/Saab is the source of serious corruption allegations.
Photograph: Chris Ison/PA
Thabo Mbeki is not big on globalisation. The South African president can
reel off the names of multinationals that are ill serving the world by
exploiting developing countries and the poor. Top of his list are the big
pharmaceutical companies, which he accuses of profiteering on the back of misery
by overstating the link between HIV and Aids in order to sell drugs that he says
poison and kill more people than they save.
But there is an exception. Mbeki takes an entirely different view of the world's
arms manufacturers, who have sold South Africa £4bn worth of warships,
submarines, fighter jets and other weaponry. Critics say the country doesn't
need the weapons and that the billions would have been better spent on schools,
hospitals, job creation and, yes, dealing with Aids.
Cynics might say this difference of attitude toward contentious multinationals
can be traced back to what the weapons dealers have done
for the ruling African National Congress and the drug companies haven't -
money.
Major weapons firms, including Britain's BAE Systems, are embroiled in a
political and corruption scandal in South Africa that, despite Mbeki's efforts,
refuses to go away.
BAE, along with German and French firms, have been
accused of paying bribes to senior ANC politicians and government officials, and
of helping to fund the ANC's 1999 election campaign in return for a slice of the
country's largest ever weapons buying spree.
A former ANC speaker of parliament has already been convicted of accepting a
bribe from a German weapons manufacturer. A financial adviser to South Africa's
former deputy president, Jacob Zuma, is in prison for setting up a deal by a
French arms company to bribe him. Zuma is now expected to face charges himself.
Britain's Serious Fraud Office is investigating BAE over the £75m it alone paid
in "commissions", some of which made it into the pocket of the then defence
minister, Joe Modise, and one of his senior advisors, Fana Hlongwane, who is
believed to have received about £3m according to an SFO request to the South
Africans for assistance.
That help has not been forthcoming. Instead, Mbeki
has quashed investigations by the South African parliament, the auditor general
and the director of public prosecutions into the links between senior ANC
officials, the party and the arms companies.
Mbeki has denied any wrongdoing, characterising the investigations as a
"substantial campaign to discredit our government". But others see it as a move
to protect the ANC from devastating revelations
about where the party got its cash and the extent of corruption among some
senior officials.
Mbeki may also be looking out for his own reputation - he chaired the committee
that selected what is proving to be the most controversial of deals - BAE's
£1.5bn contract to supply fighter aircraft for training that critics say
represents a blatant piece of political rigging in
favour of an arms contractor.
The British company won the contract in a joint venture with Saab only after the
bidding criteria were changed significantly by the politicians to exclude the
price because the British bid was nearly twice that of an Italian company,
Aeromacchi.
But even with costs removed the BAE bid still failed because Aeromacchi came out
on top on the technical requirements set by the air force.
It was only when the contentious "industrial offsets" - the supposed economic
benefits in which arms companies commit to building factories and providing jobs
in South Africa as part of the contracts - were included as a factor that BAE
emerged ahead.
The offsets proved to be an illusion. The man who
negotiated them on behalf of South Africa, Jayendra Naidoo, later said that it
was "highly questionable" that the offsets generated any economic development.
Andrew Feinstein, who was sacked as the most senior ANC member of a
parliamentary committee investigating corruption in the arms deal after he
resisted pressure from Mbeki to curb the investigation, says in a new book that
the BAE contract was of no benefit to South Africa.
"We eventually established that for 17% greater technical value [which was not
required by the air force] the ministers had decided on a 72% greater cost!" he
wrote.
Feinstein says that besides eventually shutting down his investigation, the
presidency also put pressure on the auditor general to alter a report saying
there were "fundamental flaws" in the process was manipulated to ensure the
contract went to BAE.
"During the investigation it became apparent that preference was given to BAE/Saab
by making changes to value systems midway through the process," the original
draft of the report said.
It goes on to say that the South African air force's requirements could have
been adequately met through the cheaper Italian bid. All of this was stripped
out and replaced with a paragraph saying that the BAe/Saab bid was chosen by
ministers "for strategic reasons, including the total benefit to the country in
terms of counter trade investment and the operational capabilities [of the South
African military]".
In fact the air force was so strongly opposed to buying the British fighters
that its chief said it would only accept them if "politically obliged" to do so.
The secretary of defence, Pierre Steyn, later resigned over what he described to
investigators as the "arse-about-face" decision in
which the military's requirements were tailored to suit the choice already made
by the politicians.
Feinstein said the politicians decided in favour of the British planes at an
"informal meeting" attended by Mbeki, Modise and at least one official since
implicated in corruption in the deal. The BAE bid was then presented to the
cabinet for approval without any other bids on the table.
"The unexpurgated version of the [auditor general's] report thus revealed the
full extent of the manipulation undertaken in order to award BAE the contract,"
the book says.
Feinstein says the offsets that were so crucial in the numbers game that won BAE
and others their contracts have proved the illusion that many predicted they
would be.
In 2000, the government promised that the arms deal as a
whole would deliver 12,000 new jobs through offsets. The department of trade and
industry now tells parliament that it will be only a quarter of that figure. *1
The weapons manufacturers were also contractually obliged to generate about £7bn
for the South African economy through new economic activity, but all that has
been achieved is about £3.5bn through investments and exports. *2
"To put it politely, the South African government
was taken for a very expensive ride by the arms industry *4," writes
Feinstein.
"All the usual tactics were on display: create inappropriate relationships with
those you think might influence a deal, persuade the boys that they need far
more toys than they actually do, blind even the clever with economic nonsense
about offset benefits, involve your most influential salespeople, especially if
they happen to be your prime minister, charge more than the goods are worth and
smile all the way to the bank as the country realises it paid too much for
armaments it doesn't need, with no economic benefit to anyone other than the
arms companies."
And a few individuals in the ruling party. Despite Mbeki's
efforts to bury the issue, the graft around the
arms deal keeps rearing its head. Modise is dead but the ANC's chief
whip, Tony Yengeni, who led the campaign on behalf of Mbeki to shut down
parliament's investigation of the weapons contracts, went to prison for
accepting bribes from a German arms manufacturer. Schabir Sheik is serving 15
years after being convicted of bribing the then-deputy president, Jacob Zuma, on
behalf of a French arms consortium.
Zuma is now facing the prospect of corruption charges himself which may derail
his efforts to replace Mbeki as president. He has said that if he does land up
in court he will name names, and bring others in the ANC down with him.
With acknowledgement to Chris McGreal
and Guardian Unlimited.
*1 In 1999, the government promised
that the arms deal as a whole would deliver 65 000 new jobs through offsets. The
department of trade and industry now tells parliament that it will be only
one eighth of that figure.
*2 The weapons manufacturers were also contractually obliged
to generate about £7bn for the South African economy through new economic
activity, but all that has been achieved is about £3.5bn through smoke and
mirrors *3
*3 Much of the credits given for NIP are not for hard Rands
earned and directly resulting from the deals (causation). Often the NIP credits
are given for "marketing" expenditure or in respect of projects that would have
or could have occurred quite independently.
To this day we are requested to support DIP credits for purchases entirely
unrelated to the original deals.
*4 This is not true.
A. The South African Government already had a very decent contract to supply
four light frigates from Bazan of Spain.
This was after an exhaustive acquisition process following all the norms and
prescriptions carried out between 1993 and 1995. I know, I was part of this
process. The entire deal including 4 brand-new combat suites with all the bells
and whistles, exactly according to specification, would have cost about R3,5
billion.
All that was need was the Cabinet's final approval in mid-1995. But Mandela and
Mbeki turned that one down. There has never been a satisfactory explanation.
But in that precise time period Mbeki went to Germany and told the German
government that the race was still wide open and specifically open to Germany,
who had come 5th in the previous competitive bid.
The military performance index and military performance vs cost index were
clearly topped by Bazan even in the 1998 bid. Yet the SA Government tweaked the
NIP scores to give the contract to the German Frigate Consortium (GFC).
The corvette platform deal with the GFC was entirely of the South African
government's own making.
B. The South African government already had an almost
complete locally-developed corvette combat suite, developed at vast amounts of
taxpayers' money under Project Sitron and SUVECS.
Yet Mbeki cancelled the Bazan deal and then secretly went to meet Thomson-CSF of
France.
We then got a radically different combat system based on the French Tavitac NT
combat management system, Diacerto databus, MRR radar, TMS hullmount sonar,
etc., etc. The price went from R1,47 billion in 1998 Rands to 2,599 billion in
1999 Rands.
The corvette combat suite deal with Thomson-CSF was entirely of the South
African government's own making.
C. The SA Navy did not need nor could afford coastal
submarines.
Yet in 1995 Mbeki went to Germany and told the German government that it was
also shopping for submarines and that the race open to Germany.
The military performance index and military performance vs cost index were
clearly not topped by German Submarine Consortium (GSC) in the 1998 bid. Yet the
SA Government tweaked the NIP scores to give the contract to the GSC.
The submarine deal with the GSC was entirely of the South African government's
own making.
D. The SA Air Force (SAAF) did not need nor could afford a
jet trainer with any operational capability.
Yet in 1995 Mbeki went to the United Kingdom and told the UK government that it
was shopping for jet trainers and that the race was open to the UK.
The military performance index and military performance vs cost index were
clearly topped by Aermacchi in the 1998 bid. Yet the SA Government tweaked the
NIP scores to give the contract to British Aerospace.
The lead-in fighter trainer (LIFT) deal with BAe was entirely of the South
African government's own making.
E. The SA Air Force (SAAF) did not need nor could afford a
jet fighter as it already had 48 of these with a lifespan until 2012 or 2017.
Yet in 1995 Mbeki went to the United Kingdom and told the UK government that it
was shopping for fighter aircraft and that the race was open to the UK.
British Aerospace was part of the consortium making the Typhoon medium fighter
and so offered this to the SA Government.
But the SA government could not afford an advanced high-performance twin-engined
fighter and therefore forced the SAAF to adopt a two-tier system with the top
tier being an advanced light fighter aircraft (ALFA).
But British Aerospace never had an ALFA and so rushed off to Sweden, cuddled up
with them and bought 30% of the company.
There were only three contenders for the ALFA contract, Swedish Saab's JAS39,
French Dassault's Mirage 2000 and German AT2000.
The latter was not really a contender because it was a paper aircraft.
SA Government effectively decided that the LIFT and ALFA had to come as one
package and tweaked all the evaluation scores to give the contract to
Saab/British Aerospace.
The ALFA deal with Saab/BAe was entirely of the South African government's own
making.
F. The SA government specifically instructed Armscor not to
consider any bids for main equipment from the United States.
However, Bell Helicopter were able to offer is light utility helicopter (LUH)
through its Canadian subsidiary.
However, with some inventive double standards from Chippy Shaik, the DoD's Chief
of Acquisitions and Armscor's Llew Swan, Chief Executive Officer, Bell were
ousted as a bidder in favour of Agusta of Italy.
The LUH deal with Agusta was entirely of the South African government's own
making.
So, there M'Lord, is a summary of a most compelling argument that the South
African government was not taken for a very expensive ride by the arms industry.
To the contrary, M'Lord, the South African taxpayer was taken for a very
expensive ride by the South African government.
The foreign armaments industry went along for the joyride.
The local defence industry rode out those barren years from 1989 until 1999 and
then got shafted by the South African government.
A rough ride.
Double standards indeed.