Genre: Corruption and Scams
 
ANC Chief Whip Tony Yengeni was sentenced to four years in jail. Schabir Shaik was sentenced to 15 years in jail. His brother Chippy Shaik was accused of accepting a $3-million bribe and deputy president Jacob Zuma was fired and may yet face corruption charges.

They are all casualties of the multi-billion rand South African arms deal. But a joint investigation report exonerated the government of any wrongdoing. So what's wrong with this picture?

Bongani Bingwa(Carte Blanche presenter): "It's the stain that won't wash out. South Africa's arms deal has been in the news for almost 10 years now. Though some may think it's passé, two new books give explosive information that may have far-reaching implications."

"Eye on the Money" by Terry Crawford-Browne and "After the Party" by Andrew Feinstein may answer some of the lingering questions. In 2001, this former ANC Member of Parliament resigned in protest at his party's handling of the arms deal and the subsequent alleged cover-up.

Andrew Feinstein (Author: "After the Party"): "The arms deal was flawed from the beginning. In the parliament- conducted defence review -' which suggested that we needed to spend about R8-billion to modernise our defence force - they needed to be updated ... there was no doubt about that. However, that grew from the eight billion that was suggested in that review to a figure that is now somewhere between R40-billion and R50-billion. Nobody's quite sure."

Terry Crawford-Browne (Author: "Eye on the Money"): "It was a bad deal. Unfortunately, after 1994 European politicians flocked to South Africa. The European armaments industry was in a state of collapse at the end of the Cold War. They saw South Africa as a new market. On the one hand they were paying tribute to our new democracy and to Nelson Mandela by supplying so many weapons. They were also promising that by buying arms it would stimulate South Africa's economic product. So unfortunately our government succumbed to that pressure."

Terry Crawford-Browne is an economist who represented the Anglican Church at the Western Province Council of Churches in the eighties. His wife Lavinia has been Archbishop Desmond Tutu's personal assistant for over two decades. At Tutu's request Terry spearheaded the banking sanctions campaign against apartheid, and it was then that he first met Thabo Mbeki.

Terry: "In October 1989, he asked me, through the Anglican Church officer in New York, to come to Lusaka. I was asking him then, 'What are you going to do with the military?'. His answer to me was, 'We will mothball the navy; we have other priorities'. That was similarly Lekota's view. He didn't see that we would have any need for an army to fight our neighbours. So the ANC changed dramatically once they were in office and were then subjected to pressure from the Europeans and, I think, particularly the British."

And the pressure paid off. In spite of objections by the South African Air Force, the cabinet approved the purchase of 24 Hawk training aircraft from British Aerospace and 28 Gripen fighter jets from BAE and Saab in Sweden.

The cost of the planes was R15.6-billion.

Andrew: "It's absolutely clear that after the intervention of the then Defence Minister, Joe Modise, cost was removed as a decision-making criteria for those jets and the jet fighters. This was the single most expensive contract in the deal. This was the single most expensive procurement in the history of what was then our very young democracy. We removed cost as a criteria. That is inexplicable to me. That was inexplicable to my colleagues on the Public Accounts Committee in Parliament. And to this day it remains inexplicable."

BAE is the premier global defence and aerospace company, with annual sales of over 15-billion. Together with Sweden's SAAB they supply the Gripen fighter aircraft. But there are now several investigations under way into BAE's alleged payment of bribes to win contracts. The Serious Fraud Office in London is looking at BAE deals done in various countries around the world.

Robert Wardle (Director: Serious Fraud Office): "We are looking at contracts and payments in relation to the countries, Chile, Romania, the Czech Republic, South Africa and Tanzania. There are connections with Austria in the Czech case. Also, the Swedish authorities have an interest in the Gripen. The Swiss authorities have recently announced that they are opening an enquiry themselves."

The British investigations indicate that BAE's modus operandi is the same in all these countries. Money is paid from London to a BAE front company in the British Virgin Islands called Red Diamond. From there it is transferred to various middlemen around the globe to sway government decisions.

Andrew: "BAE/SAAB didn't even make an initial shortlist. The process was then revamped ... it got onto the shortlist. It certainly wasn't the winner by a long, long way on the scoring system that had been set up. The scoring system was quite methodically changed until it was the winner.

Bongani: "As far as you know, how much money did Joe Modise get out of the arms deal?"

Andrew: "There seems to be a significant amount of evidence to suggest that Modise did receive money and that the amount of money could be anywhere between R10-million and R35-million."

The allegations of corruption were first made by concerned ANC members of the Parliamentary Defence Committee.

Terry: "ANC intelligence operatives came to me in mid-1999."

Bongani: "Why did they come to you?"

Terry: "Because of my association with the Anglican Church. I was staggered by the scale of it. It was way beyond the scale of anything I had conceived. I introduced the operatives to Patricia de Lille's staff members."

Patricia de Lille (Independent Democrats): "Some of them were trained in Russia, highly trained intelligence people. They felt that this just was not what the struggle was all about -' a few people getting rich for themselves. We have got such a lot of work to be done for the nation and they felt it was wrong."

The information became known as the De Lille Dossier, and she used it to call for an investigation.

[Sept 1999] Patricia: "The House therefore calls for the establishment of a full judicial commission of enquiry into the arms acquisition and the offset process to determine whether certain officials and public representatives are guilty of criminal conduct in the dealing with the arms procurement process."

Bongani: "The arms deal saga first became public when it was raised in Parliament by Patricia de Lille. She remains a key player in assisting investigators around the world unravel its web of deceit."

Patricia: "I did a trip early this year in January to Germany. I will be a possible witness if there are any prosecutions in Germany. I then went across to the United Kingdom and had a meeting with the Serious Fraud Office. They are also investigating. I am also working with the Swedish people on the issue of SAAB. So it is really an indictment that we are not doing it ourselves and that other countries are doing it."

The South African investigation was derailed before it even began. In 2000, the Auditor-General's Report confirmed there were serious irregularities in the arms deal and Parliament's Standing Committee on Public Accounts held a public hearing. Feinstein, known as "Mr Clean" at the time, led the ANC contingent.

Andrew: "Chippy Shaik, who at the time was head of procurement in the Defence Force -' an appointment that was pushed through against the wishes of the Secretary of Defence by the Defence Minister, Jim Moidse. Chippy was really at the fulcrum of the deal. He was involved in everything to do with the deal. Chippy's brother, Shabir, had a company that was bidding for some of the sub-contracts on this deal. To us that was an obvious conflict of interests and we questioned Chippy quite directly on it. On each occasion he said quite explicitly 'I recuse myself from any discussions where my brother's interests were raised'. In fact, at one point, he said 'I actually left the room'. We then asked for minutes for that specific meeting. We were given minutes that showed he had recused himself. After the hearing we started to do some of our own investigations and it became apparent that the minutes were doctored. The original minutes from that meeting showed that not only had Chippy stayed in the room, he had continued to chair the meeting and that he had continued in the discussion quite actively, even though it was about his brother's interests. So, not only were there issues of conflict of interests not being addressed, but Parliament had been misled."

Bongani: "Isn't it an offence to mislead Parliament?"

Andrew: "It is. I wrote to then Speaker of Parliament, Frene Ginwala. I pointed out to her that the Public Accounts Committee had been misled and, for the sake of the integrity of Parliament, action should be taken about the matter. It was an open letter and I never heard back from her. As far as I am aware no action has ever been considered, let alone taken."

Frene Ginwala gave us her response in writing. "Parliament had no proper record of the hearings at which the statement was reported to have been made. Therefore no action could be taken."

To begin with, Frene Ginwala had been very supportive of the investigation.

Andrew: "Frene Ginwala and Jacob Zuma were extremely supportive. Jacob Zuma, on a number of occasions, said to me, 'You are doing your constitutional duty; continue what you are doing'."

But after Parliament passed a resolution setting up a multi-agency investigation, Frene Ginwala's attitude changed, according to Feinstein.

Andrew: "I was then called to see the speaker at her official residence, at which it was made clear to me, that her view of the proceedings had changed. She had been very supportive and in fact had said to me that if I was in any way prevented from investigating the deal that she would publicly resign. She was now raising all sorts of problems. It was clear to me that things had got a lot tougher and that the ANC had decided how they were going to close this thing down."

The President decided that Judge Willem Heath's Special Investigating Unit would not be part of the investigation.

Bongani: "What would the Special Investigating Unit have done? How would it have changed the picture?"

Andrew: "He had powers. His unit had powers to access certain documents, like bank reports, that some of the others didn't. His unit also had the power to go to the courts and seek to rescind contracts if there was corruption in them. But I think the most crucial factor -' and why the ANC, including Jacob Zuma and Frene Ginwala -' that would determine that Heath should not be included, was that he was the one investigator who was obviously not under the influence, or who could be influenced by the ANC."

Frene Ginwala has been appointed by the President to lead the enquiry into Vusi Pikoli's suspension as Head of the National Prosecuting Authority. The effect of his suspension has been to delay the investigation of National Police Commissioner, Jackie Selebi.

Bongani: "In trying to get to the truth of the arms deal, Andrew Feinstein found himself isolated from his former comrades within the ANC. His political career had reached a crossroads. He had to choose between his party and his principles."

Andrew: "When I first started investigating the deal a member of the ANC's National Executive Committee called me to his house and he said to me, 'Look Andrew, you can't win on this thing'. I said, 'What do you mean?' He said, 'There is never going to be a full and proper investigation. You are going to be stopped.' I said, 'Why?' He said, 'Well, how do you think we paid for the 1999 election? Elections are expensive to run.' I can't understand why a whole organisation would close ranks like the ANC did around the arms deal unless the organisation itself had something to lose by the full exposure of the facts."

The party responded to these allegations in writing: "The ANC has never received any material benefit from the strategic arms procurement process. This is not the first time that such allegations have been made, including by Andrew Feinstein, based on nothing more than second hand hearsay."

But this week in Parliament Patricia de Lille claimed to have proof of arms deal donations.

[November, 2007] Patricia: "I can now confirm that on 29 January, 1999, the following organisations each received R500 000. The African National Congress, The Nelson Mandela Children's Fund and the Community Development Foundation. This money was paid into the account in Switzerland at Credit Suisse First Boston Bank."

Minister of Defence Mosiuoa Lekota was quick to respond.

[November, 2007] Mosiuoa Lekota (Minister of Defence): "Is Miss De Lille saying that the ANC was paid money for the defence strategic package? Is that what you are saying? She makes an allegation that money was paid into the Nelson Mandela Children's Fund. Is this honorary member saying - and we would like to put this very clearly - that Comrade Nelson Mandela, the former president of this country, was included in the group that stole money from the package? Because, if that is what she is saying, she must get out of this House and say it there. Because Nelson Mandela Children's Fund is not represented in this House."

The payments into Credit Suisse Bank are being investigated by German prosecutors, but London's Serious Fraud Office has now traced huge payments to BAE agents in South Africa -' secret payments of 70-million.

Andrew: "One of the people who they have significant prima facie evidence about as receiving, I think, an amount of 3-million is a gentleman by the name of Fana Hlongwane, who at the time was political adviser to Joe Modise therefore, obviously a person of great influence in relation to the deal. Similarly, German prosecutors who are investigating an mount of $55-million in commissions have very strong prima facie evidence alleging that Chippy Shaik received $3-million from a German company."

In 2006, the British authorities were on the point of making arrests over the BAE deal with Saudi Arabia, when Prime Minister Tony Blair intervened, claiming it would not be in the national interest.

Terry: "It has subsequently transpired that British Government was complicit in bribes of 1-billion to Saudi Prince Bandar and that these were being laundered though Riggs Bank in Washington D.C.. So that is why the Americans are now investigating. The Saudi Arabian investigation is the main one by the British Serious Fraud Office, but South Africa was the second. So the actions of Tony Blair [has] in fact focused attention on the South African Arms Deal."

Patricia: "If you look at the statement made by President Mbeki at Davos earlier this year -' basically attacking Tony Blair by suggesting that you drop the charges and the investigations against the Saudi Arms Deal with British Aerospace and why not with South Africa - both heads of state did this as if nothing went wrong."

President Mbeki's office gave us his views in writing: "Government conducted an investigation which found there was no wrong doing in the awarding of the arms procurement tender. This position remains valid."

In 1999, it was the Cabinet Defence Committee - made up of the senior cabinet ministers - that took the final decision over which armaments to buy and from whom. The committee approved the purchase of four Corvettes and three submarines from Germany, at a cost of R11.2-billion. To sweeten the deal, the Germans offered industrial offsets, or counter-trade to stimulate the economy.

Bongani: "These Corvettes are the most visible toys that have been delivered from the arms deal. Part of the attraction for the politicians was the promise of offsets in investment and jobs. It is like saying 'buy a car and I will build a house for you and employ 200 people to do it'. Only, that hasn't happened."

Patricia: "When this deal was sold to South Africans it was said we are going to spend R30-billion. In return it will create investment of another R110-billion and it will create 65 000 jobs. That is how it was sold. So you try going against a good package like that! To me it looked more like a pyramid scheme. I have continuously gone back to Parliament and asked for more information about the offsets. In September 2006, out of the 65 000 jobs we have only created 8 000 jobs. By September 2006, we had already spent R29.6-billion on this arms deal."

Bongani "The cost of the arms deal is impossible to tell. The loan agreements are set to run for another 12 years. But who knows what the rand exchange rate will be then."

Terry: "The loan agreements for the BAE and SAAB fighter aircraft are funded by Barclays Bank and they run until 2019 for a 20-year period from 1999. The submarine contracts [and] the frigate contracts will run for 12 and 16 years respectively. The loan agreements are not in rand. The public perception has been that the arms deal cost R30-billion. But that was simply the cost, excluding finance costs, excluding a lot of other costs, at a thumb-suck figure of R6.25 to the dollar. The default clause in the loan agreements make them, in my opinion as a former banker, a classic example of third world debt entrapment by the European banks and governments. Now those loan agreements have never been referred to Parliament in violation of the Public Finance Management Act."

The loan agreements were signed by Minister of Finance Trevor Manuel.

Terry: "Trevor Manuel's responsibility as part of that committee was the affordability of the arms deal, and then its funding. So he was centrally involved. And he has to allocate public resources appropriately and I believe he failed in his constitutional responsibility to the people of South Africa."

[June, 2005] Patricia: "We call on the NPA to investigate the British Aerospace Hawk deal. Why did we pay R50-million more than the market price?"

In response Finance Minister Trevor Manuel insisted that the cost of the deal was worth it.

Trevor Manuel (Finance Minister): "We didn't go to a bargain basement sale to find the cheapest aeroplane on the market. We wanted to equip the air force with the best. So the fact that it wasn't the cheapest is neither here nor there. The honourable De Lille has no idea of what she is talking about. She is a useful idiot in the hands of those who failed in their bids to secure the contracts. Thank you very much."

We asked Trevor Manuel for an interview, but he was unavailable. Mosiuoa Lekota did not respond to our request, neither did Fana Hlongwane; BAE Systems were unable to comment; nor was ANC Treasurer Mendi Msimang. Alec Erwin refused to participate in the programme, as did Chippy Shaik. Jacob Zuma did not respond.

With acknowledgement to Sapa.