In one of the most serious tests yet for President Jacob Zuma's cabinet, it
will in the next month have to either cancel a R47 billion freight aircraft
transaction that went wrong, or pay the price of a potential arms deal scandal
Part 2.
Armscor chief executive Sipho Thomo admitted to shocked MPs yesterday that the
cost of acquiring eight A400M Airbus heavy-lift planes had rocketed from an
already steep R17bn in 2006 to an "estimated" R47bn.
Parliament's committee on defence grilled Armscor and acting secretary of
defence Tsepe Motumi yesterday about their annual reports.
The Defence Department received its 10th consecutive qualified audit report from
the Auditor-General, who noted that the government might have blown R2.9bn on
the Airbus planes in an irregular
tendering process.
The escalating cost of the eight planes came to light as MPs questioned Thomo
about the R2.9bn paid out of the secret Special Defence Account.
Armscor has already admitted there were no
tendering processes and the decision to buy the planes was
made by the cabinet, after which it asked the state arms acquisition company to
handle the process.
Former defence minister Mosiuoa Lekota announced the decision in 2005 and the
deal was concluded in 2006.
The aircraft is a new model that has yet to take to the skies and is
a joint project between France's Airbus and the
European Aeronautic Defence and Space Company (Eads), with participation by
British Aerospace (BAe), French armament electronics company Thales and South
African aerospace companies Aerosud and Denel Saab Aerostructures. *1
Eads, Thales and BAe were beneficiaries of South Africa's
R60bn Strategic Defence Procurement Package. The package has cost the taxpayer
at least R60bn in what is now known simply as "the arms deal".
Yesterday, Thomo told the committee the government had withheld a further R1.1bn
payment for the aircraft - in addition to the R2.9bn - after Airbus told Armscor
last week about the price escalation and that the planes were
four years behind schedule.
They will only be delivered in 2016, 10 years after the order was placed.
Thomo said the cabinet had a one-month window period to cancel the planes.
Armscor and a Defence Department delegation would not answer detailed questions
about the fiasco,
saying they still needed to brief Defence Minister Lindiwe Sisulu.
"Some of the questions are sensitive and we are not at liberty to discuss (it)
in an open forum," Thomo said.
He said the cabinet could still terminate the contracts. "Our concern is, we
don't have time. That decision needs to be made by the end of October."
Committee chairman and ANC MP Nyami Booi noted the payments would have to come
from the defence budget, which is only R32bn a year.
"It is very serious. We must understand how much we are spending on the aircraft
and the delay vis-224-vis the soldiers that were protesting in front of the
Union Buildings who earn dismal salaries," Booi said.
DA MP David Maynier wanted to know what the total cost of the acquisition would
eventually amount to, as well as the cost to the taxpayer should the cabinet
decide to cancel the deal. He has already called on the government to start
terminating the procurement and to launch a "full and independent inquiry into
the Airbus deal".
Booi has summoned the Defence Department, its secretary, the minister and
Armscor's board and management to the committee on October 28 with all relevant
information.
Armscor's board chairman Popo Molefe was castigated for not attending the
meeting, leaving Thomo to answer questions on why the Armscor annual report
reflects an 89 percent salary and benefits increase paid to him as CEO. Armscor
has disputed the 89 percent increase to Thomo, saying his package included a
once off "restraint of trade" payment and two years of bonuses.
With acknowledgements to Christelle
Terreblanche and Cape Times.
*1Now could one ever
find a more auspicious conglomeration that this?
The investigators must be slobbering at their mouths.
I'm waiting for a response from the Blank Knight - a keen A400M supporter.