THINGS change. Things stay the same. Armscor CE Sipho Thomo announced to the
parliamentary portfolio committee this week that the cost of acquiring eight
A400M Airbus heavy-lift planes had rocketed from an already eye-popping R17bn in
2006 to an “estimated" R47bn.
Thomo didn’t actually say the contract would now be cancelled, but it seems he
was heading in that direction. Apparently, he did not appear to dissent with the
committee chairman, African National Congress (ANC) MP Nyami Booi, who noted
that the payments were more than the department’s annual budget.
Booi also raised the fact that South African National Defence Force soldiers had
protested at the Union buildings about their dismal salaries when the budget was
being eaten up by equipment expenses. Booi is completely right, but how long has
it taken for that penny to drop?
Cancelling the contract would now appear to be the right thing to do, although
R2,9bn already paid has to be written off. But, as Booi says, it’s either have
the planes or have the defence force.
What intrigues me is not the R47bn, but the R17bn. If you go back in the files,
you’ll find the original contract price for the planes was R7,5bn. How did that
increase happen? Has it already escalated by more than 120%? We don’t know.
What we do know is the R2,9bn already paid came out of the special defence
account, one of those devious things that was invented by the apartheid
government that the ANC decided was too juicy to give up.
The special defence account is technically out of reach of the auditor-general,
who has doled out the Department of Defence’s 10th consecutive qualified audit
report . This included a charge that it might have lost huge amounts because of
the irregular tendering process for the Airbus planes.
In the late ’ 80s financial aspects of the militarisation of South African
society were hidden in this account. Now it gets a new use as a fund where huge
amounts can leak out into the hands of foreigners without anyone knowing about
it.
But it seems odd that the contents of the fund are mentioned in an open
committee meeting. Conveniently, the person responsible for this whole fiasco is
now the leader of an opposition party Mosiuoa Lekota of the Congress of the
People. So what was absolutely secret yesterday is rightfully public knowledge
today. This from the same party that thought the Eskom increases were just too
hurtful for our delicate little ears.
It is mostly Lekota’s fiasco. A fter the arms deal process ended up being such a
disastrous horse and pony show, it was decided against repeating the laborious
process. So it was decided that no tender process was necessary on a R7,5bn
contract!
It was incredible at the time, but Lekota was something of a pawn in the
process. It seems to me the deal was the indirect consequence of one of South
African Airways’ (SAA’s) many bungled aircraft-buying sprees, when then CEO
Andre Viljoen bought 38 Airbus A320s and A340s in 2002. After SAA’s first
hedging disaster, this was pared back and SAA cancelled orders for 15 Airbus
planes in 2004. It seems a deal was struck in which Airbus allowed SAA to renege
on the deal if the contract was swapped for A400Ms.
There is a little coda to the story. Armscor's board chairman, Popo Molefe,
didn’t attend the portfolio committee meeting. According to Business Report,
Thomo had to answer questions on why the Armscor annual report reflects an 89%
salary increase.
Just as in the private sector, blowing billions is such a rare gift that those
who do it successfully need to be adequately compensated for their unusual
skills.