Presentation by Adv Stoffel Fourie, chief investigator in the office of the public protector of South Africa,

delivered at the

11th International Anti-corruption Conference held in Seoul in the Republic of Korea

25 - 28 MAY 2003

1.      Introduction 

1.1     The Joint Investigation into the Strategic Defence Procurement Packages of the South African National Defence force was conducted over a period of approximately one year, from November 2000 to November 2001. It was the most comprehensive and also the most controversial investigation into the conduct of government agencies conducted since the Republic of South Africa attained democracy in 1994.

1.2     Because of its high profile, the huge amount of public funds involved and the many allegations made by, inter alia, politicians, members of the public, and disgruntled tenderers that were unsuccessful with their bids, the Joint Investigation was the focus of an extensive media campaign which in itself created and still causes substantial controversy. Because of human nature, news that a Joint Investigation, was underway, created the expectation that something bad would be found. Any investigation of this magnitude is expected to either implicate or exculpate. As investigators of issues of maladministration and corruption all over the world know very well, that is often not the case.

1.3     It was under such circumstances that the Joint Investigation had to be conducted by the Joint Investigation Team with resolute independence, depth of courage and an uncompromising standard of intellectual integrity.

1.4     The investigation had essentially been about probity. It had to establish whether those representing the Government had conducted business diligently, properly and in the best interest of the country. It also had to consider whether the contracting parties had followed the rules of good faith and fairness. The issues of procedure, checks and balances, compliance with policy and good business practice were all an important part of this enquiry. Relating to this had been the question of whether crimes had been committed and whether prosecutions could and ought to be instituted.

1.5     Even though an investigation of this kind can never be perfect because the discipline involved is not an exact science and the human element can never be fully accounted for, the report on the Joint Investigation has been praised by numerous commentators of the media, the arms and other industries, both locally and internationally, as being of an exceptional standard. There, of course, have been and always will be, those who differ from us in respect of the manner in which the investigation was conducted, its findings and recommendations. Some of them, obviously, have their own agendas, whether political, financial or otherwise.  The findings and recommendations made in the report on the Joint Investigation have, however not been formally challenged. The report was accepted by Parliament and the procurement contracts are in the process of being executed.

2.      Background

2.1     The Defence Review

2.1.1   The South African Constitution provides that it is the primary objective of the South African National Defence Force to defend and protect the Republic, its territorial integrity and its people. South Africa also has international commitments, particularly in the African Region, to support operations under the auspices of the United Nations and other similar organizations, which involve military resources. The Defence Force has the additional task of protecting the coastline and the marine resources of the Republic.

2.1.2   The resources of the Defence Force which were taken over by the democratic government in 1994 were not nearly adequate to enable it to conform to its constitutional obligations. Many of the armaments left were old and outdated, some were obsolete and others, such as aircraft and naval vessels, were reaching the end of their lifespan.

2.1.3   During May 1996, the former Minister of Defence presented the White Paper on Defence to Parliament. It received strong support from all the political parties and was approved. The White Paper made provision for a Defence Review that had to establish:

2.1.3.1 The tasks that the Defence Force would and may have to perform in the future;

2.1.3.2 The manner in which these tasks should be undertaken; and

2.1.3.3 The equipment and weaponry required by the Defence Force to fulfill these tasks.

2.1.4   During the process of the Defence Review, the Department of Defence developed different force design options. These options reflected the different permutations of the level of defence, defence structure and cost.

2.1.5   Cabinet and the Parliamentary Defence Committees were presented with four options, which were discussed in detail. The chosen option relevant to the Joint Investigation that was approved, subject to the availability of finances, was:

2.1.5.1   16 Light fighter aircraft;

2.1.5.2   32 Medium fighter aircraft;

2.1.5.3   12 Combat support helicopters;

2.1.5.4   5 Maritime helicopters;

2.1.5.5   96 Transport helicopters;

2.1.5.6   4 Submarines; and

2.1.5.7   4 Corvettes.

2.1.6   As could be expected, certain foreign countries approached the Department of Defence with various offers to enter into agreements to procure military equipment. This resulted in the Department adopting a package approach to the acquisition process instead of the individual purchasing of different types of equipment. These offers became known as the "Strategic Defence Packages".

2.1.7   The Defence Review was approved by Parliament in April 1998.

2.2     The Special Review by the Auditor-General

2.2.1   The Strategic Defence Packages were identified by the Office of the Auditor-General as a high-risk area from an audit point of view. The Auditor-General therefore decided that his Office should conduct a special review of the procurement process. This review was finalized in September 2000.

2.2.2   The main findings of the Special Review dealt with:

2.2.2.1 The independence of role players involved with the procurement of the Strategic Defence Packages;

2.2.2.2 The technical evaluation of the Lead in Fighter Trainer during the procurement process;

2.2.2.3 The adequacy of the performance guarantees pertaining to the National Participation Programme;

2.2.2.4 The policy of the Ministry of Defence pertaining to the Strategic Defence Packages procurement;

2.2.2.5 The armaments acquisition policy applied during the Strategic Defence Packages procurement;

2.2.2.6 The negotiations in respect of the Corvettes; and

2.2.2.7 The tender procedures followed to award subcontracts.

2.3     The subsequent events that gave rise to the Joint Investigation

2.3.1   The Special Review by the Auditor-General was debated by the Parliamentary Standing Committee on Public Accounts (SCOPA). The report by SCOPA on the matter, that was accepted by the National Assembly in November 2000, suggested that a meeting be convened with the Auditor-General, the Public Protector, the National Director of Public Prosecutions and the Special Investigation Unit. The purpose of the meeting was to discuss the framework of an independent and expert forensic investigation to be conducted into some of the issues referred to in the report on the Special Review.

2.3.2   It was shortly afterwards, at such meetings, decided that in order to combine skills, resources and legal mandates, a joint investigation would be conducted by the Office of the Auditor-General, the Office of the Public Protector and the Directorate of Special Operations of the National Prosecuting Authority. It was agreed that the Directorate of Special Operations would focus on allegations and suspicions of criminal conduct, whilst the Office of the Auditor-General would conduct an extensive forensic investigation. The Public Protector would look into the quality of the contracts of the Strategic Defence Packages and unethical conduct by any of the public officials. Part of the investigation by the Public Protector would be conducted in public.

2.3.3   The Joint Investigation was unique in that three organs of State, for the first time, conducted an investigation into alleged irregularities and criminal conduct simultaneously. The holding of a public phase of the investigation can equally be described as unique. This was by no means an easy task as all three agencies had to pioneer their way through uncharted and, at times, difficult territory.

2.4     The legal mandates, powers and functions of the Public Protector, the Auditor-General and the National Director of Public Prosecutions

2.4.1   The Public Protector, the Auditor-General and the National Prosecuting Authority, headed by the National Director, exist separately. Each has his/her/its own constitutional mandate.

2.4.2   In Chapter 9 of the 1996 Constitution, the Public Protector and the Auditor-General are grouped together with other institutions, under the heading: "State Institutions Supporting Constitutional Democracy". The Constitution provides that these institutions are independent and subject only to the Constitution and the law. They are constitutionally bound to be impartial and to exercise their powers and perform their functions without fear, favour or prejudice.

2.4.3   The Public Protector has the power to investigate any conduct in state affairs, or in the public administration in any sphere of government, that is alleged or suspected to be improper or to result in any impropriety or prejudice. He/she has the power to report on the conduct found and to take appropriate remedial action.

2.4.4   The Public Protector is the national Ombudsman of the Republic of South Africa. His/her powers and functions are further regulated by national legislation.

2.4.5   Section 188(1) of the Constitution provides that the Auditor-General must audit and report on the accounts, financial statements and financial management of all national and provincial state departments and administrations, all municipalities and any other institution required by legislation to be audited by him/her. National legislation also regulates the powers and functions of the Auditor-General and his/her Office.

2.4.6   The National Prosecuting Authority is empowered by the Constitution to institute criminal proceedings on behalf of the State and to carry out any necessary functions incidental to instituting criminal proceedings. The powers and functions of the Directorate: Special Operations that was involved in the Joint Investigation are regulated by an Act of Parliament.

3.      The Joint Investigation

3.1     Practical difficulties and challenges

3.1.1   As most of the documentation relevant to the investigation is classified, it was not readily available. After several discussions in regard to access to these documents, control measures were eventually agreed on to enable the joint investigation team to access the information required. Obtaining the documents according to this agreement proved to be cumbersome. The investigation teams had to accept that the documents which were found at the identified locations, were all the documents pertaining to the procurement. It was therefore not possible to ensure that access was provided to all the documents. There was, however, no indication that any documents had been willfully hidden, destroyed or kept from the investigators.

3.1.2   One of the biggest challenges was to control and manage documents, in excess of 700 000 pages, which were made available by the Department of Defence.

3.1.3   The Joint Investigation Team recognized the right to legal representation of those persons or institutions affected by the investigation. The investigation teams had to contend with the different time schedules of the different legal teams in order to find suitable dates for consultations and the questioning of witnesses. In addition, many of the witnesses had left the employ of the departments concerned and had to be traced.

3.1.4   The consent of the Minister of Defence had to be obtained, in terms of legislation, in respect of every witness that testified before the Public Protector during the public phase of the investigation.

3.1.5   As indicated above, the investigation was a matter of enormous public interest. The media's role and function to keep the public informed and to ensure accountability and transparency was recognized and respected by the Joint Investigation Team. However, it appeared from news reports that the media conducted an investigation concurrently with the investigation team and this led to some difficulties. So, for example, did the media expose the names of various individuals and connected them to various allegations before any findings had been made. This resulted in unwillingness on the part of the affected persons to cooperate with the investigation teams. There were also unexplained leaks to the media, which often prejudiced the investigation.

3.1.6   At the commencement of the public phase of the investigation by the Public Protector, two of the national television and radio networks lodged applications for direct and/or delayed broadcasting of the proceedings. The Public Protector dismissed the applications. The networks took the matter to the High Court, but their efforts were unsuccessful.

3.1.7   It should be mentioned that the government departments and agencies that were involved in the investigation cooperated with the Joint Investigation Team. The difficulties experienced also did not have any effect on the results of the investigation.

3.2     The allegations and concerns investigated

3.2.1   The Joint Investigation Team received numerous allegations, most of which were of a criminal nature, referring to issues such as corruption and conflict of interest. Several rumours about improprieties in connection with the so-called 'arms deal' and the Joint Investigation were also (and are still being) continuously spread by the media and others, including prominent politicians from opposition parties. One such politician was extensively questioned during the investigation about information that she claimed to have in her possession, however with limited positive results. There can be no doubt that the arms deal and the investigation became highly politicized and that different agendas played and still play a motivating role in many of the unfounded allegations and rumours.

3.2.2   As independent institutions of high integrity, the three investigating agencies had and have to be seen not to get involved in the political and other agendas.

3.2.3   Most of the allegations were of a criminal nature, referring to issues such as corruption and conflict of interest. The Directorate: Special Operations conducted preliminary investigations into these allegations. Some were found to be without any substance and therefore required no further investigation.

3.2.4   The former Chairperson of the Defence Portfolio Committee in Parliament who received a substantial discount on a car from one of the successful contractors, was arrested and charged with fraud and corruption. He pleaded guilty on the former charge and the latter was withdrawn by the State. His sentence of 4 years imprisonment is currently on appeal.

3.2.5   A senior official of the Department of Trade and Industry was dismissed because of a similar discount that he received.

3.2.6   Whilst there may have been individuals and institutions who used or attempted to use their positions improperly, within government departments, parastatal bodies and in private capacity, to obtain undue benefits in relation to these procurement packages, up until the conclusion of the investigation, no evidence emerged to suggest that these activities affected the selection of the successful contractors/bidders, which might have rendered the contracts questionable.

3.2.7   Criminal investigations in connection with allegations of corruption are still continuing and might, as new and better evidence come to the fore, be continuing for some time.

3.3     The public phase of the investigation conducted by the Public Protector.

3.3.1   Due to the huge media exposure of the Joint Investigation, it was decided that it would be in the public interest and in the interests of the investigation that a part of it be conducted in public. The principles of transparency and openness that underpin our constitutional democracy require that matters of national interest be dealt with in a manner that is accessible and comprehensible to the citizens of our country and every other interested person or institution. However, for obvious reasons, the criminal and forensic investigations did not allow for public insight and participation. The Public Protector Act however, makes provision for investigations to be conducted in public.

3.3.2   As the different parts of the joint investigation involved many of the same role players and key issues, considerable care was taken to ensure that one part of the investigation did not have a negative impact on any of the other parts. The selection of the issues to be addressed and the witnesses to be called during the public phase of the investigation were carefully managed.

3.3.3   It was decided by the Joint Investigation Team that it was in the interest of the public to be informed of what the acquisition under investigation was all about. Why was it necessary, what was required, how was it required, at what cost and what its effect on the country was going to be.

3.3.4   In order to limit overlapping and possible interference in other parts of the investigation, it was decided to divide the public phase of the investigation into two stages. The first stage comprised testimony in respect of the requirements of the South African National Defence Force and the process and procedure of acquisition. The second stage included and focused mainly on the evidence of a tenderer who alleged certain improprieties in the acquisition process that caused his company to be 'deselected' from obtaining a specific contract.

3.3.5   The public phase of the investigation was conducted on a voluntary basis. Witnesses were invited to participate and notified accordingly. All witnesses were represented by legal counsel. Persons and institutions implicated by the evidence provided during the public phase were informed of their right to attend and to respond and a number of them did so.

3.3.6   The Public Protector himself presided during the hearings and was assisted by an Executive Manager in the Office of the Auditor-General and a Director of Public Prosecutions.

3.4     The forensic investigation by the Auditor-General

3.4.1   The operational team of the Auditor-General was divided into 5 subteams. Each was allocated certain responsibilities to ensure that the investigation would be completed within a reasonable time. A project office was established and the investigation was headed by a project manager. The different teams focused on several specific areas of the Strategic Defence Packages.

3.4.2   The forensic investigation conformed to internationally acceptable forensic investigation standards.

3.4.3   Apart from the studying of the thousands of pages of documents, the forensic investigators interviewed many witnesses.

3.5     The criminal investigation by the Directorate: Special Operations

The investigation team of the Directorate was divided into 4 subteams. Two of them concentrated on the process of the arms procurement and the other two mainly focused on the issues pertaining to the conflict of interest and other allegations of criminality.

3.6     Report and due process

3.6.1   In performing their respective tasks during the investigation, the three investigating agencies, obviously, had to comply with their statutory mandates. Being subject to the Constitution and the law, they also had to ensure that due process, as prescribed by the law, was followed. The South African Constitution was built on the principles of fairness, equality and reasonableness. These fundamental principles include the basic observance of the rules of natural justice that provide that the other side should always be given a proper opportunity to respond before a decision on the investigation of a complaint or suspicion can be taken. Both the Auditor-General Act and the Public Protector Act provide for due process in this regard.

3.6.2   As indicated above, the Joint Investigation dealt with huge volumes of facts. Most of the information that was evaluated related to matters of national interest, i.e. the defence of the peoples of South and Southern Africa. During the investigation several high-ranking officials were implicated in different ways.

3.6.3   In terms of due process, as prescribed by the Constitution, the different regulating Acts of Parliament and the common law, it was decided to submit the draft Joint Report to the President, in his capacity as the Chairperson of the Ministers' Committee involved in the procurement under investigation, and to the Ministers that formed part of the Committee.

3.6.4   Government submitted a response on the factual accuracy of matters referred to in the draft report that was appropriately considered during the finalization of the Joint Report.

3.6.5   Much was made by certain individuals, some of them again driving their own agendas, of the fact that the Joint Investigation Team followed this route of due process. Without putting any substance to their allegations, they spread rumours to the effect that the Government influenced the decisions of the investigating agencies and that they insisted that the report be amended to support their case. That did not happen at all. As a matter of fact, the Government's response did not even deal with the findings and recommendations made by the investigating agencies.

3.6.6   What did happen was that the draft report that consisted of individual reports by the three investigative bodies involved had to be combined into one joint report. The reason for this was that many duplications and overlaps occurred in the draft reports. A task team of the three agencies compiled the final Joint Report that was submitted to Parliament in November 2001. The final report, in essence, contained the same findings and recommendation as the draft reports.

4.      The Arms Procurement Process

        From their review of the arms procurement process under investigation, the Joint Investigation Team deduced that:

4.1     The Strategic Defence Packages were unique to South Africa. Firstly, it was the first time that a 'package approach' to the acquisition of armaments was adopted. Secondly, the acquisition consisted mainly of designed and developed weapon systems.

4.2     Due to sanctions imposed on the acquisition of arms prior to 1994, an adequate acquisition policy to accommodate the procurement of armaments for the Defence Force in the international markets did not exist.

4.3     The Department of Defence recognized the limitations of the procurement policy, which existed during the acquisition process, and the need to adapt and interpret it, in order to render it suitable for international procurement programmes.

4.4     The policy on the acquisition of armaments that evolved during the Strategic Defence Packages procurement process consists of the necessary authorizing bodies to enable the Department of Defence and Armscor to deal effectively with international defence equipment procurement. This policy compares favourably with defence procurement policies in the United Kingdom and Australia.

4.5     In view of the magnitude and extent of the Strategic Defence Packages procurement, the time allocated for each evaluation and execution was insufficient to ensure that it was done properly and efficiently.

5.      The Investigation of Allegations made by C2I2, One of the Unsuccessful Tenderers

5.1     C2I2, a South African company that participated in the procurement process of the Strategic Defence Packages, complained that they had been treated unfairly and improperly by the government agencies and certain of the individuals involved. The Joint Investigation Team conducted an in depth and comprehensive investigation into these allegations, which included a forensic investigation and a public hearing of the complaints.

5.2     Many hours and a substantial amount of public funds were spent in this process. The Managing Director of the company, Dr R Young, was invited to appear before the Public Protector and to state the details of his complaint in public. Although somewhat reluctant at first, he eventually agreed and was given unlimited time to state his case in public. During the presentation of his testimony, he was assisted by officials of his company, an attorney and junior and senior counsel.

5.3     Dr Young was questioned on his statements by the other parties involved. The Department of Defence indicated that they wanted to present evidence in response. Dr Young was given notice of this in advance and was also presented with a short summary of what the evidence would comprise. However, for reasons not exactly clear to the Joint Investigation Team, he and his legal team left the proceedings without questioning the evidence of the key witness called by the Department of Defence, Admiral Kamerman.

5.4     The public investigation of Dr Young's complaints took 5 days to complete.

5.5     The forensic investigation of the Office of the Auditor-General into these complaints was detailed and exhausted all aspects of what was raised.

5.6     A full chapter of the Joint Report, comprising 57 pages, was devoted to the investigation of the complaints by C2I2 .

5.7     Subsequent to the presentation of the Joint Report to Parliament, Dr Young has instituted legal action against certain individuals, including the former Public Protector, for defamation. C2I2 has also sued the Department Of Defence for damages. These matters are all sub judice at present.

5.8     The efforts made by the Joint Investigation Team to look into the complaints of this one unsuccessful tenderer are indicative of the seriousness with which this matter was approach and the commitment by the investigators to get to the bottom of these allegations and the complainant's perceived dissatisfaction.

6.      Key Findings and Recommendations

6.1     The Joint Investigation Team made 25 key findings. Some of the prominent ones, apart from those mentioned above, were:

6.1.1   Various key documents had not been finalized and/or duly approved before the final contracts were concluded.

6.1.2   The decision to allow bidders for the Corvette programme to supply information after the offers were submitted constituted a deviation from proper procurement practice.

6.1.3   Although different models and views can be used to determine the future projected costs and economic effects of a procurement of this magnitude (R30,3 Bil at the time of the signing of the contracts) adequate measures were taken to present to the Government a scientifically based and realistic view on these matters. Ultimately, the decision about what the country can and cannot afford is one of political choice.

6.1.4   Fair and competitive procurement procedures for the selection of subcontractors were not followed in all cases where strategic considerations played a significant role.

6.1.5   Proper evaluation procedures were not consistently and diligently applied and a proper audit trial was not established throughout the procurement process.

6.1.6   There was a conflict of interest with regard to the position held and the role played by the Chief of Acquisitions of the Department of Defence by virtue of his brother's interests in companies that benefited from the procurement process. Although he properly declared this conflict, the Chief of Acquisitions did not recuse himself properly from the process where the offers of these companies were discussed.

6.1.7   The imposition of a risk premium on one of the items tendered for by C2I2 was not unreasonable.

6.1.8   The Industrial Participation obligations contracted for by the prime contractors in terms of the Strategic Defence Packages as well as the performance guarantees in relation thereto, compare favourably with the position in other countries that exercise counter trade practices.

6.1.9   The intended controls contained within the contracts may, in certain instances, not be sufficient to deter prime contractors from fully meeting their industrial participation obligations.

6.1.10  During the investigation it came to the attention of the investigation teams that the former Minister of Defence was allegedly involved in a company that was to benefit from the procurement. The Minister concerned was actively involved in the procurement process before his retirement. Although no evidence of impropriety was found, such a situation seems extremely undesirable as it creates negative public perception about a process that might otherwise be in order.

6.1.11  No evidence was found of any impropriety or unlawful conduct by the Government. The irregularities and improprieties referred to in the findings as contained in the report, point to the conduct of certain officials of the government departments involved and cannot be ascribed to the President, the Ministers involved or Cabinet. There are therefore no grounds to suggest that the Government's contracting position is flawed.

6.2     The Joint Investigation Team made a number of recommendations in respect of measures that should be taken to address the shortcomings of process and procedure that were found. They also recommended that:

6.2.1   Proper consultation and an impact study should be done before equipment types or functionalities are reduced.

6.2.2   Specific rules and guidelines should be developed to address conflict of interest issues and to ensure that personnel are properly informed in this regard.

6.2.3   Parliament should take urgent steps to ensure that high ranking officials and office bearers, such as Ministers and Deputy Ministers, are not allowed to be involved, whether personally or as part of private enterprise, for a reasonable period of time after they leave public office, in contracts that are concluded with the State.

7.      Lessons Learned

From the Joint Investigation into the Strategic Defence Procurement Packages we have learned, inter alia, the following lessons:

7.1     The international arms trade has a reputation, whether justifiable or not, of corrupt and improper practices. Many allegations and suspicions of impropriety are, however, based on unsubstantiated rumours and distorted facts and often originate from competitors in a specific field and politicians that are opposed to the decision of the government involved to purchase armaments. Investigators of allegations and suspicions should be weary of this and ensure that they are not influenced by high profile and strong personalities driving the spread of misinformation.

7.2     An investigation of the magnitude of the Joint Investigation can never be perfect. It is impossible to cover every step of all the transactions in detail, especially where no proper audit trial exists.

7.3     Investigating agencies dealing with allegations of corruption and maladministration should act and be seen to be acting without fear, favour or prejudice.

7.4     The credibility and worth of such an investigation depend on a reasonable and informed interpretation of all the facts and probabilities that are discovered and evaluated during the process. Findings and recommendations should only be based on objective facts that can be verified.

7.5     Investigators should be careful of being influenced by those who criticize them before, during and after the investigation. Although constructive criticism can be helpful and although investigating agencies should not regard themselves as being beyond critique, they should be selective when considering comments of such nature. In an investigation of matters of public interest where political infighting is rife and competition amongst tenderers sometimes overshadows their sense of reason because of the huge financial benefits at stake, there will always be those that conduct their own investigations and that know better than the investigators. Most of the time, however, their findings are not based on the true facts of the matter.

7.6     A Joint Investigation of this magnitude is difficult to manage. It is fundamentally important that a joint team of highly skilled and experienced investigators be selected to work together on a full time basis, without any other distractions, and that the investigation process be centrally coordinated and controlled.

7.7     Whenever matters of national interest are investigated, the investigation should not be delayed, but be finalized as a priority within the shortest possible time. Any delay in the process leads to further rumours and unsubstantiated allegations. It also prevents the uncertainty that prevails in the international community, as to whether or not corruption did in fact take place, from being clarified.

7.8     Whatever the findings and conclusions of an investigation are, there will always be those that disagree, especially in an investigation of this nature. The possibility of litigation during and after the investigation is a reality and investigating agencies should be prepared for it.

7.9     There is always the possibility of new information being revealed after the conclusion of the investigation. Investigation agencies should be ready to consider such information and to reopen the investigation when it is justified.

7.10    The media plays a very important role in any investigation into allegations of corruption. Their role to keep the public informed must be recognized and respected and they must be assisted by the investigating bodies to ensure that their reports are accurate. Continuity is very important in this regard and contact with the media should be handled by an experienced and well-trained media liaison official. It is just as important that irresponsible reporting that can jeopardize the investigation be prevented and that when it does occur, the public be informed of the inaccuracies of such reports.

The Joint Report is available on the Internet at: http://www.agsa.co.za.