|
The Arms
Deal Investigation |
A critique of the JIT Report - by Gavin Woods
February 2002
OPENING COMMENT
In October 2000 Parliament referred the Auditor General’s “Review of the Strategic Defence Package (SDP)” to the Standing Committee on Public Accounts (SCOPA). In terms of the Constitution and the Rules of Parliament, this obliged SCOPA to look into the issues raised in the Review and into any related matters – in representing the interests of the public. To this end, SCOPA through its 14th report strongly indicated the need for in-depth investigation into key aspects of the SDP. SCOPA proposed that a multi-agency investigation, in addition to its own ongoing investigation, would be necessary - given the magnitude of the SDP and the nature of the initial concerns which had emerged. These proposals were adopted by Parliament.
Some thirteen months later the joint investigation team (JIT) completed its work and has submitted its findings to Parliament. SCOPA, through decisions and actions of its majority component, was prevented from undertaking its further investigation and therefore from meeting its obligation to Parliament and to the South African public.
The purpose of this paper is :
Now that both the Executive and Parliament, to all intent and purposes have proclaimed the arms deal controversies to be behind us, it is important, given the circumstances, to establish whether the more important public interest considerations and its right to know have been adequately dealt with. As this paper will show, the more significant questions and concerns remain largely unanswered in relation to the following issues.
Cost of the SDP
SCOPA’S 14TH REPORT – ISSUES/CONCERNS RAISED
i. The concerns at the substantial increase in the overall cost of the arms packages
ii.The possibilities of this increasing further and the potentially serious effects thereof.
THE IMPORTANCE OF THESE CONCERNS
Given the more serious implications for social spending, the fiscus and the macro-economy that the raising cost of the SDP could hold, the public should as far as possible be informed as to how much they as the tax payers will ultimately have to pay and in what other negative ways they could be affected (e.g. through the budget). The significance of these tens of billions of rands is undeniably great.
JIT INVESTIGATION
The JIT, through the Auditor General, did not address the main concerns expressed by SCOPA. Rather it spent its time confirming factual situations which SCOPA had already established in its 14th report. i.e. :
-that when announcing the SDP, Cabinet had been in a
position to have more fully informed the public of its cost implications and
other possibilities, and
-that the Affordability Study was an essentially sound and
comprehensive piece of work.
The JIT’s studious documentation of an historical perspective of these two matters is useful for the record but does not address the central concerns which SCOPA (and the public) wanted looked into. The lack of public response to the JIT findings bears this out.
It will be seen that the “Scope of the Investigation” (9.2.1. of the JIT report) established by the JIT was not relevant to SCOPA’s stated concerns – with the exception of one item (9.2.1.6) which promises investigation into “The full financial and fiscal implications of the SDP”. Strangely, the JIT then fails to undertake this particular investigation. The 6 “findings” from this part of the JIT’s investigation (9.3) simply served to confirm what SCOPA had stated as a matter of fact in its 14th report. It makes no reference whatsoever to SCOPA’s main concern regarding the financial and fiscal implications of the SDP.
COMMENT
With reference to the above, an investigative exercise along the following lines would have been especially informative :
| Contract price | R x including all direct cost aspects of the arms |
| Statutory costs | R x inc. insurance, freight etc |
| Project Management costs | R x |
| ECA premiums | R x for ECA-loans |
| Escalations | R x the contractual inflationary consideration |
| Interest/Finance cost | R x investigate the R22.9bn (Armscor estimate) which is to be included in Treasury budget |
| Extra costs | R x the R1 – 2bn “extras” which is to be financed through the Defense budget |
| Currency adjustment | R x use SARB projections to establish high/low scenarios |
| Higher maintenance costs | R x these are referred to as “the biggest cost challenge” in the JIT report |
| Operation costs | R x the “underestimating of the long term full cost of ownership of the packages” is referred to in JIT report |
| Conversion of Denel Aviation | R x for replacement of Italian technology and expertise |
| Maritime helicopters | R x to be purchased to make Corvettes fully functional |
| Etc. | R x |
| ------------- | |
| FULL PROJECTED COST | R x indicated through a range of currency permutations |
| ------------- |
It will be seen from the 2002 Budget Review Treasury’s total cost figure of R52.7billion omits many of these cost items – including the estimated R20+billion rand SDP debt servicing costs.
Further, the JIT might have been expected to conduct some enquiry as to the implications of the rising cost to the country – even if this was only to have the economists they employed identify and quantify the theoretical consequences. And then to have sought governments thinking on how they might manage such situations should these arise.
It is clear that cabinet had to stretch every aspect of the affordability question in order to agree to the original R30bn cost – so how can the fiscus afford the equivalent of at least double that cost? How will the unanticipated price rise be met ? Through curtailed social spending, loans, higher taxes ? And what of the inevitable balance of payment effect – which was another concern referred to in SCOPA’s 14th report. The 30:110 proportions (Cost : I.P. value) which government said were necessary to render the SDP economically neutral is now closer to 60:110 and still closing. Does this already mean a balance of payments problem which will need to be taken care of by discrete sacrifice elsewhere? There will be implications and the public have a right to know what these might be. The reluctance of government and the JIT to admit to these is very problematic.
All this, together with Cabinet’s misleading public contention that “over the medium and long term the benefits from the DIP and NIP programmes will fully off-set the economic and fiscal costs of the military equipment” (GCIS 23/01/01) is ignored by the JIT. The important question regarding the extent to which the offsets might counter currency effects of the cost of the deal is just one such aspect that should have been probed and explained. Clearly, the benefits of offsets/industrial participation projects (plus any escalation in their monetary value) overwhelmingly accrue to the wealth of independent business interests and not to the state. Simply put, the state (through public taxation) has to pay more when the cost increases through a weakening rand – but does not get this back through any respective increase in value of the Industrial Participation projects.
These failings to investigate and report on the critical issues related to the cost of the SDP is disappointing. Even more disappointing is the manner in which the JIT tries to excuse itself from undertaking the most important work in this regard. This being seen in the final sentence of the chapter where the JIT contends “Ultimately, the decision as to what the country can and cannot afford is one of political choice”. This seems to be saying to the people of the country that the ultimate price you (as tax payers or you as receivers of services) will pay is none of your business. This is most regrettable coming from those who should be promoting public accountability - and not dismissing it. This attitude is seen to be characteristic of JIT positions taken in other areas of their report, where short unsubstantiated statements substitute for lack of proper investigation – and coincidently in each case does so to the advantage of the executive government.
Note: The undertaking by the Portfolio Committee on Finance in their report to Parliament in December 2001 will not address these essential concerns.
Offsets/Industrial Participation (I.P.) Projects
SCOPA’S 14TH REPORT –ISSUES/CONCERNS RAISED
The issues/concerns raised by SCOPA were :
IMPORTANCE OF THESE CONCERNS
As the public was led to believe that the decision to proceed with the SDP was contingent on the I.P.’s, it is vital that these I.P.’s deliver what they have promised. Against this therefore, the great importance of the above issues and concerns is self evident.
JIT INVESTIGATION
As can be seen, the JIT simply discarded 10 of the 14 concerns SCOPA’s wanted investigated. And none of the 4 it looked at were satisfactorily addressed. The JIT chose to narrow its scope down to particular aspects of the performance guarantees, their comparability to a selection of countries and government’s plans and ability to monitor the delivery of the I.P.’s. In doing this it spent considerable time on the DIPS (Defence Industrial Participation), which as SCOPA pointed out in its 14th report, were not a concern as these are required for completion of the arms - meaning that the supplier could not deliver the arms and receive payment if the DIPS were not met. A SCOPA contention which is proving to be correct). All SCOPA concerns obviously revolved around the NIPS which comprised some 86% of the IP’s.
COMMENT
Summary of approximate I.P. Commitments
NIPS R31bn-purchase of SA goods by the arms suppliers
R24bn-foreign investments in SA by companies associated with arms suppliers
DIPS R 4bn- via direct participation in the production of the aircraft and ships
R 3bn- via technology transfer (in royalties and licensing agreements)
R 7bn- via promotion of the defence contracts with third parties
The JIT’s one dimensional approach to the I.P. guarantees is not helpful. Firstly by failing to make the arithmetically adjustments necessary to compare the South African penalty percentage (which is of contract price) to the penalty percentage (which is of I.P. value) in the other countries, the JIT finding on the issue is flawed. Secondly by ignoring the international norm of having a predominant proportion of DIP in relation to NIP (for reasons referred to above i.e. the assuredness of DIPs) the JIT misses the major underlying risk issue in the South African case. (International practice in the region of 85% DIP to 15%NIP, the South African mix is approximately 14% DIP and 86% NIP – e.g. see US Congress comparative report). The JIT also missed the strong international tendency to pursue high technology-transfer NIPS which are more secured. As is noted in South Africa’s case, government accepted a very wide variety of NIP types across many industries. And then the JIT also missed the concern expressed by SCOPA relating to the 3.5:1 ratio (value of I.P’s to cost of Arms) as was “achieved” by the negotiators of the South African I.P.’s. As this is the highest in the world it should have rung alarm bells as to whether it is sustainable or even possible. If it made any sense, as top economists keep pointing out, many countries would spend huge portions of their budgets on arms in anticipation of receiving almost 4 times the value in return. The Issue of the adequacy of the penalties therefore remains a lesser issue in the face of these big realities and the JIT is very mistaken to claim that their superficial ‘finding’ will “allay the concern raised by SCOPA (in its 14th report)” 12.3.2..
Another international experience is that I.P’s are also impossible to monitor with any accuracy – and for the country to ultimately know if everything promised was received. Given the width and complexity of South Africa’s unique arrangements (see above) it will be interesting therefore to see the methodologies the Auditor General proposes using to meet his undertaking in this regard. A recent study on the many discrete ways in which to discount export values and inflate imports is informative. There are numerous other ways to produce figure which would suggests whatever is intended. The concern is that progress will prove impossible to record and monitor – especially after the initial (easier) I.P.’s have been forthcoming and when the arms supplying companies (as profit driven businesses) get to those I.P.’s which offer little or nothing to their bottom lines. Over the decades business has become extremely inventive when it comes to getting out of deals which do not offer the best return on their investment. It is the rationale most pivotal to their existence. The single issue approach (I.P. penalties) of the JIT appears altogether unaware of this.
The system of issuing credits is likely to be very contentious and dependent on subjective assessment. This will be very vulnerable to the tactics of businessmen wishing to escape part of their obligation.
The likelihood of it all is that many of the promised I.P’s will not turn out as hoped, and given governments potential embarrassment it is equally as unlikely that the public will ever know of any serious failings in this regard.
There has however been some acknowledgement of this from the Executive (more so than from the JIT). While a particular cabinet minister (Minister of Trade and Industry) repeatedly says there is no risk whatsoever concerning the non-delivery of I.P.’s he was contradicted by his colleagues who have said “government is naturally aware that the risk of the NIP and DIP not materializing fully is intrinsic to the procurement” (GCIS 23/01/01.) This is an important admission and is more than borne out by the large body of international evidence concerning failed and partially fulfilled IP obligations. Indeed the USA, Canada and the EU have in recent years moved to prohibit the tying of IP and counter trade to their own arms purchases. If the JIT has had a look at this evidence of failed obligations (where penalty clauses were also in place) – it might of added more appropriate scope to its “investigation”.
The sensible thing for the JIT to have done would have been to closely evaluate the viability of the I.P’s from the business plans suppliers were obliged to submit rather then to have resigned itself to a ‘lets wait and see’ approach. This is an obvious requirement of SCOPA’s 14th report. This could have produced a much more accurate understanding of what is likely and what is not. It might of also provided sufficiently early warning to try and resolve possibly shortcomings. We have already learnt that the business plan of the largest of all the I.P’s (Coega) was seriously flawed and unrealistic. The Chairman of SCOPA attempted to call for the I.P. business plans in order to carry out such an examination – but was blocked by the majority component of the Committee. It was therefore doubly disappointing when receiving the JIT report and noting the omission of this important exercise – preferring to limit itself to a mechanical compilation of very specific circumstances rather than rigorous investigation across a fully relevant framework of issues.
Regarding the quality of the “I.P. agreements” which SCOPA referred to in its 14th report. It is beyond dispute that the JIT, in attempting to dismiss this concern in its report (Chapter 13), makes the mistake of looking at the “supplier contracts” (instead of the I.P. contracts). At least 3 references in the chapter prove that - notwithstanding the Public Protectors subsequent denial of having erred. Actually, in the case of the I.P. contracts the investigation which informed the 14th report was carried out on behalf of SCOPA by one of the more senior members of the Auditor Generals office. The available working papers cite exact pages and paragraphs where the errors exist. For the JIT to completely miss this and produce the comments which they did is inexcusable.
In concluding this section, it can again be pointed out that almost all of the questions which underlie the public’s interest were not responded to by the JIT.
The Selection of Suppliers/Awarding of Contracts – the policies and procedures
SCOPA’s 14TH REPORT – ISSUES/CONCERNS RAISED
THE IMPORTANCE OF THESE CONCERNS
There have been many case studies which
show how costly the consequences of poor application of good procedures
and practices can be. These experiences across many countries has gradually led to
an internationally developed set of principles and best practices.
Regarding the SDP, it is important to establish whether government went
to sufficient lengths to put the procedures in place necessary to limit the risk
of inappropriate actions and decisions. Even
more so considering the degree of public opposition to the proposed arms deal as
the biggest single spending package ever undertaken by government. Weak or flawed policies and procedures can advertently or
inadvertently lead to hugely expensive mistakes which produce unintended
results. As serious, is the poor or
inconsistent application of the policies and procedures.
It is therefore an imperative of good practice to ensure that all
policies and procedures are firmly in place, with accompanying controls,
prior to the transactions taking place.
Amongst other things this would include having researched and established
the required product specifications - against which tenders will be invited and
against which the products offered will be evaluated.
This prevents unfairness, dishonest manipulation and ensures the securing
of supplies which meet your fully considered requirements.
THE JIT INVESTIGATION
In this area, the JIT did considerable work which is useful
to the evidence gathering stages of this part of the investigation. The
conscientious way in which they sequentially
documented the historical process is acknowledged and appreciated. The
failing seems to be in the analysis of and deductive reasoning from the facts
established. This led the JIT to
understate serious actions and in
cases to justify the
shortcomings found – as can be seen from the somewhat weak
“findings” listed by the JIT, which detract from the many serious departures
from the laid down rules and procedures.
COMMENT
Today there is vast international agreement over what
constitutes procurement/tendering best practice. These best practices
apply to any country. Given
the collective experience that has gone into the compilation of these, and the
subsequent proof of their relative effectiveness, the DoD and Armscor should
have ensured that these were firmly in place well in advance of the
SDP. The decision to ‘cut
and paste’ DoD, Armscor and other acquisition procedures in an attempt to
cover all SDP bases inevitably left some weaknesses. The JIT points out that
changes were introduced to deal with these weaknesses well after the
procurement process had begun.
The JIT does however wish to assure us that this exercise ultimately
produced procedures which compared
favorably with those used in other countries - and in fact only mentions one
related shortcoming in its findings.
The establishment of an adequate range of the necessary procedures is an essential requirement – as essential, is the full and proper adherence to these procedures. In this latter regard, it will be noted from the JIT report (chapters 4 to 12) that there were well over 50 instances of non-compliance – especially across the selection and awarding processes that led to the 5 prime contracts. Many of these rules which were broken are considered to be fundamental to good practice.
These many failings go beyond simply being unacceptable.
These would in fact represent a crisis of credibility for procurement
transactions anywhere else, and would see those responsible for such flagrant
disregard of the rules
being the subject of considerable sanction. In the SDP the officials
concerned and indeed the decision makers appears to have been quite at ease when
changing the carefully prepared and internationally established procedures,
criteria and conditions - often for
the most dubious of reasons. Even though this invariably led to different
results to what the laid down practices
and criteria would have otherwise produced the JIT is relatively unmoved.
In select instances and without substantiation it claims that the changes
of rules and formula had no bearing on the resultant outcomes. In no single case
did the JIT find it necessary to criticize any one for having departed from the
rules – no matter how serious. Neither does it give details of any exercises
it did to support its contentions.
Far less significant acts of non-compliance in the ordinary
course of government departments
business, are identified and reported on is strong terms by the Auditor General.
In terms of Public Finance Management Act standards,
the Auditor General would
have had to declare most of the five main SDP transactions as unauthorized or
irregular expenditure. As a result of this there would have been serious
consideration in Parliament as to whether this expenditure should be allowed and
whether the responsible decision makers should be made to answer for their
unacceptable actions. But with the
SDP, notwithstanding its size, policies,
laws, rules and regulations were frequently flaunted with implications for
hundreds of millions of rands – and this is all either rationalized
away or quietly stepped over in the “findings” presented
by the JIT.
Even a superficial scanning of the relevant sections of the
JIT report bring into the question the JIT claim that the procedures adopted
compared favorably with those used in other countries. It is yet another of the
single statement variety the JIT
uses throughout its report to dismiss serious
concerns without producing the necessary investigative work. Elementary
requirements of good policies and procedures concerns
the controls and disciplines that are built in - to ensure application.
As earlier indicated, the JIT report itself shows over 50 instances which
were apparently possible due to a lack of the control dimension. To imply this to be acceptable as it is comparable to that in other countries is hard to accept.
It is another case of the JIT’s failure
to work to the bigger picture.
As mentioned, the established procedures and practices were repeatedly disregarded across the five main transactions. To mention some of the more critical contraventions of accepted practice one could include the following:
The facts show that had the laid down rules and criteria
been adhered to, at least three of the five choices of arms suppliers
(LIFT, SUBS, Corvettes) are likely
to have been different. The JIT argued
that in two or three instances the breeches would not have changed specific
results along the decision making line - but did not point out that the final
choices were in most cases affected.
In the cases of the Submarine and LIFT selection processes the JIT seemed to run out of
‘reasons’ with which to rationalize away the endless succession of
departures from the rules – and in the case of the latter it ended the chapter
seemingly unable to give an investigation finding – so it lamely suggested
that the Cabinet, in choosing the HAWK, had the right to do whatever it wanted
to do. This is a shocking position
to take especially as it dismisses the need to establish the truth. Its position
displays a surprising disregard for the principals of accountability and
transparency and leaves the public to speculate as to the actual reasons why
Cabinet took a decision which was in stark conflict with the predetermined
policies and procedures. In fact
the JIT in its findings finds it difficult to take issue with any malpractice
– no matter how serious. Never
once do they even hint at possible irresponsibility or incompetence of the
decision makers – who until recently vehemently denied any shortcomings in the
processes and any possibilities for any human failing.
The LIFT process is particularly disconcerting – where it
took a succession of rule changes to keep the Hawk in the reckoning. When there
were no rules left to change and the manipulated process had still not elevated
the Hawk to that of leading contender – Cabinet chose it anyway. The JIT
suggests this was acceptable and that we
just live with the result. . In a search (outside of the JIT’s report) for the
reasons as to the choice of
the Hawk, there have been at least three conflicting explanations given, none of
which were quantifiable. These came
from the Secretary of Defence, the Department of Trade and Industry and the
group of four ministers at their press conference in January 2001. The reason hinted at in the body of chapter 4 of the JIT
report (which is the same as that of DTI) is that
BAe’s higher IP’s secured it the contract. If this were the case, the
IP’s weighting in the overall evaluation and selection process would have had
to be pushed up from the predetermined one third to
two thirds – with the financing, cost and technical considerations only
amounting to one third ! The JIT
did not consider this remarkable situation to be worth commenting on. Neither
did it make an issue of the failure of the decision-makers to comply with the
universal tendering practice which is to
give the other bidders an opportunity to resubmit their offers - in line with
the goal posts which had been moved to dramatically advantage one particular
bidder.
Another unsubstantiated statement made by the JIT which
instantly dismissed a major contention (also made by SCOPA in its 14th
report) is seen in their finding
4.12.6.. This is where the JIT says “No evidence could be found in support of
the allegation that South Africa is paying more than the normal basic unit price
for the Hawk or Gripen aircraft.” No explanation whatsoever is given as to
what work the JIT undertook in coming to that dismissive conclusion. As South Africa is the only country outside Sweden to have
bought Gripens where does the JIT find
the “normal” basic unit price to compare against?
There just isn’t one ! And
regarding the Hawk, information is
available to easily contradict the JIT ‘s
comparative exercises it claims to have
undertaken. It is reasonable
to suspect that no such exercise was undertaken.
Further it would have been hoped that the JIT would have completed the
exercise which SCOPA was prevented from completing – which was to study the
cost break down of the two aircraft in order to establish if the profit margins
were reasonable – and to see if these costs included a loading to cover
possible I.P. penalties - as has happened in other countries.
They did not do this either and all-in-all the investigation failed to
tell the taxpayers if they were overcharged by BAe.
Note the statements by the former Secretary for Defence, statements by
the chairperson of UCC (Ukhozi Control Council) and even the JIT itself
(4.1.14) where it says “in
terms of quoted acquisition and life cycle support costs, both aircraft (Hawk
and Gripen) were by far the most expensive options in their respective
classes”. Does this contradict their finding which suggests that the costs
were comparable to purchases elsewhere ?
Particularly disappointing is the failure of the JIT to
give an overall account of the contraventions which would have
accurately portrayed the suspect credibility or otherwise of the whole
process and those responsible for it.
From an investigative perspective it also fails to contemplate possible
wider ramifications of the contraventions and from this to extend its investigation.
The lateral and rigorous thinking which characterizes good investigation
is notably absent.
Selection of Sub-contractors
SCOPAS 14TH REPORT – ISSUES/CONCERNS RAISED
THE IMPORTANCE OF THESE ISSUES
To establish whether there was any improper influence from individuals within the SDP process, related to selection of sub-contractors (see also “conflict of interests” section)
And to understand why a seemingly acceptable South African product was rejected in favor of a more expensive foreign product.
The wider implications of these two issues should be
apparent.
JIT INVESTIGATION
The JIT’s investigation into the government’s
involvement in the selection of sub contractors was sufficiently informative.
It’s lines of enquiry satisfied the general questions which SCOPA had
on the matter.
Specific questions relating to the C²I² issues were however not adequately addressed.
Note : The JIT’s investigation and related findings into
possible conflicts of interest are responded to in the following section.
COMMENT
Notwithstanding denials by the Department of Defence,
proof has been forthcoming that government (on occasions via Armscor) did
intervene and even instruct prime
contractors regarding the selection of sub contractors
(see 11.5.1.1. (j), (l)).. This was done in a way which went beyond the
scope allowed for by Armscor policy. For
its part, the JIT points out
instances of where principles of openness and fairness were not followed and
goes on to say (somewhat weakly) that in these instances the process could be
criticized. As in other areas of its report the JIT tends to understate the
seriousness of the contraventions of laid down procedures.
The basis for the risk loading which priced C²I²
out of contention is left unexplained as the
JIT says it was not feasible to pursue the matter. It is disappointing that the
JIT was unwilling to take this matter further as it does have a clear South
African interest aspect to it and the associated allegations of underhanded
manipulation do have a plausible basis. Yet another case of where the JIT uses a
single contention to put an important (unresolved) issue behind it. There is
something very wrong if such explanations are just “not feasible to pursue”
and would of hoped that the JIT would have least given account of the steps it
took to establish the facts from the supplier in question. Could Armscor, with
its legal right to demand information relating to the awarding of sub-contracts,
not have provided an avenue ?
The JIT does
not address the key question concerning the basis used to compare the C²I² and
competing products. The validity of the contention made in this regard by DoD/Armscor
is fundamental to investigation of this
situation.
Also notwithstanding the many irregularities discovered by
the JIT it strangely fails to make a single recommendation in this regard.
It is also apparent that much available evidence was not taken into
account by the JIT.
Conflicts of Interest
SCOPAS 14TH REPORT – ISSUES/CONCERNS RAISED
THE IMPORTANCE OF THESE CONCERNS
The importance of the above concerns is self evident
insofar as these could question the integrity of the SDP and the opportunities
for individual officials to dishonestly benefit at at the state’s cost.
JIT INVESTIGATION
The JIT lists almost all the positions held by DoD’s Head
of Procurement (HoP) within the arms deal structures. It also lists
the businesses in which the HoPs’ brother had a significant business
interest. Not mentioned are
businesses in which his political and other associates had an interest.
The JIT succeeds in establishing further instances of incorrect and
dubious actions by the HoP but
notwithstanding the vast grounds for suspicion and associated allegations the
JIT says its investigation failed to find sufficient incriminating evidence
regarding the HoP. The other
concerns raised by SCOPA were ignored by the JIT.
COMMENT
The seriousness of the situation and its exploitive possibilities only becomes fully apparent if a bigger picture exercise is carried out – which the JIT failed to do. Such an exercise would include the following :
A diagrammatic lay out of all the organogramically established structures –
covering the preferred bidder selection stages from tender
documents through to Cabinet and covering the
negotiation stage structures from the preferred bidder through to the Cabinet.
e.g. :
The JIT would have found a more lateral exercise f this
nature very informative and of much assistance to a more inferential
investigative approach as opposed to their approach of
trying to make sense of a smattering of
incidents and anecdotes – which they
admit left them with suspicions but without a way forward.
The above exercise as representing a more composite reality, would show that there are a number of officials who had an
undesirable degree of influence and the possibility to use this influence in a
dishonest way. While allegations have been made concerning certain of these
officials, the country is in the dark as to whether the Director of Public
Prosecutions will undertake thorough investigation – or if he will investigate
them at all.
The appearance of the Head of Procurement (HoP) across the
completed diagrammatical exercise is staggering. His presence and strong
influence is seen at virtually every level of the selection process – the
actual evaluation of tenders, the SOFCOM, the AASB, the AAC, the Cabinet Sub
Committee through to his
appearances at all Cabinet decision-making sessions.
And similarly through the negotiation stages – the PCB, the technical
assessments, the IONT, the Affordability Team and again through to the Cabinet
sub-committee and Cabinet itself. And
within all this, he was the
Secretary for the Cabinet sub-Committee and played a leading role in the
presentation of recommendations for
final decision-making to the Cabinet Sub-Committee and to Cabinet itself. This remarkable scope of involvements, which altogether
escapes the JIT, and its associated influence contravenes the most cardinal of good practices and division of responsibility rules. Cabinet portray
an ignorance of this and the JIT apparently felt no need to explore the
possibilities this gave rise to. Again a documented concern of SCOPA’s was
treated superficially by the JIT.
This JIT failure to establish a more comprehensive view and
therefore its not knowing where to look for more evidence left it unable to
attribute blame for who was
responsible for the highly irregular state-of-affairs - besides the HoP himself,
who simple took the opportunities presented to him.
Even where the JIT is able to produce evidence which shows the HoP to
have lied about the extent of his potential
conflict-of-interests and his claims of disclosure and non-participation, the
JIT avoids recommending any sanction. It
would appear however that Parliament through SCOPA’s post JIT report (December
2001) was also prepared to ignore the fact that the HoP lied to it.
The HoP should have been suspended from active duty as soon
the JIT was announced at the end of 2001 – given the allegations and
possibilities which were then already public. This is a non-negotiable condition
of this type of investigation all over the world, but for some reason the JIT
was reluctant to do this. His
domineering and intimidatory style was brought to the attention of both
Gavin Woods and Andrew Feinstein, who were told by anonymous DoD officials in
February 2001 that they wished to offer important evidence regarding the arms
deal, but out of fear would not do
so while the HoP remained in his position. It
is noted in the Mail & Guardian newspaper of 30 November 2001 that the
HoP was even able to influence changes (to his advantage) to
the Auditor General’s Review into the SDP in October 2000 - and in fact
had personally produced the actual substitute words which were to appear in the
Review. It is further noted that he
received copies of a draft of the
JIT report and it is alleged that through
his lawyers he managed to influence
changes on this occasion as well.
The JIT report, while doing some good work in cataloguing
the conflict of interest and potential conflict of interest situation, as
explained above, fails through the poor investigative quality of its work to do
deliver answers to the questions of Parliament
and the public.
Allegations of (Criminal) wrongdoing
SCOPA’s 14th REPORT – ISSUES/CONCERNS RAISED
-the need for a comprehensive forensic investigation to
look into the many serious allegations put forward.
THE IMPORTANCE OF THESE CONCERNS
The extensive media coverage given to the arms deal and its
possible failings indicates the high degree of public interest in the
allegations. This coverage was
especially high in respect of allegations
of criminal type wrong doing . This has a negative bearing on the morale of the
public, their respect for government
and ultimately also bears negatively on economic sentiment.
The need therefore to establish the truth or otherwise of the allegations
is crucial - as to leave the allegations unaddressed
would compound the negative perceptions of the country and would do
little to discourage such criminality in future.
THE JIT REPORT
The JIT report did not go much further than say that the
Directorate for Public Prosecutions had had reasons to dismiss many of the
allegations and would continue looking into those which it believed
to be worthwhile.
COMMENT
It is known that many arms deal related allegations of
wrongdoing have been sent to the units falling under the Director of National
Prosecutions – certainly more than one hundred of these.
A considered assessment of those allegations which were in the public
domain might suggest that at least
50 of these have substantive credibility in terms of their source, their
plausible correlation with actual occurrences and their consistency with facts
already known. The JIT fell
somewhat short on explaining the scope of its investigation into such
allegations. Strangely it singled out 4 particular
allegations for public dismissal (see 1.3) – but in doing
so gave these an incorrect slant
which made them easier to dismiss. e.g. in 1.3.1. (a) where a ‘consultant’
becomes a ‘director’, and in 1.3.1. (b) where ‘sub contractors’
become ‘prime contractors’ . Also
by dismissing these as lacking
substance, the JI T leaves the reader to believe that they have no truth.
No detail is given as to the extent of the investigation which brought them to
this abrupt conclusion. An example here would be dismissed
allegation 1.3.1 (d), which reads
“That the former Minister of Defence, Mr Joe Modise, paid for share in Conlog
with a bribe received from a successful prime contractor”.
It is well know, that there were a variety of allegations concerning the
nature and the source of the money which Mr.
Modise used to buy Conlog shares. Why
does the JIT in very specific terms only dismiss one of these ? Surely the
question on the public mind is ‘How much did Mr. Modise pay for his large
Conlog shareholding, where did he suddenly get this money from, and did he
and/or his associates receive any other material benefit, as is alleged ?’.
Thus the JIT does not answer these obvious questions – leaving some to
wonder why not.
The report then goes on to say that certain allegations do
have substance which require extensive investigation and lists only seven as
being investigated by its Directorate of Special Operations (1.3.2.1).
It is unclear as to whether these are the only seven allegations being
investigated, and if so what about
the many others that were made public. Especially those which have not
been challenged by those accused of wrong doing?
Will the JIT (via the DoPP) at
any stage explain which other allegations he chose not to pursue and why not.
Will there be indication as to the extent of his investigative efforts – or
will the public be left in the dark ? As has been seen with a number of other
cases taken up by the DoPP –
these can carry on for many years without the public even knowing if it has been
abandoned or what the eventual outcome is.
This gives rise to the questions of how
the DoPP is held accountable for his work ?
According to the JIT this remains the only area of on-going JIT/DoPP work and it seems that
only time will tell if it will get closer to exposing more truth than the rest
of the JIT’s efforts was able to.
Responsibilities of
Cabinet/Cabinet Sub-Committee
Given the known problems with the SDP processes, it is
appropriate to question whether the Decision-Makers acted responsibly and
competently. This is especially so
given the JIT’s frequent and unsolicited defence of their involvement. The
following points should be reflected on :
From a basis
of fact,
SCOPA pointed out in its 14th report
that Cabinet had been put in a position by the Affordability Team to know
and understand the full financing and economic implications of the SDP.
The JIT for some unknown reason re-engages the issue and
comes up with the same finding. i.e. “The Ministers’ Committee was
put in a proper position by the Affordability Team to apply their minds in
essence as to the financial impacts of the procurement.” (9.3.5). And “The
Ministers’ Committee was made fully aware of the (currency) risk …….” (9.1.1.9) .
See also 9.1.2.5.
The scope the Cabinet gave
to individuals to act, including the
HoP and the irregularly appointed Chief Negotiator, within the structures and
processes was repeatedly in conflict with basic ‘good practice’..
The number of serious deviations from good tender practices that went unchallenged or unnoticed by the Decision–Makers is astounding – considering that their very important decisions were reliant on those very practices,.
Given the evidence produced in the detail of the JIT report
(but omitted from its findings) together with the facts highlighted in this
paper – the Cabinet and the cabinet committee in particular did not act in a
sufficiently responsibly manner when applying their minds to the SDP processes
and when making the important decisions. Thus the public has been let down by
the way in which this single biggest expenditure of the South African government
was decided upon.
It is therefore not unreasonable to wonder if it was
the members of the Cabinet
sub-committees’ subsequent awareness of their failings that caused their
disapproval and ridicule of
SCOPA’s proposed investigation into the SDP.
A suspicious mind wonder about the particular interventions which
so inhibited further investigative efforts. (See paper – SCOPA’s
Intended Arms Deal Investigations – The Interventionist Causes of its
Failure).
There is however a theory which might demonstrate some
sympathetic understanding towards the Decision-Makers and any such
shortcomings of theirs. It suggests that, as frequently happens in
organizations, those who prepare
and present analytic reports and
accompanying recommendations are the most influential parties in a
decision-making situation. That this is especially likely when the actual
decision-makers are very busy people who are not involved in the day-to-day
issues and who simply attend the occasional meeting in order to receive a
presentation and its recommendations, to ask any questions which come to mind
and then to agree or disagree with the recommendations presented.
Invariably the recommendations are accepted in such situations as the
presenter has preempted likely difficult questions which could have threatened
his/her personal choice.
Concluding Comment
The quality of the JIT
investigation as documented is generally poor and superficial, and given the
secrecy, politics and controversy which it was surrounded by,
an inevitable skepticism prevails. For
SCOPA (through its majority
produced and majority voted report) to express gratitude to and confidence in
the JIT – when it ignored almost every issue/concern SCOPA had raised and
which parliament had adopted, will remain a blight on the oversight record of
SCOPA for ever.
The high recurrence in the JIT report of shortcomings which are discovered, but than dropped or explained away as having insufficient influence to have led to different decisions, borders on the absurd. The JIT in almost every instance says that despite all that was wrong, there were no seriously negative consequences arising from any of the decisions made. The choices of arms suppliers, the prices to be paid, the I.P.’s to be received, the actions of the officials concerned etc. have all, despite the mountain of information to the contrary, turned out well. The JIT does not point out a single serious failing which was to the disadvantage of the state. No seriously damning or embarrassing findings. Not one shortcoming serious enough to cause sanction or disciplinary action for a single official - or criticism for any politician. It was an exercise which produced findings which conclude that beyond some sloppiness and a degree of inadvertent non-compliance, nothing really was wrong. All this would suggest that South Africa’s SDP amounts to the most perfect international arms deal over the past few decades - with high value-for-money acquisitions and no impropriety or dishonesty on the part of anyone. .
As this paper more than proves, the JIT did a very
sub-standard job -.whether out of pure incompetence or for whatever reasons we
will probably never know. It was an exercise of much information gathering
but with very narrow lines and very shallow depth of investigation. There
is virtually no thorough “forensic” (as defined) investigation in evidence.
At best it looked around the
peripheries of some of the SCOPA raised issues while ignoring all the more
important of these. Where it came across poor practices, it suggests that these
still somehow produced the right answers – but it never gives proof of this. And where ever it could not
produce the more important sought after answers, it simply closed the
door on the problem or question by
way of one-off statements such as
‘it is a political decision’, ‘the cabinet had a right to change
its minds’, ‘compares favorably with elsewhere in the world’,
‘there was insufficient evidence available’,
etc.
Thus the JIT have produced a report which finds little
wrong with the SDP. This led to celebration by those who might otherwise have
been embarrassed and led to the whole saga now being assumed buried. The
Executive warned every one to put the affair behind them and Parliament reacted
smartly by pushing the report through a superficial scrutiny exercise.
Of one thing we can be certain, with the JIT having taken the positions it did and Parliament (mostly through SCOPA) having abdicated its investigative responsibility, justice has not been done to the public interest. Parliament has failed the people !