Press Statement by :

Economist Allied for Arms Reduction - South Africa

October 21, 2003

ECAAR-SA
3B Alpine Mews
High Cape
Cape Town 8001

021-465-7423
ecaar@icon.co.za 

The ANC government's decision to spend US$4.8 billion on warships and warplanes remains incomprehensible to the majority of South Africans and to millions of people around the world who supported the struggle against apartheid.

ECAAR-SA's litigation to cancel the arms deal financial agreements was brought as a class action in terms of Section 38 on behalf of poor people. It is inexplicable that there is apparently funding available for armaments but not for housing.

In his judgment of 7 July 2003, Judge Selwyn Selikowitz quoted at length from the Irene Grootboom judgment, and rejected the City of Cape Town application for eviction of squatters. Referring to the Constitutional Court, he also noted that while there is a shortage of funding to provide housing, it is also incumbent upon the State not to aggravate the situation and to "desist from preventing or impairing the right of access to adequate housing".

It is also inconceivable that the armaments acquisitions can be reconciled with Section 217 (1) of the Constitution, which requires that government procurements should be conducted in accordance with a system "which is fair, equitable, transparent, competitive and cost-effective".

The Joint Investigation Team report found that every arms deal tender, but most especially the corvette contracts, was riddled with tendering malpractices and irregularities. Even Armscor's legal department recommended that the German Frigate Consortium should be disqualified.

The first German-built corvette, the SAS Amatola is scheduled to arrive in Simon's Town on November 4. Fitment will take two years before the SAS Amatola can be commissioned into the SA Navy in late 2005.

A. Corvettes:

Chapter Seven of the Joint Investigation Team report into the arms deal covers the corvette tenders, which were won by the German Frigate Consortium despite numerous irregularities.

The findings note:

7.7.1. With the exception of Bazan, all the bidders involved in the Corvette procurement programme failed to comply with the minimum evaluation criteria in respect of financing, technical requirements and Defence Industrial Participation. Bazan failed only in terms of the financing evaluation criteria.

7.7.2. The decision to allow bidders to supply information after the offers had been submitted constituted a deviation from proper procurement practice.

Recommendations:

7.8.1. Once evaluation criteria and instructions have been compiled, compliance with these should be enforced, even if it means the process must re-commence from the RFO (Request for Offer) stage. This will ensure a fair, competitive and open procurement process.

The JIT was particularly scathing about the German Frigate Consortium, declaring:

7.3.3.5 Non-conformance with critical minimum criteria

(iii) The Meko A200 of GFC failed the specified engine compartment vulnerability separation requirement due to the CONDAG-WARP design. The design apparently affords other compensating vulnerability advantages and did not need to be corrected.

7.3.5.4 The results of the forensic investigation

(c) Non-conformance to critical criteria

(i) GFC did not comply with the minimum criterion specified in the DIP value system of providing a bank or sovereign guarantee to the value of 5% of the DIP commitment. GFC should have been disqualified from proceeding to the next round of evaluation. The said guarantee, according to one evaluator, was submitted only on 6 June 1998 after GFC had been requested to do so by the co-chairpersons of SOFCOM. Despite this non-conformance, GFC proceeded to be evaluated in the next round after SOFCOM's chairpersons approved a request by Mr Van Dyk to allow GFC to comply with this requirement.

(ii) This was clearly a deviation from the value system instructions. Had it not been for this late submission of the guarantee, GFC would not have proceeded to the second stage of evaluation and would therefore not have won the bid for the Corvettes. According to DoD, the decision to allow GFC to submit the guarantee after the tender submission date, was taken in terms of the tender rules and RFO documents. The specific paragraphs referred to by DoD in the RFO are the following:

2.1.3 The buyer reserves the right to deviate from the prescribed rules applicable to prospective contractors (K-STD-0010) in any case where such deviation is deemed justified.

2.10.1 Offerors may submit an alternative offer not strictly in accordance with the requirements, or an alternative offer to satisfy a requirement, provided all information requested by the RFO is furnished by the closing date. The alternative offers and deviations from the requirement must be indicated in the offer.

(iii) Upon noting non-compliance by GFC with the minimum DIP criteria, Mr Van Dyk sought legal opinion from Armscor's legal division on 14 May 1998.

(iv) On 22 May 1998, the legal division issued its opinion, confirming the non-comformance by, inter alia, GFC.

On 1 June 1998 Mr Van Dyk issued a memorandum to the chairpersons of SOFCOM requesting, inter alia, that they approve the procurement of additional information from the non-complying bidders in order for them to comply. The memorandum was issued notwithstanding the fact that legal opinion had already confirmed the deviations and that the evaluation team held the opinion that the non-complying bidders should be disqualified.

Upon enquiry, Mr Van Dyk asserted that no consideration was in fact given to the legal opinion.

Closely related to the corvette controversy are the allegations by c2i2 that the contract for the information management system for the combat suite for the corvettes was wrongfully awarded to the French company Thomson CSF rather than to the local company c2i2. The latter is suing government for R150 million, and claims that the German-built corvettes are being equipped with 20 year-old obsolete French technology instead of state-of-the-art technology developed in South Africa which is now used by the US Navy, including the aircraft carrier USS Ronald Reagan.

Chapter Eleven of the JIT report attempts to mitigate government arguments that c2i2's technology was unproven, but these arguments have been discredited. Thomson CSF has a very chequered history, and is centrally involved with recent armaments industry scandals and the French government's covert operations in Europe, Africa and Asia. Thomson CSF is now a likely buyer for Howaldswerke Deutsche Werft (HDW) Shipyard, a member of the German Frigate Consortium and proposed builder of the second and fourth corvettes.

B. Housing:

The Irene Grootboom case is a landmark constitutional case. The Constitutional Court in October 2000 held that the State has an obligation to implement an effective plan to provide emergency shelter for destitute people, especially children. Irene Grootboom was one of a destitute group of 390 adults and 510 children, stranded on a sports field belonging to Oostenberg municipality in the Western Cape. Their shacks had previously been demolished by the municipality, which was now also determined to remove them from its land.

Three years later the housing situation is even worse. The Cape Times reports that :

the Cape High Court on 15 October 2003 refused the City of Cape Town leave to appeal against a ruling earlier this year that its housing programme failed to comply with its constitutional and statutory obligation. The City had in July asked for an order so that some 50 occupants of an informal settlement in Valhalla Park could be evicted, and their structures be demolished.

The City confirmed that there were more than 250 000 applicants for housing on its waiting list, and the figure was growing by 25 000 a year. Enough funds were available to build only 10 000 homes per year in the Cape Metropolitan area.

Justice Selwyn Selikowitz dismissed the application to appeal, saying that the City had failed to comply with the constitution which required the state to take reasonable measures to achieve the realisation of the right to adequate housing. The City was further ordered to deliver a report stating what steps it would take to comply with the constitution.

In his judgment, Selikowitz notes Section 26 (2) requires the State to devise and implement within its available resources a comprehensive and coordinated programme progressively to realise the right of access to adequate housing. He also notes Section 237 requires all constitutional obligations must be performed diligently and without delay.

The shortage of financial resources is raised continually to explain the housing crisis in the Western Cape. Yet the expenditure on purchasing four corvettes could, instead, have resolved the housing crisis. The contract price in 1999 values for the four vessels was Euros 612 million plus R1.5 billion , excluding the costs of the combat suite. In current values in rand terms, the cost of the four vessels is estimated at R10 billion. In eight years the estimated costs have risen from R1.7 billion: no one knows what the eventual costs will be by the time the payments have been finalised in 2011.

The City of Cape Town admits that the current housing shortage amounts to 250 000 units. At the current housing subsidy of R23 000 per unit, all 250 000 houses might be built for R 5.75 billion, ie for very considerably cheaper than for the cost of four corvettes. The Constitution imposes an obligation on the State to properly prioritise its expenditure, and the provision of housing is a matter of constitutional priority.

In the Western Cape the housing backlog is estimated at 310 000 units, and is projected to increase to 410 000 units by the year 2006. Even all 410 000 units could be built for R9.4 billion - again less than the cost of four corvettes. Closely related to the housing crisis, is the unemployment crisis.

The Department of Housing estimates that every R3 billion spent on housing construction sustains 45 000 jobs in the building industry, and an additional 43 000 jobs in provision of building materials. Thus a dramatic contribution could be made in job creation by prioritising low-cost housing instead of warships.

In one of his earlier cartoons on the arms deal, Zapiro in 1995 showed a group of demonstrators demanding houses. The Minister of Housing declares: "sorry, the houses aren't ready yet, but maybe Mr Kasrils would let you sleep in a corvette".

Almost ten years after the transition to democracy, neither issue has been resolved. Judge Selikowitz on 15 October 2003 ordered the City of Cape Town to develop a plan to address the housing crisis. As confirmed by the Joint Investigation Team report, the corvette contracts fail the tests of Section 217 (1) of the Constitution and should be set aside.

With both the State and the City having failed to address the housing crisis, let us apply for the court to order that the corvette contracts are set aside, and that the funds are applied to house the poor on whose behalf our application to cancel the arms deal is made. Can we do so as an urgent interdict to prevent the SAS Amatola from entering South African waters on 4 November 2003?

(With the legal team, we decided on October 28 not to expend energy and money on an interdict, and to focus our efforts on the November 17 and February 17 court dates).

The question in the corvettes versus houses battle is whether the Constitution is just a "tourist constitution" - good for foreign consumption but useless in the townships. South Africans will rue the day if our constitution proves to be just a useless scrap of paper. The arms deal is truly the litmus test of South Africa's commitment to democracy and good governance.

Terry Crawford-Browne October 21, 2003