Arms deal probe

The 380-page report of the official investigation into the strategic defence package has failed to defuse controversy over the deal, in large measure because it has cleared the government of all responsibility for the "irregularities and improprieties" that its sleuths discovered. When they drafted the report, the high-powered investigators seem to have discarded the doctrine of accountability - which featured so strongly in the vocabulary of the African National Congress when it first came to power in 1994.

The report declares: "No evidence was found of any improper or unlawful conduct by the government." From that conclusion it proceeds to another. The moral and logistical deficiencies of the "certain officials in government departments" cannot be ascribed to the president or to his ministers, four of whom - the ministers of defence, finance, trade and industry and public enterprise - were heavily involved in overseeing the process of procuring armaments. But, to quote Raenette Taljaard of the Democratic Alliance, if government ministers are not responsible for the actions of high-ranking officials in their departments, particularly where billions of rands of public money is at stake, who is? That is a question that the report fails to answer.

The silence of the three high-powered investigators - the Auditor General, the Public Protector and the National Director of Public Prosecutions - is a major weakness in their report. It accounts in part for the cries of protest from opposition parties and the belief that the report has, as Patricia de Lille of the Pan Africanist Congress puts it, white-washed the government. One of the officials who played a pivotally important role in the arms deal, and whose honesty is questioned in the report, is Shamin "Chippy" Shaik, the chief of acquisitions. Apart from his role as acquisitions chief, he occupied several more influential positions in the process of deciding what fighter aircraft, warships, submarines and helicopters to buy, and from whom and under what conditions. He was chairman of the project control board, co-chairman of the strategic offers committee, and secretary of the ministers' committee.The investors found that there was a conflict of interest between his role as chief of acquisitions and the business stake of his brother, Shabir Shaik, in Thomson-CSF Holdings (SA), Thomson-CSF and African Defence Systems (ADS), companies that tendered successfully for contracts in the arms deal. Shabir served as a director of Thompson-CSF (SA) until September 1999 and was, at the time of the investigation, a director of both Thomson-CSF and ADS.

Questioned about the conflict of interest during his appearance before Parliament's Standing Committee on Public Accounts (Scopa), Shamin explained that he recused himself when decisions had to be made about the companies with which his brother was linked. But the Auditor General, Shauket Fakie, who had access to the confidential minutes of the projects control board, concluded of a meeting of the board on May 27, 1999: "He did not declare any conflict. Nor did he recuse himself. He actively participated in the decisions relating directly to the issue in respect of which he had previously declared a conflict of interest".

The report concluded more generally that Shamin "continued to take part in the process that led to the ultimate awarding of contracts" to companies in which his brother had a stake, "even after admitting that he had a conflict of interest in December 1998". The report's general findings on Shamin end with another damning sentence: "During the course of the investigation it was established that the chief of acquisitions has not applied for and did not receive the military security clearances required by law".

Since then the situation has become graver for the Shaik brothers. Shabir has been arrested and charged with theft relating to his alleged possession of minutes from the cabinet sub-committee of which his brother, Shamin, is the secretary. The minutes relate to arms procurement, according to Sipho Ngwema, spokesman for the National Directorate of Public Prosecutions. If Shabir is in possession of cabinet minutes, his brother Shamin is suspected of providing them and, by implication, of blatantly and dishonestly abusing his position of influence in the department of defence. Responding to journalists who asked how Shabir could have been in possession of the minutes, Ngwema says: "He will have to explain that in court". He then adds: "I don't know. But you and I know that his brother is head of acquisitions."

Important questions of accountability are at issue, in particular the question of who should be held to account for Shamin's deployment in the upper echelons of the department of defence without the prerequisite security clearance. Trade and Industry minister Alex Erwin is on record as admitting in his evidence to Public Protector Selby Baqwa that he and his co-ministers knew of Shamin's conflict of interest. In spite of that he has defended the retention of Shamin as chief of acquisitions, on condition that he recused himself when his brother's companies were involved as contenders for a stake in the arms deal. As he puts it in his testimony to the public hearing on the arms deal: "The president knew about it. We issued an instruction that he must recuse himself." It has to be asked, however: who was responsible for ensuring that he did so, if not the minister of defence? Another question arises: if the minister of defence failed to ensure that Shamin recused himself, how can the investigators exonerate the government as completely as they do?

The implications of Shamin's failure to recuse himself raise doubts about the categorical insistence by President Thabo Mbeki and the four ministers involved that the primary contracts between government and the winning armament companies are "fail-safe" against corruption. These doubts are intensified by the complaints from two contending arms manufacturers that Shabir had told them that they would have to conclude a deal with either ADS or Futuristic Business Solutions - between whom there are links - if they wanted to be considered seriously for a primary contract. Their complaints, voiced privately to a member of Scopa, are known to have been referred to the joint investigating team.

The minister of defence during a major proportion of the acquisition process was Joe Modise, who is now a businessman with reported interests in the armaments industry. During his time as minister Modise was - as the joint investigation report notes - "actively involved in the procurement process before his retirement" in June 1999. The report refers to an allegation that Modise was involved in a company that "was to benefit from" the strategic defence package. But it seems to come to contradictory conclusions about the allegation. It records (page 286) that the "matter was not investigated during the public and forensic phrase of the investigation", only to state in the final summary of its findings and recommendations that "no evidence of impropriety was found [against Modise] during the public and forensic phases of the investigation". Until that ambiguity is cleared up, a shadow of suspicion will linger over the former minister and, by extension, the government in which he served.

The report identifies many anomalies that characterise the procurement of arms in the strategic defence package. One relates to the dual and contradictory role of ADS in the selection of subcontractors for the four frigates purchased from the German Frigate Consortium (GFC). ADS was simultaneously part of the GFC and a contender for subcontracts. That - in the words of the report - "amounts to non-compliance with good procurement practice" and almost certainly accounts for the failure of the rival Cape Town-based company, C2I2 to win the subcontract to provide an integrated management system. Another anomaly is found in the awarding of the contract to supply fighter aircraft and lead-in fighter trainer planes to BAE Systems instead of the originally preferred bidder, Aermacchi MB339FD. Aermacchi lost its status as number one contender when the terms of the tendering process were changed, at the request of defence minister Modise, to include a non-costed option. In his initial special review the Auditor General described that change as a "material deviation from the originally adopted value system". But the joint investigating report appears to back away from that initial assessment, describing the decision as "unusual" but neither "unlawful nor irregular" and consistent with prerogatives of the government. Perhaps so. But the report contains as eye-catching sentence which challenges the insouciance with which the BAE award is justified: "The Secretary for Defence remarked that the cost of the (BAE) Hawk would be twice that of the MB339FD for an increase in performance of approximately 15%". Taljaard believes that the award to BAE should be investigated in the context of the donations paid to the Umkhonto we Sizwe War Veterans Associations by BAE. Modise is, of course, a former commander of Umkhonto.

Another broader anomaly was the failure of the investigating agencies to keep Parliament's public accounts committee, the initiator of the probe, informed of the progress of the investigation or even to indicate their broad framework of reference. The joint investigating team's aloof, if not disdainful, attitude towards Scopa contrasts with its co-operative approach to the government - even though it was the government's handling of the arms procurement process that was under investigation. The joint investigating team referred a complete draft copy of the report to President Mbeki and the ministers of defence, finance, trade and industry and public enterprise. But Auditor General Fakie failed to inform Scopa about the referral when he briefed the committee on the progress made towards completion of the report on October 16. Opposition parties were incensed when they heard that a draft version of the report had been made available to the president and the four ministers.

Fakie defended the decision to refer the report to the president by saying it was required to fulfil the "doctrine of legality" and to give the government as an "affected party" an opportunity to present "explanatory information". But the opposition feared that by affording the government an opportunity to make explanatory inputs, the Auditor General was actually providing it with a chance to revise the report. He dismissed as untrue press reports about a wholesale rewriting of the joint investigation team's account of, and conclusions on, the arms deals after the interaction with government. But suspicions remained that the investigators had been prevailed upon to revise their report to take account of government explanations.

Taljaard, the Democratic Alliance leader on the public accounts committee, sought to attain greater clarity. In a letter to Fakie she requested detailed information about:

• when the draft report was made available to the president and the quartet of ministers;

• whether the submissions from the government were included in the final report;

• if so, when the report was recast to make provision for them;

• whether the report was re-submitted to the president after the explanatory inputs were added.

Fakie, however, declined to reply in writing and, instead, admonished Taljaard for not trusting him during a brief exchange when the report was presented in Parliament on November 16.