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The Genie Is Out Of The Bottle – South African Arms Deal

Since 30 September 2010, when the Hawks officially closed their investigations into criminality in the arms deals concluded by South Africa with various arms dealers based in Europe, there have been some developments which are good cause for hope for those who long to see constitutional democracy under the rule of law flourish in post-apartheid South Africa.

The decision to close the files is, in itself, not above criticism. The Hawks are ill suited to the type of investigation required. They have no will, insufficient skill and a shortage of capacity to deal with the wealth of information that strongly suggests that there was a lot of corruption, bribery and irregularity in the conclusion of South Africa’s deals with European arms companies. The Hawks lack the sapiential authority or “clout” to take charge of a corruption enquiry at the level required in the arms deal. Unfortunately, the Scorpions, who did have the clout required to do so, are no more.

As always, the starting point is the Constitution itself. Section 217 sets out the requirements for procurement by the state, this includes purchase of armaments. It demands a system which is “fair, equitable, transparent, competitive and cost-effective”. The arms deals are arguably none of these.

Participating in the fourth global conference of the Gothenburg Process in London on 29 October, Andrew Feinstein spoke movingly about the South African arms deal and its impact on democracy and socio-economic development. He developed a compelling argument in favour of the proposition that the global arms trade undermines accountable democracy. This is not only because of the use and abuse of arms in the world, it is also because of the way in which arms deals are done. The practice of paying bribes to middlemen and officials is both illegal and reprehensible. The inducements offered by way of the so-called off-set deals seldom come to fruition. The waste of working capital inherent in buying weapons that are “not needed and barely used” (as Feinstein put it) when the money could be better spent on socio-economic development is also self-evident.

Developing his theme, Feinstein pointed out that the socio-economic opportunities lost have served to undermine the rule of law. The lack of responsiveness to the needs of ordinary people in South Africa has meant that there is now a backlog of over 2 million housing units; leaving some 12 million less fortunate citizens inadequately housed. Among them are 6 million AIDS patients, 355,000 of whom died avoidably because there was no money for their treatment available.

Even before Feinstein spoke out so boldly, several Swedish NGOs had laid a criminal complaint against SAAB, the manufacturer of the Gripen aircraft delivered by the BAE/SAAB partnership which landed the SA aircraft arms deal after Joe Modise decided to throw overboard the prescribed criteria and adopt a “visionary approach” in which price, believe it or not, was not a criterion for selection of the BAE/SAAB aircraft.

In Germany there are festering investigations both into a $3 million bribe solicited by Chippy Shaik and a payment of R30 million by Ferro-Staal to Thabo Mbeki, who gave R2 million to Jacob Zuma and the rest to the ANC according to a report carried by the Sunday Times two years ago. Neither president nor the ANC has sued that newspaper for defamation. This tends to suggest that there is veracity in Feinstein’s assertions that the 1999 election campaign of the ANC was paid for out of bribes given in the arms deals.

By far the most interesting new development is the fresh probe launched into the activities of KPMG, the accountants who advised BAE on how to “structure the commissions” and to disguise their payment via an elaborate scheme of corporations and the use of the British Virgin Islands banking system as a safe haven for so doing. The Accountants and Actuaries Disciplinary Board in London is determined to ascertain whether the standards of professional ethics required have been adhered to by KPMG. This investigation has every potential to unlock a veritable treasure trove of information. There are several indications that R1 billion in bribes were paid in the BAE deal. This has already been admitted on the basis that “commissions were kept within reasonable limits” in the British House of Commons. A South African court has also been satisfied, on a prima facie basis, that there was wrongdoing in the deal. If KPMG is found to have given advice to enable that wrongdoing, consequences of a disciplinary nature can be expected. This will echo the fate of Steve Biko’s doctors.

The truth is, as stated by Andrew Feinstein, that about US $300 million in bribes were paid in all of the deals which make up the arms deal of 1999. This means that slightly less than half of the bribes relate to the BAE/SAAB aircraft deal.

It is very difficult for the many well meaning members of the ANC who were not involved in the bribery, to credibly assert that there is now zero tolerance of corruption in tenders when the massive arms deals tender corruption festers in our midst. All initiatives directed at stamping out corruption become suspect if nothing is done to properly address the corruption in the arms deals. Feinstein encourages his audiences to drop the polite “allegations of corruption” and simply call a spade a spade. He has not been sued nor have the other authors of the books on the subject.

The new developments around the arms deals are a test of the extent of the resolve of the government to deal comprehensively with corruption. If the arms deal probe within South Africa is left buried and the Hawks continue to turn a blind eye or to offer half-baked and begrudging assistance to foreign based investigators, the writing will be on the wall for the rule of law in South Africa. Failed state status will beckon. If however, an independent commission of inquiry is appointed and suitably empowered to fully investigate, then the prospects for the rule of law look rosier.

Cancelling the arms deals, and reclaiming all payments made, is an option which the government needs to seriously consider; both in the interests of the public and of its own probity. It is the right thing to do.

Paul Hoffman SC
9th November, 2010

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