Letter by Terry Crawford-Browne to SCOPA chairman Themba Godi
The Arms Deal

1. Locus Standi:

I was appointed by Archbishop Njongonkulu Ndungane to represent the Anglican Church during the 1996-1998 Parliamentary Defence Review. In keeping with the 1995 Defence White Paper, the stance of the Church was that poverty was the critical security issue facing South Africa, and that eradication of poverty required priority over the purchase of armaments. It was conceded even by the military establishment that there was no conceivable foreign military threat to South Africa to justify massive weapons purchases. Therefore, arms industry lobbyists concocted the economically-absurd proposition that expenditure of R30 billion would generate R110 billion in offsets to create over 65 000 jobs and thus would stimulate the economy.

Professionally, I had been Nedbank’s Regional Treasury Manager for the Western Cape until 1986 when I relinquished my banking career to become involved in the international banking sanctions campaign against apartheid. Given my international banking experience, I repeatedly warned Defence Review hearings that offsets are internationally notorious for corruption, and that promised benefits rarely materialise. Corruption is nothing less than theft from the poor. It is well established that corruption undermines the legitimacy of democracy in countries such as South Africa. The international armaments industry is well documented to be the world’s most corrupt business, with no compunction about instigating wars in “third world” countries in the pursuit of profit. Bribery of politicians is standard practice in the armaments industry, albeit that BAE is most especially venal.

2. Allegations Of BAE Bribery, And British Government Complicity:

As the representative of the Anglican Church, I was present in March 1998 when the Department of Defence Procurement Director, Chippy Shaik told the Joint Standing Committee on Defence that the Department wished to apologise to parliamentarians that so much time, effort and expense had been expended on investigating weapons acquisitions. The Department, Mr Shaik said, now realised that South Africa could not afford the proposed acquisitions, and would have to reconsider the country’s requirements in the light of economic and financial realities. Astonishingly, the chairman of the Committee, Tony Yengeni interrupted Mr Shaik, and instructed the Committee and the Department of Defence to proceed with the acquisitions “on the assumption of better financial days ahead for South Africa!”

In June 1998 I was invited to attend a breakfast in Parliament for the visiting Swedish Minister of Defence, and sat directly across the table from Mr Yengeni. After Mr Bjorn von Sydow’s presentation, Mr Yengeni declared that “the decision on what armaments to purchase will depend on the generosity of the offsets.” Mr Ntsiki Mashimbye added “if Sweden really wants to be generous to the new South Africa, then the BAE/Saab Gripen fighter aircraft should be manufactured in South Africa so that they could also be exported to countries such as Brazil.” The “body language” of both parliamentarians screamed “how big are the bribes.” Mr von Sydow responded that “the decision was not his to make, but that he had got the message, and that he would take that message back to Sweden.”

Within a few months, allegations swept through Parliament that Mr Yengeni had been the recipient of a £1 million “first success fee” for his assistance in procuring BAE’s position as a preferred supplier in the arms deal. Mr Yengeni was subsequently convicted of fraud in respect of the Mercedes Benz 4×4 vehicle connected to German warship contracts, and sentenced to four years’ imprisonment. He was removed both from his position as chief whip of the ANC and from Parliament, but allegations that he was also the recipient of bribes from BAE have not yet been investigated.

In December 1998 I was invited by the National Union of Metalworkers of South Africa (Numsa) to participate in a workshop in Johannesburg on the arms deal. Given the failure of GEAR to deliver jobs, Numsa shop stewards were divided on the prospect that the arms deal could deliver the more than 65 000 jobs being promised by the Department of Trade and Industry and other pro-arms deal lobbyists.

Numsa officials then informed me that additional bribes of R30 million were being laundered by BAE via two Swedish trade unions, ostensibly to fund an industrial training school but, in reality, to bribe South African parliamentarians to support the arms deal. Mr Moses Mayekiso, then head of SANCO and a member of parliament, was allegedly the conduit for these bribes. Through Swedish media sources, I obtained confirmation of payments being routed through the two Swedish trade unions, but could obtain no further verification.

Accordingly, through Campaign Against Arms Trade (CAAT) in London, I asked the British government to investigate whether BAE was bribing South African politicians. The then Secretary for Trade and Industry, Stephen Byers appointed the London Metropolitan Police to investigate. I learned in due course that it was then not illegal under British law to bribe foreigners and, therefore, as far as the British police were concerned there was no crime to investigate.

It was however, illegal in South Africa to accept bribes. The British government, and only after considerable pressure from the United States, finally enacted legislation in 2001 to give effect to the 1997 OECD Conventions Against Bribery of Foreign Officials. The British government was censured in 2007 by the OECD, and even in 2010 remains notoriously lax in its enforcement of anti-corruption commitments.

South Africa is also a party to the OECD Conventions and, in terms of section 7 of the Prevention of Organised Crime Act of 1998, failure to report even suspicions of corruption is punishable both to a fine and up to fifteen years’ imprisonment. Regrettably, those international obligations and that legislation also remain unenforced. The arms deal became the original sin that unleashed the culture of corruption which has so blemished South Africa’s constitutional democracy, and which has led to popular discontent and “non-delivery” riots.

British politicians, including Minister of State in the Foreign and Commonwealth Office, Mr Peter Hain, vehemently denied that there was any evidence of corruption by BAE. Only in 2003 did Ms Patricia Hewitt (who succeeded Mr Byers as Secretary for Trade and Industry) reluctantly admit that BAE had paid “commissions” — for which read “bribes” — to secure its South African contracts. Extraordinarily, Ms Hewitt then pleaded that these bribes were “within reasonable limits.”

British investigators had until then estimated these BAE bribes as approximately £200 million. It transpired that even the British government had baulked, and pressured BAE to reduce the bribes to “only” £115 million. (See section 5 below).

Former British Prime Minister Tony Blair in December 2006 intervened to squelch British Serious Fraud Office (SFO) investigations into BAE bribes to members of the Saudi Arabian royal family. Mr Blair spuriously claimed that the investigations threatened British national security. It transpired that BAE, with collusion of the British Department of Defence, had transferred sums exceeding £1 billion to Saudi Prince Bandar, and that these bribes were laundered through Riggs Bank in Washington DC.

Crucially related to these developments is a fund estimated to be worth US$100 billion administered by the Bank of England, and related to the notorious £43 billion Al Yamamah arms deal between Saudi Arabia and BAE. This was negotiated by former British Prime Minister Margaret Thatcher and Prince Bandar in 1985, and was renewed by Mr Blair in 2007. The fund was created by supplies over the course of 20 years of Saudi oil to Royal Dutch Shell and BP. The primary purpose of this fund, allegedly, is to secure British and American support for the Saudi royal family against local opposition and, secondly, covert destabilisation of resource-rich countries in Asia and Africa, including South Africa.

In a plea bargain agreement negotiated in February 2010, BAE agreed to pay a fine of US$400 million. However, investigations into BAE bribes to secure its South African contracts have been squelched by both the British and South African governments.

Prince Bandar has been exposed as a “bagman” for BAE, and also the ultimate conman. He was an agent for the United States Central Intelligence Agency as well as the British MI 6 and, during the 1980s, was crucially involved in instigating Afghan resistance against the Soviet Union — the consequences of which have continued to destabilise the international community. Recent Wikileaks exposés of documents relating to the ongoing war in Afghanistan again confirm the diabolical nature of the British and American war business.

Prince Bandar was a frequent visitor to South Africa during the period that the arms deal was being negotiated, and both Presidents Nelson Mandela and Thabo Mbeki were beguiled by lavish Saudi financial contributions to ANC campaign funds. Mr Mandela’s shirtmaker, Mr Yusuf Surtee, was allegedly one of the conduits for these payments. Mr Surtee was also referred to in the Schabir Shaik trial in connection with Thomson CSF bribes as “the tailor.”

It is reported that Prince Bandar was detained in Saudi Arabia in August 2009 after a failed coup d’etat against his uncle, King Abdullah, and that he remains under house arrest.

3. The Briefing To Patricia de Lille, MP From Concerned ANC MPs:

Public awareness of the arms deal scandal dates from release of this document in September 1999. In June 1999 the Cape Town representative of the South African Council of Churches, the Rev Malcolm Damon and I had met Mr Jayendra Naidoo to reiterate that church leaders were adamantly opposed to the arms deal, and that alarming reports were being received of massive corruption and kickbacks to the ANC. Archbishop Ndungane in August 1999 appealed to President Mbeki to appoint a judicial commission of inquiry into the arms deal.

ANC intelligence operatives and “whistleblowers” produced compelling evidence, which Ms de Lille and I decided should be forwarded to Judge Willem Heath for investigation. I wrote in October 1999 to the Director of the British government’s Export Credit Guarantee Department (ECGD) and to Mr Hain in January 2000 advising that the evidence against BAE was overwhelming and, accordingly, that it would be fraudulent to proceed with financing the BAE contracts pending Judge Heath’s findings. I also advised the then Minister of Finance, Mr Trevor Manuel, both verbally and in writing, and before he signed the Barclays Bank loan agreements on January 25, 2000 that give effect to the BAE contracts.

The Auditor General, Mr Shauket Fakie in September 2000 released his interim report to SCOPA, his findings included that BAE had been unduly favoured in securing the BAE Hawk and BAE/Saab Gripen fighter aircraft contracts. SCOPA conducted public hearings in October 2000, and issued its 14th report.

SCOPA’s 14th report was referred to the National Assembly, which on November 2, 2000 unanimously approved a multi-task investigation into the arms deal, and including the Heath Unit. It is public knowledge that Mr Yengeni, former Minister Essop Pahad and the former Speaker of Parliament, Dr Frene Ginwala then combined to derail that investigation. Former President Mbeki has also acknowledged that he, not then Deputy President Jacob Zuma, was the author of the abusive letter dated January 19, 2001 to Dr Gavin Woods.

SCOPA’s minutes of its meeting on February 26, 2001 will confirm how the former ministers of Defence, Trade and Industry and Finance harangued and lied to the Committee. As a former international banker, it was painfully evident to me that the Minister of Finance was totally out-of-his-depth when he aggressively lambasted Ms Raenette Taljaard, MP for her well-directed questions on the foreign exchange risks of the arms deal.

In addition, every submission at public hearings by the Trade and Industry Committee on February 6, 2001 had condemned offsets as inappropriate as an instrument for economic development. Offsets are internationally notorious as a scam developed by the armaments industry – but especially by BAE – to gain political support for weapons expenditure and armaments proliferation. They plainly violate section 217 (1) of the Constitution, which requires government procurements to be conducted “in accordance with a system which is fair, equitable, transparent, competitive and cost-effective.”

After those hearings, a shaken Minister of Trade and Industry, Mr Alec Erwin told E-TV reporters and viewers: “I and my colleagues are neither criminal nor stupid.”

It became public knowledge in May 2001 that the arms deal affordability study had warned cabinet ministers back in August 1999 that the arms deal was a reckless proposition that could lead the government and South Africa into “mounting fiscal, financial and economic difficulties.” The study also warned cabinet ministers that offsets are internationally discredited and could not be guaranteed. Inexplicably, those warnings were ignored notwithstanding the responsibility of the Minister of Finance to ensure that the arms deal was affordable, and that it would not impact negatively on the ability of the State to meet South Africa’s critical socio-economic priorities.

After numerous delays, the Joint Investigating Team (JIT) report into the arms deal was finally tabled in Parliament on November 14, 2001. As documents subsequently obtained by Dr Richard Young have confirmed, the JIT Report was criminally “doctored”, apparently by the President’s office, during the period from early October to mid November 2001.

The report’s executive summary purportedly exonerated the cabinet and government of any improprieties. Yet this summary contradicted the 350 pages of the report that found that every arms deal contract was seriously flawed by tendering irregularities. Chapter four — which deals with the BAE Hawk and BAE/Saab Gripen fighter aircraft contracts – confirms that the SA Air Force rejected the BAE proposals as early as July 1997 as unsuited and too expensive for South Africa’s requirements. It also found that the ministers of Defence and of Trade and Industry had intervened irregularly on behalf of BAE, and that the former Secretary for Defence had resigned from his position rather than take accounting responsibility for such malpractices.

One week after the JIT report was tabled in Parliament, I filed an application in the Cape High Court (case 9987/2001) in the public interest to have the loan agreements signed by the Minister of Finance set aside. These 20 year loan agreements give effect to the arms deal supply contracts.

4. BAE/Barclays Bank Loan Agreements Underwritten By The British Export Credit Guarantee Department (ECGD):

I obtained these documents of 255 pages from a source in England, and they have been verified as authentic. The main agreement is signed on page 47 by Trevor Manuel, “for and on behalf of the Republic of South Africa acting through its Department of Finance.” In my opinion as a former international banker, the agreements are a textbook example of how the British government and British banks entrap countries such as South Africa in “third world debt,” and then apply the default clauses to further impoverish them. The Minister’s own legal counsel agreed in 2003 that the representation, covenant and default clauses were “potentially catastrophic” for South Africa.

In violation of section 71 of the Public Finance Management Act (PFMA), these agreements have never been submitted to Parliament or authorised by way of a resolution of the National Assembly. I submit that the former Minister’s action was ultra vires, and totally beyond his authority. I also submit that the subsequent Barclays Bank takeover of ABSA was a further consequence of these “catastrophic” agreements.

The ECGD is notorious in Britain for turning a blind eye to corruption to promote British arms exports, most especially by BAE which is by far its largest client. Accordingly, I now hand over copies of the main loan agreement signed by Mr Manuel — including the representation, covenant and default clauses, paragraphs 21 to 23 — to SCOPA for investigation why they were never referred to Parliament as required by the PFMA, and for remedial action.

5. British Serious Fraud Office (SFO) And Scorpions Affidavits On Bribery Payments By BAE:

The then Deputy Director of Public Prosecutions, GD Baloyi on November 19, 2008 obtained requisite authority to search various premises in South Africa related to bribery payments made by BAE through front companies, in particular by Red Diamond Trading Company incorporated in the British Virgin Islands. Affidavits by Gary Daniel Murphy of the SFO and Johan du Plooy of the Scorpions totalling 163 pages detail how BAE (previously known as British Aerospace) paid bribes of £115 million to secure its arms deal contracts with South Africa, and to whom and into which bank accounts the payments were made.

Paragraph 20 entitled “Remedies in case of bribes” on pages 43 and 44 of the supply agreement dated 3 December 1999 between Armscor, the Department of Defence, the Department of Trade and Industry and British Aerospace (Operations) is clear. It states:

If the seller or any of its members or representatives in relation to negotiating, entering into or execution of the Agreement has:

1. Been convicted of having committed an offence under the Prevention of Corruption Act or analogous legislation in any relevant jurisdiction by, for example, having promised or caused on its behalf to be promised, offered or given any kind of illegal gift, illegal advance or illegal consideration, or

2. Been convicted of fraudulent, illegal or criminal acts in obtaining or in execution of the Agreement;

3. Armscor and the South African government may summarily cancel the Agreement and claim damages.

I now hand over copies of the SFO and Scorpions affidavits for investigation by SCOPA. I submit that in violation of South Africa’s commitments to the OECD as well as to the citizens of this country, the Directorate of Public Prosecutions has been criminally negligent in failing to take action against the beneficiaries of the BAE bribes. In addition, given the tendering irregularities revealed in chapter four of the JIT report, the citizens are entitled to demand why the government has not summarily cancelled the BAE agreement and claimed damages.

The two most prominent persons of many people and companies named in these affidavits are Mr Fana Hlongwane and Mr John Bredenkamp. Mr Hlongwane was the assistant to the former Minister of Defence, the late Joe Modise. Mr Bredenkamp is a Rhodesian-Zimbabwean who has a long history of criminality. He was a tobacco and arms sanctions buster during the Rhodesian UDI period, and is subsequently alleged to have become one of President Robert Mugabe’s main financial sponsors. He is BAE’s main agent in Southern Africa and also, allegedly, a top British intelligence agent.

Mr Bredenkamp was named in 2001 by the United Nations investigation into the plunder of resources in the Democratic Republic of Congo. His assets in the United States have recently been frozen by the US Treasury, and he is currently challenging a blacklisting in South Africa by Standard Bank by pleading in the Constitutional Court that this action unfairly prevents him from conducting business in South Africa.

Amongst many allegations in the public domain concerning the arms deal is the highly controversial question whether the arms deal was the payback to Mr Modise from President Mbeki for his role in the 1993 assassination of the late Chris Hani, and thus the removal of Mr Hani as a candidate to succeed President Mandela.

It is further alleged that Mr Janusz Walus was ultimately employed by Mr Bredenkamp on behalf of BAE to undertake that murder, Mr Bredenkamp also having made little secret of his propensity for “third world procedures.” Mr Hani was known to be opposed to the proposed arms deal because of the corruption it would unleash.

These remain allegations, but are extremely serious allegations that require thorough investigation because the assassination nearly derailed South Africa’s transition to democracy.

The current Director of National Prosecutions, Mr Menzi Simelane in March 2010 intervened to block prosecution of Mr Hlongwane. Despite detailed affidavits, Mr Simelane claimed that the case against Mr Hlongwane had been abandoned because of lack of evidence. The refusal to prosecute the persons named in the SFO and Scorpions affidavits thus substantiates concerns expressed by the OECD that there is little political will to comply with South Africa’s international obligations to deal with corruption and money laundering.

Nonetheless, Mr Simelane in May 2010 advised SCOPA that the NPA had washed its hands of all investigations relating to the arms deal, and was in the process of handing rooms-full of documents to the Hawks. Accordingly, copies of these affidavits are also being handed over to the Hawks for further investigation.

Consequent to the raids by the Scorpions, Archbishop Desmond Tutu and former President FW de Klerk on December 1, 2008 jointly petitioned President Kgalema Motlanthe to appoint a judicial commission of inquiry into the arms deal. President Motlanthe dismissively informed them that the matter had already been investigated by the Joint Investigating Team and that a commission of inquiry would not assist in bringing greater clarity to the arms deal controversies.

Another plea for such a commission of inquiry was made when President Jacob Zuma came to office. President Zuma also responded that there was no case for such investigation. Accordingly I have instituted action in the Western Cape High Court for an order compelling the President to appoint an independent judicial inquiry into the arms deals on the basis that the accumulated prima facie evidence of irregularities and possible corruption render it irrational not to do so in the face of the repeated requests from various quarters that the necessary commission look into the situation.

6. Perjury And Money Laundering Charges Against Trevor Manuel:

On August 20, 2008 I filed a criminal complaint against Mr Manuel – Cape Town Central Commercial Branch CAS number 20/08/2008. In almost two years no action has been taken by the SA Police Services to investigate or prosecute this matter. I also now hand over copies of these documents for examination and investigation by both SCOPA and the Hawks.

The submission by Dr Young again confirms that Mr Manuel committed perjury when he certified that he had complied with a March 2003 order by the Cape High Court that he furnish discovery to me within ten days of the International Offers Negotiating Team and Financial Working Group papers regarding the arms deal. It became evident that, in fact, he furnished less than three percent of the documents to which I was entitled.

Whether Mr Manuel was a financial beneficiary of the corruption associated with the arms deal is irrelevant. His function as Minister of Finance in the Cabinet’s arms deal sub-committee was the affordability and financing of the acquisitions. He was repeatedly warned of allegations of corruption relating to the arms deal, including bribery payments to the late Mr Modise.

In violation of the Prevention of Organised Crime Act (1998), Mr Manuel not only failed to investigate the allegations, but actively engaged in impeding and thwarting investigations by SCOPA and others. As noted on page 2 above, even failure to report suspicions of corruption is subject to imprisonment of up to fifteen years.

As attested by the repeated receipt by SCOPA of qualified financial statements for government departments, almost all government departments are now dysfunctional. This disgraceful situation impacts most severely on the poor, denied government services to which they are entitled and which are crucial to the eradication of poverty. Section 216 of the Constitution sets out the obligations of National Treasury that public financial resources are not squandered or mismanaged.

The arms deal was not only the “original sin” that unleashed a culture of corruption in South Africa. It is also, in the description by Idasa, the “litmus test of South Africa’s commitment to democracy and good governance.” In casting a blind eye to corruption with respect to not only the arms deal but virtually all government departments Mr Manuel, I submit, criminally failed in his constitutional obligations to the people of South Africa.

Perjury and money laundering are extremely serious matters. When a person in the position of Minister of Finance is involved, it makes a mockery of South Africa’s constitutional democracy, and the commitment of section 2 that the “Constitution is the supreme law of the Republic; law or conduct inconsistent with it is invalid, and the obligations imposed by it must be fulfilled.”

7. Remedies Proposed:

SCOPA’s mandate and responsibility is to ensure that taxpayers receive value for money. The submarines and frigates (mistakenly described as corvettes) lying idle in Simon’s Town harbour illustrate how public resources were squandered on warships that the country did not need and could not afford. The SA Navy now complains that it cannot afford even to fuel these vessels. Some R10 billion was wasted that more appropriately should have been spent on housing, education or health services.

The BAE Hawk and BAE/Saab Gripen fighter aircraft contracts constituted more than half of the cost of the arms deal. Only seven of 28 Gripen aircraft have so far been delivered. It is public knowledge that the SA Air Force lacks the pilots to fly these aircraft, the mechanics to maintain them and even the money to fuel them. The cost of fuel per hour is alone estimated at US$5 000 (R37 500).

In terms of the bribery clauses outlined in section 5, the government has the option to cancel these contracts and to claim compensation. The affidavits regarding bribes of £115 million paid by BAE to secure these contracts are unambiguous, and the recipients of these bribes must be prosecuted. These contracts are underwritten by the British government’s Export Credit Guarantee Department (ECGD). The financial consequences flowing from cancellation of the BAE contracts would therefore fall to British rather than South African taxpayers.

The affidavit by Mr Johan du Plooy sets out in detail why the Directorate of Special Operations (Scorpions) within the Directorate of Public Prosecutions had reason to believe that BAE and its agents in South Africa had committed the following offences:

i) Racketeering in contravention of section 2 of the Prevention of Organised Crime Act, no 121 of 1998, (POCA)

ii) Corruption in contravention of section 1 of the Corruption Act, no 94 of 1992 and section 3 of the Prevention and Combating of Corrupt Activities Act, no 12 of 2004,

iii) Money laundering in contravention of section 4 of POCA, and

iv) Fraud.

1. These are extremely serious charges. Accordingly, I boldly suggest that SCOPA should recommend that the Hawks and National Prosecuting Authority must urgently proceed with prosecution, including the possibility of plea bargaining against full disclosures, so that the BAE contracts can be cancelled in terms of their bribery clauses.

2. Eleven years have now elapsed since Archbishop Ndungane first called for a judicial commission of inquiry into the arms deal. Judge Chris Nicholson, in his judgement in September 2008 that led to the removal from office of former President Thabo Mbeki, also called for such an investigation, as did Archbishop Tutu and former President FW de Klerk in December 2008. The affidavits confirm beyond any reasonable doubt the need for such an investigation to determine why and how South Africa became ensnared in the arms deal scandal. They also substantiate the admission in 2003 of a former British cabinet minister that BAE had paid bribes to secure its arms deal contracts. Those bribery payments evidently continued until at least the end of April 2004. Accordingly, I respectfully request SCOPA to recommend to President Jacob Zuma that he accedes to these calls to appoint such an investigation in terms of section 84 (2) (f) of the Constitution.

3. Perhaps most crucially of all is the necessity to begin to rollback deliberate destabilisation and impoverishment of the continent of Africa by the British and American “war business,” which the Bush and Blair administrations promoted in Iraq, Afghanistan and Africa under the pretext of the “War Against Terror.” The so-called “Africa’s First World War” in the Democratic Republic of Congo and the “failed state” in Somalia are but two manifestations in Africa of covert operations by the BAE/Al Yamamah fund administered by the Bank of England, investigation of which Mr Blair insisted in 2006 and 2007 would violate British national security. The assassination of Mr Chris Hani in 1993 allegedly was another example.

Terry Crawford-Browne
August 6, 2010