Sunday, April 10, 2011

THE ARMS DEAL SCANDAL

New evidence:

A number of key pieces of evidence have recently surfaced, much of which supports
the notion that changes were made to the report and that a number of critical pieces of
evidence outlining irregularities in the acquisition process were removed.
The evidence in question includes:

• Draft copies of the JIT report, including handwritten notes requesting additions
and omissions.
• The full transcript of an interview with the former Secretary of Defence, Pierre
Steyn.
• A set of disputed minutes relating to the decision to choose BAe/SAAB as the
preferred bidder for the LIFT and ALFA projects.


When this new evidence emerged late last year government was
characteristically dismissive and even silent on the issue. Joel Netshitenzhe
questioned the longevity of the controversy saying that he believed that the
storm would die down within days and that people should not read “silence
as proof of evil”.
Netshitenzhe argued that there was nothing inherently wrong with
government being consulted before the release of the final report. This
position ignores the fact that government was a far from disinterested party
in the investigation, but rather the very subject of the investigation itself.
Any objective observer can see that the integrity of an investigation would
be severely compromised if the subject of the investigation was able to
“cherry pick” what it wanted included and excluded from the final JIT report.
The fact that the report was subjected to such substantial changes raises a
number of fundamental questions regarding the conduct of the A-G,
including the following:

1. If the A-G is compelled to refer reports with a direct correlation to
the Special Defence Fund, why was the Special Review of the
New evidence:
A number of key pieces of evidence have recently surfaced, much of which supports
the notion that changes were made to the report and that a number of critical pieces of
evidence outlining irregularities in the acquisition process were removed.
The evidence in question includes:
• Draft copies of the JIT report, including handwritten notes requesting additions
and omissions.
• The full transcript of an interview with the former Secretary of Defence, Pierre
Steyn.
• A set of disputed minutes relating to the decision to choose BAe/SAAB as the
preferred bidder for the LIFT and ALFA projects.
2
Selection Process of the Strategic Packages not referred to the
Presidency?
2. Why were the then Secretary of Defence Pierre Steyn’s objections
to the purchase of Hawk and Gripen fighter planes documented in the
earlier drafts of the report but downplayed in the final version?
3. Why was the existence of a second set of minutes which disputes
the fact that the BAe/SAAB was chosen as a preferred bidder at a
special MINCOM meeting in 1998 not investigated more fully?
4. Why were a number of deviations from agreed tender evaluation
procedures recorded in earlier drafts either downplayed or omitted
from the final version?
5. Why did the A-G fail to sufficiently interrogate the fact that it
appears government manipulated the acquisition process to fit a
predetermined choice in the form of BAe/SAAB?
6. Why did the JIT report fail to vigorously interrogate the bizarre logic
that expenditure of more than R30 billion on arms would bring over
R100 billion in investments?
7. Why in the interests of transparency, did the explanations and/or
comments, contained in the management letters between the
Presidency, MINCOM and the Department of Defence, not form part of
the report?
8. If it was entirely regular to make such changes why did the A-G tell
Parliament that no such changes of this nature were made?
Steps taken by the DA to uncover the truth:
The DA believes that these questions will not go away until they have been
fully answered.
The DA has already explored a number of avenues to get the answers that

• In December last year, we wrote to President Mbeki requesting him to
establish a Judicial commission headed by a respected judge to investigate
fresh allegations that there was executive interference that resulted in
substantive changes to the draft JIT report. The Presidency has yet to respond
to the substance of our request.

are required:


We also placed the matter on the agenda of the Ad-Hoc committee on the
Auditor-General where the matter was discussed three times. The committee
has subsequently received legal opinion which argues that due its temporary
nature it is precluded from launching an investigation into the matter.
• On the strength of this Eddie Trent MP has written to the Chair of SCOPA
Francois Beukman requesting him to put the matter on SCOPA’s agenda. The
matter is now due to be discussed by SCOPA when Parliament reconvenes.

Evidence and allegations that SCOPA needs to investigate:

• 1. The draft JIT report was changed:
In his Special Review1 the Auditor-General came to number of damning
conclusions including the following:

“I am of the opinion that the aspects of independence, fairness and impartiality
could have been addressed more significantly.”
• “The potential conflict of interest that could have existed was not adequately
addressed by this process.”
• “The fact that a non-costed option was used to determine the successful bidder
is in my opinion a material deviation from the originally adopted value
system.”
• “The Advanced Light Fighter Aircraft (ALFA) project did not have a prior
approved staff target and staff requirement.”
• “No formal budget was compiled as required by governmental financial
regulations at the request for information stage. The total cost of military
equipment was approved by Cabinet only during the negotiation phase.”
• “As mentioned… material deviations from generally accepted procurement
practises were discovered.”

The overall conclusion of the draft JIT report echoed that of the Special
Review, namely that the government’s contracting position was flawed.


1 Special Review of the Selection Process of the Strategic Defence Package, September 2000

1.8.1. The findings of the joint investigation support the majority of the key
findings by the A-G as contained in his Special Review dated 15 September
2000.
• 1.8.2. There were fundamental flaws in the selection of BAe/SAAB as the
preferred bidder for the LIFT & ALFA programme.

This conclusion was not included in the final JIT report.

The most likely reason for its exclusion is that there is an instruction
apparently flowing out of the correspondence from the executive to “add to
overall conclusion”.


Add to overall conclusion:

• “The joint investigation team found no evidence of impropriety, fraud or
corruption by cabinet or by government.”
• “Government cooperated with the investigation team and assisted them with
their endeavours”.


 This conclusion was translated into the Final JIT report as follows:


“No evidence was found of any improper or unlawful conduct by the
Government. The irregularities and improprieties referred to in the findings as
contained in this report, point to the conduct of certain officials of the
government departments involved and cannot, in our view, be ascribed to
President or the Ministers involved in their capacity as members of the
Minister’s committee or Cabinet. There are therefore not grounds to suggest
that the Government’s contracting position is flawed.”


The draft report was sent to President Mbeki by the A-G on October 4th
2000. Following this he then met with the President on either the 16th or
17th of October. The chronology of events is significant as it was during this
period that substantive changes were made to the draft report.
There is allegedly a detailed set of correspondence between the Presidency
and the A-G’s office which gives a comprehensive picture of what was
requested to be omitted and/or changed in the final report.
It appears likely that the changes were designed to remove any evidence of
irregularities in the acquisition process. Copies of the management letters
between the Presidency, MINCOM and the Department of Defence can be
subpoenaed if the matter is reopened.

The hand written notes on the draft report are from an unknown author, but
what is undisputed is that key members of the executive including Trevor
Manual, Alec Erwin, Mosiuoa Lekota and President Mbeki have never denied
that changes were made to the report.

In light of the above evidence the A-G needs to explain why he told parliament
that he made no changes to the draft JIT report under pressure from the
executive.


2. Critical omissions

Not only is there evidence that appears to show that the draft was subject to
substantive changes, there are also substantial omissions from the final JIT
report which are conspicuous in their absence.
The final JIT report neglects to mention many of the damning criticisms that
Lt. Gen (Retd). Mr P D Steyn listed in an interview with examiners from the
office of the A-G. The exclusion of many of Steyn’s criticisms is especially
disturbing as he served as accounting officer for the department of defence.

In his interview Steyn:

Questioned the legal basis for embarking on the arms acquisition process.
• Argued that the procurement process was riddled with large-scale
irregularities.
• Stated that he was “appalled” by an investigation that was only designed to
give legitimacy to “political manipulation”.
• Stated that he was “appalled” at the intention to purchase R30 billion of arms
when the defence force would be unable to operate them.
• Argued that there was a blatant disregard for the Defence Review.
• Categorically stated that the arms bought were fundamentally flawed, and that
the defence force would not be able to maintain them.

Steyn said,

• Disregard for the Defence Review –

“What has happened in this process is a blatant disregard for the very
documents that were created by the minister and the Executive. A

“Yet here we follow a process which obviously suits the decision makers, that
is wildly away from what is generally accepted by the public and which was
voted for resoundingly in Parliament.”

blatant disregard.”

• Irregularities in the procurement process –

“Sustaining the acquisition in future years by dissecting all the
possible implications from the operation or personnel’s point of view is
vitally important. This was not done.”
“Right from the start there were considerable deviations from the
prescripts of the acquisition process. Materially and otherwise.”
“If you are tempted to select the solution ahead of stating your
requirements, your temptation will continue and you will be writing
requirements meeting your specifications or meeting your choice. I
submit that we started erring in that direction. There may have been
individuals that already have decided what they want and they were
now cleaning up, as it were, the neglected process of stating Staff
targets and Staff requirements.”

“Ja. The whole process was turned arse about face and patently I was irritated no end at going through a fa├žade of legitimising what we were doing”

• The decision was taken in advance to select BAe/SAAB as a
preferred bidder:
“The decision makers and those who supported the decision makers
tried various avenues to get to presumably their predetermined choice.
Their choice for the Hawk was patently clear right from the start, the
Hawk 100. They tried non-costed options it did not work. They tried,
let us consider risk. None of them were decided upon upfront, when
the process started.”

“These were so serious deviations from procedure, that I was highly irritated
and a statement made like that, was patently an attempt to say, Mr Steyn,
please think broader than the defence requirements and procedures, because
I have a duty to think nationally. “


“How they got to the Hawk, I have never really, it has never really
convinced me. But again I stress, as accounting officer, I say it is
irregular, it is irregular to consider a non-costed option. How on earth
can you convince the general public out there that will you will acquire
an expensive system and damn the cost”.
“What I can absolutely state is that the so-called non-costed option
was introduced after the first results became known. So if you
consider cost, whether it is sensitive or not, and you do not like the
result and then introduce a non-costed option, I do not care what date
it was introduced. It was introduced after the event. It is materially
irregular. It is irregular.”
• No budgetary provision was made for the acquisitions:

The minister said we must not be in a hurry and it is wrong for us to let
people know that we cannot pay for the packages.”

“Now what is said here is that I said, we are not entitled by law to
pursue acquisitions for which there is patently not provision made.”
“Now as an accounting officer, I was appalled. The capacity of the
DOD to man and operate these defence systems, once procured, is
important. What is the purpose of spending R30 billion and you cannot
operate them? We cannot even operate what we have got.”
The questions and concerns raised by Steyn show clearly that the
arms acquisition process was severely flawed at the outset. The fact
these fundamental issues were largely excluded from the final JIT
report demands investigation.
• Attempts to manipulate the acquisition process:

“You should also be reminded that there were various attempts at trying to, let me use
the word, ‘manipulate’ the winner.”

3. Erroneous information:

The final JIT report contains only passing reference to the fact that there
were two sets of minutes in existence relating to a meeting which
supposedly took the controversial decision to select the much more costly
BAe-SAAB Hawk-Gripen option over the Italian Aermachii.


A second set of minutes (see attached document) records a completely
different outcome. This set of minutes shows that instead of
recommending the vastly more expensive Hawk/Gripen deal, the
subcommittee decided that both options – the Hawk-Gripen and the
Aermachii MB339 should be considered as options while an investigation
was undertaken to decide which option would bring the greatest benefit
to the local aerospace industry.
Furthermore while the final JIT report includes mention of a memorandum
from Pierre Steyn to the Chief of Acquisition Chippy Shaik in which
Steyn questions the accuracy of the minutes reflecting that a decision
was taken to chose the Hawk/Gripen option. It is does not interrogate the
dispute nor question what really transpired at the meeting in question.


This is a critical oversight as the existence of disputed sets of minutes reinforces
the perception that the government was determined to select BAe/SAAB right
from the outset regardless of the costs of such a decision or following the proper
procedure.

• In the minutes recorded by the final JIT report the following is
reflected:

“11. After lengthy discussion by the Ministers it was decided that Option B
(HAWK) should be recommended as the best option to meet all military and
National Economic Strategic requirements for South Africa.”


In the second set of minutes which are not referred to at all in the final
JIT report paragraph 11 reads as follows:

“After discussion it was decided that both the HAWK and the MB339 should be
investigated further with the view of structuring an industrial alliance between the
country supplying the aircraft and the South African Aerospace Industries. Both
countries will be requested to submit further information in this regard.”

• In his memorandum which questions the accuracy of the first set
of minutes (see attached document) Steyn states:
“I question the completeness and accuracy of paragraph 11. I cannot
recall that decision was made.”

“The Hawk is not the best option from a military point of view – the fact that its
acquisition cost would solicit substantially more Industrial Participation apparently
carries the day.

“The SAAF however will have to absorb considerably higher operating
costs during its life cycle.”
Steyn reinforces the view that a decision was not made and the minutes
signed by Shaik are inaccurate by stating:
“As far as I can recall, the choice between the Hawk and the MB 339 will
be made later in Cabinet. Hence the Italians should be given the
opportunity to respond with other successful bidders. If we fail to do this,
I submit that the ensuing fracas could derail the initiative completely. In
any event by keeping the Italians in play it would sustain the element of
competition.”
Steyn alleges that the highly irregular situation developed at this meeting
where Shaik not only gave a presentation on the Hawks but also acted as
the secretary of the meeting as well.

After the meeting Steyn alleges that Shaik asked him to sign a set of
minutes which he had made changes to, Steyn refused and assumed that
was the end of the matter. This was until he later saw a copy of the
minutes that appeared to indicate that Shaik signed the minutes himself
and made the minutes reflect a decision was taken to choose the Hawks.
CONCLUSION:
The controversy surrounding the arms deal is still very much alive and it
will not go away until the many answered questions that surround
irregularities in the acquisition process as well as alleged incidences of
corruption are openly dealt with.
Parliament has a central role in this process, if it fails to properly assert
its oversight role on this issue then this will further undermine its critical
role in holding the executive to account. The stakes remain high and the
DA will continue to use every possible avenue to ensure that the true
story is exposed and that those responsible for any wrongdoing are
bought to account.












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