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The 1998 Arms Deal / Strategic Defence Procurement Package

Jacob Zuma, South Africa's former president, appeared at the Durban High Court on 06 April 2018 to face more than a dozen corruption charges that date back to a a 30-billion-rand (€2 billion, $2.5 billion) arms deal in the mid 1990s. Zuma will face 16 charges, including racketeering, fraud and money laundering. The corruption allegedly occurred during a $2.5bn deal made in the 1990s.

"After consideration of the matter, I am of the view that there are reasonable prospects of successful prosecution of Mr Zuma on the charges listed in the indictment," Shaun Abrahams, the chief prosecutor, said. Abrahams said a trial is an appropriate place to settle the matter. The chief prosecutor thinks there are "reasonable prospects of a successful prosecution".

Zuma was first charged with corruption in 2005 when his financial adviser was jailed on fraud and corruption charges. Zuma went to trial in, 2006 but the case stalled when the prosecution said it was unable to continue more than a year after he had been charged. The case was controversially dropped by the National Prosecuting Authority in 2009, shortly before Zuma won the presidency.

Zuma was forced to resign in February by his ruling African National Congress (ANC) party. He was accused of corruption numerous times during his nine-year presidency but has always maintained his innocence.

Zuma's inner-circle. His former financial advisor, Schabir Shaik, was convicted in 2015 for facilitating the bribes. He was sentenced to 15 years for his involvement. According to prosecutors, Zuma and fellow officials received some €4.2 billion ($5 billion) in kickbacks.

Former ANC MP and arms-deal activist Andrew Feinstein told AFP news agency that there was overwhelming evidence against Zuma and that he "should find himself in jail". Mmusi Maimane, the head of the opposition Democratic Alliance, described the indictment as "a victory for all who have fought for years for Jacob Zuma to face accountability for his crimes. That accountability starts now."

In late 1999 the South African Government signed contracts totalling about US$4,8 billion (R30 billion in 1999 rands) to modernise its defense equipment. South Africa’s largest-ever arms deal has its roots in the White Paper on National Defence, which was approved by Parliament in 1996. The White Paper provided for a Defence Review, which outlined a new force design for the SA National Defence Force. In 1998 Parliament took the view, after a thorough Defence Review and with the support of almost all parties, that the country did need the equipment in the so-called Arms Deal.

The critical decision making structures included the Cabinet and a Cabinet sub-committee of the Ministers of Finance, Trade and Industry, Defence and Public Enterprises, chaired by the then Deputy President, Mbeki. Accordingly, the Government rejected with contempt any insinuation of corrupt practice on its part. The evaluation procedures and the decision making process did not allow for any single individual to determine what should be acquired and at what cost. Such situations were carefully avoided in order to prevent the possibility for corrupt practice within the primary contracting process.

The "Arms Deal" controversy has dogged South African politics and the South African military from the outset, with no end in sight. The controversy is complex, and many layered, and with many loose ends. For some, the problem was that South Africa had bought arms it simply did not need, given the absence of any proximate conventional military threat. The Anglican Church, in keeping with the 1995 Defence White Paper, took the stance that poverty was the critical security issue facing South Africa, and that eradication of poverty required priority over the purchase of armaments. Other countries, such as Iceland, had entirely dispensed with a military establishment. But Iceland, with a GDP of $12,000,000,000, was the largest country to have this luxury, while South Africa, with a GDP of $500,000,000,000, seemed too large to beat swords into ploughshares, even if the precise purpose of a conventional military was difficult to define.

A second critique of the Arms Deal argued that South Africa did need new arms, but that it had bought the wrong ones. Weakened by decades of combat and international embargo, South Africa's military faced a choice of refurbishment or oblivion. But it was not clear that the specific weapons purchased were the best choices. The aircraft purchases were not the obvious products of the selection process. But this is a rather technical set of arguments, seemingly seldom heard now that the weapons have been delivered.

The third criticism, and the one that refuses to go away, is that the Arms Deal was corrupted by bribes paid to South African politicians. A few mid-level operatives have gone to jail, but the center of the controvery remained Jacob Zuma, who became President of South Africa in 2009. The plot of this long-running story is almost impossible to follow, except in broad outline. The one striking peculiarity of the story is that the bribes discovered by British and German investigations of the contractors involved total several hundred million dollars, while the bribes allegedly received by South Africa politicians are only a fraction of this amount.

In November 1998 the Cabinet approved the arms deal, at a cost of R30bn. That day, Jacob Zuma, Schabir Shaik and arms dealer Thomson-CSF allegedly met, and Shaik’s Nkobi Holdings got a share in subcontractor African Defence Systems (ADS). In January 2002 the Department of Defence found Chippy Shaik guilty of leaking confidential arms deal documents, and in June 2005 is brother Schabir Shaik was jailed for 15 years. Mbeki then fired Zuma, who was facing corruption charges.

There were three decisions in relation to the National Prosecuting Authority [NPA] prosecution of Jacob Zuma:

  1. The decision by the NPA taken in 2003 not to prosecute the applicant. The then National Director of Public Prosecutions (“NDPP”) Mr Ngcuka announced the decision on 23 August 2003 - “the Ngcuka decision”;
  2. The decision by the NPA taken in June 2005 to prosecute the applicant. The decision was announced by the NDPP Mr Pikoli on 20 June 2005 - “the Pikoli decision”;
  3. The High Court struck the case off the roll on 20 September 2006. The NPA decided in December 2007 to institute a prosecution again.
On 6 November 2006, the Supreme Court of Appeal unanimously rejected Schabir Shaik's appeals against his June 2005 fraud and corruption charges. Shaik was sentenced to 15 years in prison on each of two corruption counts, and another three years for fraud, all of which will be served concurrently. Judge Craig Howie, President of the Court, announced that on the first corruption count which involved a "generally corrupt relationship" with former Deputy President Jacob Zuma, the court found that "in light of the evidence...we find the payments were corrupting money to influence Mr. Zuma to act in conflict with his Constitutional duties and thereby advance Mr. Shaik's and his group's interest." On the second charge of corruption, Judge Howie announced that Shaik's conviction stands. As for the fraud charges, which relate to Shaik's elaborate attempts to hide payments to Zuma, Judge Howie only said that Shaik was correctly convicted.

Zuma was elected ANC President in December 2007, becoming the ANC's candidate for South African president in the 2009 elections.The decision by the National Prosecuting Authority to re-file corruption charges against Zuma days after his electoral victory instantly intensified the polarization between Zuma's and Mbeki's factions within the party. Many ANC supporters accused Mbeki of politically interfering to carry out his grudge against Zuma. While stopping short of declaring him innocent of any crime, Zuma supporters ardently accused Mbeki of fomenting a political conspiracy to "persecute" Zuma with new corruption charges designed to deny his national presidential aspirations.

Allegations appeared on 5 February 2007 in a German publication, Der Spiegel, relating to a criminal investigation that is being conducted in Germany into allegations of corruption allegedly involving the former Head of Acquisitions of the South African National Defence Force, Mr "Chippy" Shaik. German state prosecutors are investigating allegations that a German shipbuilding consortium paid bribes to South African officials to win a major defence contract.

There was a conflict of interest with regard to the position held and the role played by the Chief of Acquisitions of Department of Defence (DoD), Mr S Shaik, by virtue of his brother's interests in the Thomson Group and African Defence Systems (ADS), which he held through Nkobi Holdings. Mr Shaik, in his capacity as Chief of Acquisitions, declared this conflict of interest in December 1998 to the Project Control Board (PCB), but continued to participate in the process that led ultimately to the awarding of contracts to the said companies. He did not recuse himself properly." Shaik resigned from the Department of Defence in March 2002, after a disciplinary enquiry.

In July 2008 German prosecutors aborted their probe into a decade-old arms deal between the South African Navy and German arms manufacturer, ThyssenKrupp. Despite repeated calls from opposition leaders and local analysts for an inquiry into Mbeki's role in the arms deal, no action in South Africa has been taken to investigate the details of this scandal. The two-year German inquiry concerned the sale of four corvettes in the late 1990s in which ruling ANC leaders allegedly profited from bribes in a multi-billion dollar arms package involving Germany, the U.K. and Sweden. Press reports indicated that internal memos from ThyssenKrupp detail how Chippy Shaik, the former South African head of defense procurement and brother of the infamous Schabir Shaik (who was convicted in 2005 of corruption in this deal), demanded three million dollars in exchange for contracts to build corvettes for South Africa. After failing to secure enough evidence to prosecute ThyssenKrupp during the investigation, the Dusseldorf public prosecutor's office opted to permanently dissolve the investigation.

The anxiously awaited start of Zuma's criminal trial in August 2008 was again put on hold as Zuma's legal team filed a petition at the Pietermaritzburg Regional Court. This petition asked that the charges be dropped because the NPA failed to consult with Zuma before re-filing corruption charges in December. Zuma's lawyers further claimed that their client was a victim of a political conspiracy led by the SAG with the goal of precluding Zuma's "rightful" elevation to the state presidency. Legal proceedings were suspended until mid-September when the ruling on Zuma's petition was expected. High Court Judge Chris Nicholson's ruling on Zuma's appeal in September 2008 was described as a "political Tsunami" that changed South Africa's political culture. Within ten days, intra-ANC maneuvering resulted in Mbeki being forced to step down just seven months before his second term was to end.

By 2008 weaapons delivery was broadly on track.

  • Corvettes: By the end of 2004 all four of the Corvettes had arrived in South Africa. After being fitted with the local Combat Management Suite as part of the Defence Industrial Participation Programme, SAS Amatola, Isandlwana, Spioenkop and Mendi were handed over to the SA Navy and were operationally deployed. The Corvettes enhanced South Africa's ability to protect its coastline and marine resources, to enhance its contribution to peace-keeping operations on the continent and to partner other countries such as India and Brazil whose navies operate in southern Atlantic and Indian Oceans. Fitted with cutting-edge technology, the Corvettes afford young South Africans of all races interested in a career in the Navy an opportunity to acquire skills while serving the nation.
  • Submarines: All three acquired submarines had been handed over to the South African Navy. The defence spokesperson emphasised that military strategy and the Department of Defence business plan lay down that at any given time defence will operate with two submarines.
  • Light Utility Helicopters: To date, 23 of the 30 helicopters had been delivered to the South African Air Force, of which eight were manufactured in Italy. The other 15 were manufactured under licence to Agusta in South Africa.
  • Maritime Helicopters: Four Agusta Westland Super Lynx helicopters were handed over to the SA Air Force in February 2008, to complement the surveillance capabilities of the Corvettes. The integration onto the Corvettes was currently underway. Lead-in fighter trainer aircraft: The South African Air Force (SAAF) had already received 22 out of 24 Hawk 120 lead-in fighter trainer aircraft.
  • Advanced Light Fighter Aircraft: After an initial delay in the delivery of the first four Gripens, due to a request from the SAAF for the installation and integration of an additional radio, delivery is on schedule. One aircraft delivered in 2006 is in use by the SAAF – another was delivered for testing. Another four dual seaters were to be delivered by December 2008.
By March 2008, the overall target of the Defence Industrial Participation obligations due by then had been fulfilled – the value of the actual performance was 101% of the contracted target by that date, amounting to R12 506 million credits. What was achieved by that date amounted to 83% of the total DIP obligation. Companies bidding in the arms deal promised 65 000 jobs during negotiations in 1999, as well as e110bn in investment. By 2012 it was reported that only 21 393 jobs were created, while export credits amounting to $11.5bn and investment credits of $21.4bn were achieved.

It is known in the arms industry that “commissions” can be mere camouflage for bribes and kickbacks. Democratic governments the world over increasingly seek to contain these activities which are undermining of public morality, are inflationary and destructively criminal. The history of arms purchases over many years will confirm the need for vigilance. It is therefore appreciated that there might be a measure of cynicism “in the trade” and in the media about assertions that the process for primary contracts has been above board (Editor Mondli Makhanya of the Sunday Times, on 6 Jan 2008 went as far as to respond that “gales of laughter would roar through the circles of those who know that no arms deal ever goes down without palms being greased”). It should be stressed that our whole process was driven, at the highest level, by a Cabinet committee headed by Jacob Zuma, the then Deputy President (who became President), and that no one person was able to determine what should and what should not be purchased.

There may well have been individuals and bodies who used or attempted to use their positions improperly to get personal benefit, but this would have been at the level of the secondary or sub-contracting processes – where the main contractor seeks the support of other businesses to deliver on the main transactions with government. That is what the Scorpions’ original investigations were originally all about. They were not about the Strategic Defence Procurement Package per se and Government’s agreements regarding the main contracts.

In August 2008 The Sunday Times reported that MAN Ferrostaal, part of the German submarine consortium, paid a R30m bribe to Mbeki, who gave R2m to Zuma and the rest to the ANC. This was denied. In August 2011 auditors said Germany’s Ferrostaal had paid R300m in bribes to secure the submarine deal.

On Monday, 24 October 2011 the President announced the Commission of Inquiry into allegations of fraud, corruption, impropriety or irregularity in the Strategic Defence Procurement Packages (SDPP), commonly referred to as the Arms Deal. The Commission is chaired by Judge Seriti, a judge of the Supreme Court of Appeal. All of them are senior judges of high standing and integrity, who have impeccable track records in the legal and judicial work. They are judges of independent minds, who command respect from their peers and have exhibited leadership attributes in their added responsibilities other than presiding in court.

This Commission was instituted as a consequence of allegations that had persistently been in the public domain for a long time. The allegations surfaced soon after the dawn of democracy, following the procurement of multi-billion rand armoury that was intended to address the needs identified by the South African National Defence Force during 1996 – 1998. This culminated in the Cabinet decision to purchase aircraft, corvettes and submarines at the cost of R29billion over 12 years. The allegations were probed by the different State institutions and were also a matter public debate in Parliament. Every time an end appeared in sight, new allegations would emerge.

The Commission of Inquiry shall inquire into, make findings, report on and make recommendations concerning the following, taking into consideration the Constitution and relevant legislation, policies and guidelines:

  1. The rationale for the Strategic Defence Procurement Packages.
  2. Whether the arms and equipment acquired in terms of the Strategic Defence Procurement Packages are underutilised or not utilised at all.
  3. Whether job opportunities anticipated to flow from the Strategic Defence Procurement Packages have materialised at all and: if they have, the extent to which they have materialised; and if they have not, the steps that ought to be taken to realise them.
  4. Whether off-sets anticipated to flow from the SDPP have materialised at all and: if they have, the extent to which they have materialised; and if they have not, the steps that ought to be taken to realise them.
  5. Whether any person/s, within and/or outside the Government of South Africa, improperly influenced the award or conclusion of any of the contracts awarded and concluded in the SDPP procurement process and, if so: Whether legal proceedings should be instituted against such persons, and the nature of such legal proceedings; and Whether, in particular, there is any basis to pursue such persons for the recovery of any losses that the State might have suffered as a result of their conduct.
  6. Whether any contract concluded pursuant to the SDPP procurement process is tainted by any fraud or corruption capable of proof, such as to justify its cancellation, and the ramifications of such cancellation.

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Page last modified: 14-04-2018 18:03:14 ZULU