The South African government calls it ?a fishing expedition?. The political opposition and other concerned bodies are convinced there is widespread corruption and graft in the awarding of contracts in South Africa’s R50bn military hardware shopping spree. One politician says she has irrefutable proof of wrongdoing in high places.

Whatever the situation, public hearings into the deal begin this month, June. The ?arms scandal’ is shaking institutional South Africa to its roots. The furore is because there is widespread belief that the ANC-led government has succeeded in pulling the teeth of the probe and has corralled the issue into an investigation conducted almost exclusively by the ANC.

Just as the procurement of South Africa’s $50bn arms basket is the biggest in the country’s history, so too is the controversy over the way alleged graft, corruption and backhanders in the deal will be investigated. The main challenge will be to ensure its thoroughness.

In the two years since the deal was put together, questions have bubbled to the surface, not the least being public alarm at the rapidly spiralling cost of the military hardware. Doubts were also voiced, that the counter-trade and job creation elements which had been built into the package would come anywhere near the promises that were trumpeted when the deal was announced.

Questions investigators want answered include: How does a R29.5bn agreement so rapidly expand to R50bn? In two year’s time it will be R60bn. What limits were set on escalations? What happened to the supposed benefits of counter-trade and employment creation used to garner public support for the purchases?

Since the latter half of last year, persistent claims of impropriety in the awarding of arms contracts have been levelled. So another purpose of the inquiry is to lay those suspicions at rest. If the investigation is seen to be half-baked, or if government is seen to be undermining its effectiveness, the legitimacy of the probe will be called into question.

There is no evidence of attempts to protect the top echelon in either the public or private sector. ?But,? one commentator points out, ?it will be very harmful to South Africa if this impression is conveyed to the foreign investor community.?

For all its political convolutions, the brouhaha over the arms procurements probe is becoming like sitting the exam and learning the subject later. Those pushing for an investigation are withholding what evidence they claim is in their possession and, with a few small exceptions, little concrete proof has been forthcoming that anything of earth-shattering consequence is amiss - in either the negotiations or the procurement so far of arms and associated products and services.

However, the protagonists insist, if there is foul play then they want the agency with the most teeth to tackle it. The government, on the other hand, is happy for the investigation to proceed, but wants it handled by agencies in its control. It has repeatedly branded calls for an investigation as a ?fishing expedition’.

That’s the nub of the matter, as it now transpires. Opposition parties and some quango agencies say the ANC is confusing the party with the state, and that they should stop meddling, stand back and let an independent investigation take its course.

Warning signs

How did a deal that was signed two years ago for R29.9bn become R50m today? A Department of Finance briefing to the cabinet in August, 1999, holds a few clues - and warnings - that the governing elite apparently chose to ignore.

One excerpt from the briefing says: ?The South African Government is fully exposed to the depreciation of the rand against foreign currencies, which account for about 75% of the total purchase amount. There is no effective means of hedging the currency risk inherent in the procurements.?

Another warns: ?The proposed armaments procurements are distinguished from other government procurements by four key characteristics. The sums involved are extremely large; they involve fixed contractual commitments, extending over long periods with high contract-breakage penalty costs; they are heavily import-biased; and their costs are offset by a set of associated activities (the counter trade offsets) which cannot be guaranteed.?

Trade offsets have failed

On the trade offsets, the briefing noted that the intention of the counter trade programmes was aimed at offsetting or mitigating the negative effects of the deal. ?To the extent that these projects fail to deliver their expected results, the negative economic effects of the procurement will be exacerbated? and warned that the trade offsets could not be guaranteed.

The department also hired international financial services house, Warburg Dillion Read, to help them do some crystal-gazing into the fate of the rand. The resulting report indicated that the South African currency would continue to slide and hit R26 to the US$ by 2018. The consultancy’s predictions show that for every rand depreciation in the dollar exchange rate ?the cost of servicing foreign debt will increase by R2.5bn?, noting that the scale of the procurement currency risk is sizeable over the 20-year payment period.

As long ago as November 1999, worries about the propriety over various aspects of the military hardware deal began to disturb the surface of a seemingly transparent and scrupulously negotiated package.

Allegations were forwarded to Judge Willem Heath, leader of the Heath Commission investigative unit, set up by former President Nelson Mandela in the interests of transparency and accountability in government. The claims were given further impetus by the report of Auditor-General Shauket Fakie into the arms deal. Although the report did not confirm corruption, it stopped short of approving it as open and honest.

In November last year, the chairman of the committee on public accounts, announced the formation of a high-powered investigative commission that included the auditor-general, the public protector, the Independent Directorate of Serious Economic Offenses and the Heath Commission. The Heath Commission was subsequently excluded from the investigation by the government.

What is baffling in an already perplexing scenario is why the Executive shied away from the recommendation of its own parliamentary public accounts committee’s insistence that it wanted the Heath Unit involved in the probe.

The reasons for the committee persisting in its demands for the inclusion of Heath were self-evident. Only Heath’s unit had the power to reclaim state money, and could act speedily to invalidate contracts if it found corruption had been involved in any way.

Lone crusader

The single most powerful motivating component in the arms deal investigation is Pan Africanist Congress MP, Patricia de Lille whose crusade to enforce a transparent and accountable form of governance has been a constant thorn in the side of the government.

Acting on evidence she had reportedly received but has still not made public, De Lille compelled the government, which had earlier defended the deal as completely legitimate and flawless, to agree to a high-level investigation.

In defence of its decision to exclude the Heath Commission, the government cites a Constitutional Court ruling that found Heath could not head the unit and occupy a senior judicial seat at the same time. The ruling, however, was suspended for a year opening the way for Heath to continue with his work.

The issue took on a further dimension in the form of Parliament’s public accounts committee that was spearheading the probe. This committee recommended Heath’s participation, a step endorsed by the National Assembly. The question was then whether or not a legal challenge, such as the one threatened by De Lille, could be mounted if the Executive over-rode Parliament.

007 proportions

As the drama unfolds it is assuming 007 proportions. Even before the investigation was rolled out, the chairman of the standing committee on public accounts, Gavin Woods, received a death threat.

Also setting records is the complexity of the investigation’s composition. Woods’ ram-rodding committee convened an exploratory meeting in November last year involving the auditor-general, the independent Heath investigative unit, the public protector, the Investigating Directorate for Serious Economic Offenses, the National Directorate of Public Prosecutions and other investigative bodies so that, as Woods put it, ?the best combination of skills, legal mandates and resources can be found for such an investigation.?

The Institute for Democracy in South Africa (Idasa) noted that the investigation ?may prove to be a test case for the future of democratic accountability in South Africa.? Idasa’s chief, Richard Calland, says that given the importance of the case and its complexity, the combination of a number of agencies in the investigation is a ?creative and sensible idea. It demonstrates the central role that parliament can play in ensuring that there is serious oversight of executive power.?

Calland goes on to observe that ?the amount of public money involved in this case means that the stakes are high; it really is a litmus test for the various institutions of accountability. The recommendations of the committee reflect a determination to pass the test.?

By tradition, notes the weekly Mail & Guardian, the public accounts committee pursues a cross-party approach in which all parties represented on it - both government and opposition - unite to ensure proper and efficient use of state funds. Woods, the committee chair, is from the Inkatha Freedom Party (IFP) but two of its members, who have been the most tenacious in establishing the facts about government spending, have been Laloo Chiba and Andrew Feinstein, both of the ruling African National Congress (ANC). Feinstein was later removed and replaced with ANC chief whip, Tony Yengeni.

Pressure the wrong weapon

However, if lobby groups such as political opposition and the media wanted President Thabo Mbeki to include Heath in the investigations, they went about it in the wrong way.

The South African President has demonstrated forcefully in the recent past that pressure is anathema to him. For example, in spite of intense global and domestic demands on him to admit that HIV causes Aids, Mbeki refused to yield, finally withdrawing from the issue, neither confirming nor recanting his beliefs. Mbeki is non-confrontational. When the decision on whether or not to include Heath was finally made, it came not from the President but from one of his lieutenants, Justice Minister Penuell Maduna. That being the case, Heath’s goose was cooked; Maduna is a publicly avowed enemy of the judge.

Inevitably, the debate includes the issue of guns vs butter. It’s now over two years since the Truth & Reconciliation Commission (TRC) wrapped up proceedings and requested nearly R3bn in reparations to some 25,000 officially recognised victims of apartheid.

They were to receive between R17,000 and R21,000 a year for six years. So far the government has paid out just R300m to 16,000 victims. TRC reparations committee chairman, Hlengiwe Mkhize, subsequently turned to the private sector for help, but was rebuffed with complaints of donor fatigue. Her response was a threat to ask the government to impose a special reparations tax on business.

Corporate South Africa riposted with the observation that handouts provide only temporary relief and they would be happier sponsoring programmes that would lead to job creation. All of this gives substance to the question of whether or not the government should devote more to social spending and less on military hardware.

Reciprocal investment

Bedrock to the arms deal was the industrial participation component that called for successful bidders to reciprocate by investing in South Africa. The eventual participation package rolled out by government comprised R105bn in reciprocal industrial participation generating 65,000 new jobs. Are those promises being kept? critics wanted to know.

Trade and Industry Minister Alec Erwin was recently able to reply that foreign arms suppliers have already met 15% of their obligations attached to the deal. The R15.6bn consisted of both foreign direct investment and the value of exports. According to Erwin, of the R105bn committed, R24bn will come from non-defence investments and the remainder from exports, local sales to arms suppliers and defence industrial participation contracts.

?I am confident that we are already succeeding in considerable measure in getting investments,? he said. He was less positive on the employment aspects, saying there’s a ?fairly realistic chance? that the 65,000 jobs will materialise.

Where to from here?

Now that the initial scrummage is out of the way, public hearings on the arms deal are set to commence. The meetings are scheduled to start at the beginning of June and last eight to ten weeks. PAC MP De Lille has described the meetings as a ?farce and a side show? that will not advance the cause of justice.

Forty witnesses have been invited to testify including De Lille herself, Trade and Industry Minister Alec Erwin, the former head of the navy, and the current air force chief.

Opposition parties have lambasted the public hearings for, amongst other things, going ahead without consulting parliament or parliament’s standing committee on public accounts, and serving subpoenas on witnesses. This would shift public focus to the ?whistle blowers’ from the suspects, they maintain.?It’s possible that potential whistle-blowers may be scared to come forward with information publicly, and would rather remain silent,? says United Democratic Movement public accounts spokesman, Gerhard Koornhof.

Office of Public Protector spokesperson, Nicolette Teichman, defended the hearings by maintaining they have been planned in close collaboration with the forensic and criminal investigation teams to ensure the underlying probe was not jeopardised.

And there the matter rests for the time being. Two months of public hearings stretch ahead. And thereafter? That’s anyone’s guess.

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