SA “haggling hard” on A400M money


Minister of Defence and Military Veterans Lindiwe Sisulu says government is “haggling hard” to get aircraft manufacturer Airbus to pay it back nearly R3 billion, an amount linked to the South African Air Force’s cancelled contract for eight A400M strategic transport aircraft.

Speaking to members of Parliament’s Standing Committee on Public Accounts, she said the money should have been paid back when the contract was terminated in November 2009. “In terms of the contract that we have with Airbus, the money should have been paid out when the contract was terminated at a particular time, and we are haggling hard to make sure that we can get it back,” she said.

Earlier, Secretary for Defence Mpumi Mpofu told MPs that Airbus was claiming they could not pay the lump sum, and were seeking terms, the South Africa Press Association reports. “They have pleaded they do not have R3 billion to pay back in a single cheque,” she said.

The matter had been referred to Treasury to approve a repayment schedule, SAPA said. Asked for comment, Airbus responded that “Airbus Military and Armscor legal teams are in engaged in ongoing discussion and making good progress toward wrapping up the 2005 A400M acquisition contract which South Africa has moved to cancel.”

Sisulu last week told a media briefing she had called in Treasury’s help with the refund. Asked last week with the progress in reclaiming the R2.9 billion government believes its due, Sisulu said: “No, we have not yet recovered our investment into the Airbus venture. As we have always indicated this was a primary condition of our contract with Airbus that should we withdraw before a particular cut-off time we would be able to recover what we had put in.
“Unfortunately this has not been possible yet; the driving force in our negotiations with Airbus has always been Armscor so we have been working through Armscor. We finally resorted to asking Treasury to assist us in this matter and therefore Treasury is communicating on behalf of the South African Government with Airbus and we hope to hear from them soon. And we have given them 12 to 18 months to pay back and live up to the contract, so in 18 months time if they haven’t we will look at what options are available.”

South Africa announced its intent to participate in the A400M programme as a risk-sharing partner in 2004, just a year after seven European countries ordered 180 of the aircraft, ending a 20-year development process. An order for eight, at a cost of € 837 million (now R9.6 billion, then R6.5 billion) was placed in April 2005, linked to industrial partnerships and workshare placed with Denel Saab Aerostructures, Aerosud, Cobham and SAAB EDS (formerly Grintek Avitronics) worth anything from R2.3 billion (Sunday Times, July 2010) to €400 million (R4.4 billion, Bloomberg, Le Tribune, November 2009) to €750-million (R7.21 billion) over 20 years (Engineering News, May 2007). Deliveries were scheduled for between 2010 and 2012.

But by 2008 the programme had run into a raft of technical and financial trouble, delaying first flight of the aircraft, scheduled for September 2008 and contractually required by October 31, 2009, to eventually take place on December 11 that year. By then the total programme cost had also ballooned from €20 billion to a reported €31 billion. Then-Armscor CE Sipho Thomo in October 2009 alleged the delays had escalated the cost of the South African acquisition, Project Continent, from R17 billion to R47 billion. Airbus Military flatly denied the figures, saying the € 837 million price remained the only agreed amount between the parties. Even so, the “news” caused a political and media firestorm that speedily resulted in President Jacob Zuma’s then-new Cabinet cancelling the purchase.