SA receives R3.4bn refund from Airbus

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Airbus Military has refunded South Africa €321 million following the cancellation of a contract to purchase eight A400M transport aircraft. State arms agency Armscor today said it has received from Airbus Military €321 050 157.81, amounting to approximately R3 486 924 949.40 at current exchange rates.

“It has taken us eighteen months to negotiate and finalise the termination of the contract with Airbus Military. The process was long indeed because this was the first time that Armscor was involved in the termination process of a contract of this magnitude,” Armscor said in a statement.
“We should furthermore hasten to say that the parties have never questioned the correctness of the decision taken by SA to terminate, neither was there any attempt on the part of Airbus to challenge SA in this regard. This was a matter of following the process and the legal requirements involved in the matter.”

Armsor aid the amount included the pre-payments, other related costs and interest earned.

In its media release Airbus Military confirmed that “following constructive discussions with Armscor” it has refunded South Africa’s pre-delivery payments for the A400M military transport aircraft while, at the same time, opening the door to further close cooperation with South Africa. “The agreement we signed with Armscor on 29 November 2011, draws a line under the cancelled A400M acquisition, but crucially, it lets us all move forward together to explore further opportunities, including upcoming acquisition projects led by Armscor,” said Airbus Military CE, Domingo Urena.

Armscor added the money has now been repaid. “Today, after a long wait, we report to the Government and the Nation that the [money]… have now been paid back to Armscor.”

Minister of Defence and Military Veterans Lindiwe Sisulu in March said government was “haggling hard” to get Airbus to pay back the money. 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.

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.