A400M meanderings


So. The deed is done. South Africa has cancelled its 2005 order for eight Airbus MilitaryA400M strategic transports.

I wish I could say the decision was sound. No. I wish I could determine whether the decision was wise.

The announcement on Thursday by defence minister Lindiwe Sisulu and Cabinet spokesman Themba Maseko raised more questions than answers: especially about the purported price of the product.

Maseko told journalists the decision was taken because costs had escalated to R40 billion. Minutes later, in a briefing to Parliament’s Joint Standing Committee on Defence, Sisulu said R30 billion. This follows claims by Armscor CEO Sipho Thomo that the amount was “at least” R47 billion. Those are substantial differences.

Indeed, Barbara Kracht, a spokeswoman for Airbus Military in Seville, Spain, told the New York Times Maseko’s “figure has no connection to reality”. She insisted that the “current value of the South African order was much lower than the one cited by Mr. Maseko” but did not state an amount, understandable, perhaps as Airbus, EADS and seven European governments who bought 180 of the aircraft are still arguing that very point in connection with their own orders.

It gets worse. Sisulu also issued a statement Thursday justifying the cancellation that said the purchase price at the time Cabinet approved the deal on December 1, 2004 was already R17.646 billion. Yet the April 2005 press release announcing the signing of the contract stated it was €837 million. At the time that was about R7.4 billion. This week it was R9.6 billion. Strikes anyone as odd?

Some have suggested this is the additional cost of training, maintenance, fuel and the like; even the cost of the current R900 million upgrde of Air Force Base Waterkloof. Perhaps. But logistics and training is normally included in the acquisition price. Runway upgrades and operational costs are not.

There’s a lot here that still needs explaining and until then it will be a tough call to know whether government was prudent – or not.