Is a tax the best form of defence?

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“In my view any flow of funds should be from the SANDF to industry and not from industry to the SANDF.” So says Dr Richard Young on the issue that got front page lead treatment in South Africa’s main business daily, the Business Day yesterday.

Young, CE of defence electronics firm CCII, made the comment in an email to Simphiwe Hamilton, the executive director of the SA Aerospace, Maritime and Defence Industries Association (AMD) a month ago, and copied to other defence industry executives.

He was responding to a set of requests from the South African National Defence Force and the Defence Secretariat to industry via AMD to sponsor a work session by each at the luxury Zimbali resort on the KwaZulu-Natal north coast.

Such requests are not uncommon. “On a very regular basis I note these requests for sponsorship of various kinds,” Young added. Asked how many, Young rapidly produced 27 solictations sine 2006. These range from supporting golf days – three in October-November 2006 alone, to the 2007 Defence Advisors’ conference, a gala at 4 Artillery Regiment, the SA Army’s Junior Command and Staff Course and the Executive National Security Programme. This, of course, is just a small sample. Some suggest there are up to 10 golf days a year and a many gala evenings, command cadre conferences and the like.

The sums are not inconsiderable. In the latest incident the SANDF requested a minimum of R20 000 per company (!!) to sponsor a work session for the Military Command Council (MCC) – which comprises of all the service chiefs and division heads of the military – at the Zimbali Lodge luxury hotel. Hamilton says the money would promote “the good working relationship between the SANDF and the defence industry”. The DefSec wanted R100 000 from industry for their own work session at Zimbali.

Business Day describes this as a “cash-for-access scandal”. It notes the “scheme to allow defence industry companies to get close to the nation’s military commanders is similar in style to the African National Congress’ controversial Progressive Business Forum where big business buys access to Cabinet ministers. It is, however, potentially worse in concept as it allows the manufacturers of defence equipment to buy access to public servants responsible for adjudicating the purchase of military hardware. The issue will raise concern about the independence of the adjudication of military tenders, particularly if any of the major sponsors are in line to supply SANDF contracts in the future.”

Young agrees that such “sponsorship simply has to create a conflict of interest. In my view the solicitation for sponsorships or funding from the defence-related industries for the MoD, DoD, SANDF and SAPS should be unlawful. … If the SANDF does not have the funds to host a high-level work session, whether this be at a luxury coastal resort or at its multitude of premises throughout the country then this should be remedied in the next defence budget. If not, then it is tautologous that these high-level work sessions can have no or very little real value.”

That last point is valid. Business Day says the choice of the Zimbali Resort and Golf Estate north of Durban was so that the council’s work session could be held in a secure environment, “conducive to both a productive output and a relaxed atmosphere”. Does this imply military bases are not? One is not suggesting they pitch tents at Wallmansthal and live off a field kitchen, although, on reflection, that is an idea. More seriously, there are numerous facilities in and around Pretoria that can be used, such as the Thaba Tshwane town hall, the Defence College or Army College. The list is long…

Not unexpectedly, Democratic Alliance MP and defence shadow minister David Maynier, takes issue with the solicitations. “In both instances, there are major conflicts of interests. This is completely unethical and possibly illegal,” he says in a statement. He has asked the offices of the Public Protector and the Auditor General to investigate the matter.

The bigger question is what industry gets for its largesse. The answer seems rather little. The consensus view from many industry executives is that one learns little to nothing at these interactions one should not already know as an industry player.

There is also an element of salt in wounds or insult after injury. While money is clearly streaming from industry to SANDF, the reverse is not true. The awarding of many big-ticket and arguably important projects have been dragging for years. One may learn the Chief of the SANDF’s golf handicap but apparently little on the next step in the long-delayed Project Hoefyster (264 Badger infantry fighting vehicles), Vistula (3000? 5-ton and 10-ton trucks to replace the Samil range), Biro (3? 6? 9?offshore? inshore? patrol vessels), Hotel (a hydrographic survey ship), Millennium (a “strategic support ship” aka an amphibious helicopter carrier), or Charter (an “urgently” required ammunition disposal plant). This list is also long.

Yet this is important. Business needs this type of information to make investment decisions. The Navy in 2008 said it was keen to build the Biro and Hotel vessels in South Africa. At the time it was said contracts would be in the market in late 2009. A year later they still aren’t. No one seems to know when they will be. How can SA’s shipyards – as one example – make business decisions in the face of such drift? About the only sound decision is to exit either the local defence market – as many have done – or the industry in total, as several companies have done. Movement on even awarded contracts can be glacial, with payments and tranches often deferred. Keeping a business going and retaining skills in such circumstances can be tough. And while no money is coming in, the SANDF imposes an informal tax on the industry to “promote good relations.”



Clear direction on projects, let alone policy and priorities would actually achieve that end, and at no cost to anyone. No-one knows if the industry strategic focus areas identified in the 1999 white paper on the defence industry is still valid. And as for our defence policy? We have been waiting for the “defence update” since 2004. But these are just trifles when compared to archery lessons and golf at Zimbali.