Book review: Eye on the money

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The furore surrounding the “arms deal” as government’s so-called Strategic Defence Package (SDP) is known to most South Africans refuses to die down, partly due to the bulldog persistence of one of its main detractors, Terry Crawford-Brown.
To recap, the preferred bidders to supply South Africa four frigates, three submarines, 30 light utility helicopters and just over 50 fighter aircraft were announced in 1999 and the deals were signed a year later. Seven years have now elapsed yet many questions remain unanswered – including the level of political interference in the final selections, the strategic – versus economic need – for some of the purchases, the viability of “offsets” and the question of bribes, corruption and kickbacks. Government – in the form of Finance Minister Trevor Manuel and the office of President Thabo Mbeki – insists these issues have been addressed to everyone`s satisfaction, a handful of cranks aside. But as Crawford-Brown reminds in a semi-autobiography, Eye on the Money – One man`s crusade against corruption, this is by no means the case.   
Mbeki is an embattled leader. The faux intellectual is detested within his constituency in a way no party leader has been since Dr AB Xuma in 1944 and Prime Minister Jan Smuts in 1948. Mbeki has also failed as a latter-day Smuts. His ambitions for the international stage have come to naught and his punctilious, legalistic approach in the UN Security Council has alienated friend and potential ally in the race for a permanent seat alike. It is a moot point whether this was ever a realistic goal, as was the New Partnership for Africa`s Development (NEPAD). But having talked the talk, NEPAD`s champions then talked the walk, causing Senegalese president Abdoulaye Wade to recently slam the initiative as an “intellectual swindle” – a strong statement for a leader to make on a Continent known for soft soap. But one digresses.              
The point is that the only thing “intellectual” about the Mbeki administration has been its bloody-minded dishonesty. Mbeki is notorious for his thin skin and fast temper – and his inability to own up to a mistake: hence the dishonesty; hence the departure with reality. In this regard, Mbeki has much in common with the current American president. An opinion piece by one HDS Greenway in the International Herald Tribune of October 12, titled “Undermining America`s values” had this to say about the “leader” of the “free world”: “Despite his bluster, President George W Bush, ‘the decider`, has turned out be a weak president, riddled with insecurities, masked by stubbornness, who has allowed is subordinates to gnaw away at the Constitution.” In South Africa`s case this would include a government campaign against the media and press freedom. 
To Crawford-Brown the SDP is another swindle – this time financial rather than intellectual. It is clear that at the very least mistakes were made in the SDP process. One can be bolder: it is increasingly the perception that the word “mistake” is a very generous understatement. It is a truism that segments of the arms industry is corrupt. This is also the case in parts of the aviation and bulk construction industry – Crawford-Brown cites as an example the court-confirmed corruption underlying the Lesotho Highlands Water Scheme.     
         
The key question Crawford-Brown seeks to answer is where the money went. The answer appears to be into the ruling African National Congress` (ANC) coffers. He argues that the ANC under President Nelson Mandela accepted money from corrupt Saudi Arabian and Indonesian interests in the late 1990s and that some arms bidders capitalised on this. It is known – the paper trails have been found – that at least one company involved in the fighter deals and one involved in the frigate sale paid commissions (bribes?).
Says Crawford-Brown: “Given his masters degree in economics, Mbeki obviously knew better than to swallow the absurdity that expenditure on armaments would create jobs and stimulate South Africa`s economic development. Was he gullible or had European leaders briefed him that kickbacks from arms exports were how the funded their own political parties? The former British secretary for trade and industry, Patricia Hewitt, let the cat out of the bag in June 2003 when she confirmed that commissions had been paid to secure the BAE [System] contracts with South Africa. She pleaded that those bribes ‘were within acceptable limits.`” He adds that British researchers estimate the amount involved at £117 million (R1.4 billion). “Given the corruption associated with the German armaments industry and [then] Chancellor Helmut Kohl, it is reasonable to assume the German warships were at least as generous.”
He continues elsewhere: “the question remains whether [former deputy president Jacob] Zuma was a scapegoat used to divert attention from Mbeki`s complicity in the arms deal scandal.” Crawford-Brown then raises “evidence brought before Parliament” that “confirmed” Mbeki had intervened inappropriately on behalf of Thomson CSF (now Thales) in the frigate deal. “Those documents [apparently a series of letters] also revealed that the ANC`s treasurer, Mendi Msimang was present at several of the meetings [with Thales, then still Thomson CSF]. The implications are grave. The ANC is obviously not funded on R12 membership fees or the contributions it receives from taxpayers. It refuses to open its books to public scrutiny, claiming it is a private entity. [The opposition Democratic Alliance claims the same.] This provides some insight into why, with her husband as the keeper of the ANC`s purse, Health Minister Manto Tshabalala-Msimang has proved politically unassailable despite her bizarre pronouncements on HIV/Aids [and her problems with alcohol and kleptomania]”.
Crawford-Brown, a trained economist, was once a senior officer with Nedbank`s international division. In his view the offsets underlying the deal “were a scam … promoted by the arms industry with the connivance of politicians [who receive kickbacks] to fleece the taxpayers of both supplier and recipient countries. They are banned under the rules of the World Trade Organisation (WTO) governing civil trade. That prohibition flows from recognition by the WTO that offsets distort normal market operations, and are an invitation to corruption. Arms trade lobbying secured an exemption … under the guise of national security, and the industry has run a proverbial bus through the gap.” Offsets also drive up the price of arms as their cost to the arms industry is factored into the final sales price. 
Government in 1998 touted that the deal would cost R29.9 billion but would secure investment of R26.1 billion, exports of R59.3 billion, local sales of R25.4 billion and create 64 165 jobs. One has to love the precision of that last calculation. To the extent that the other figures have come to pass, the critic would say that the companies involved sold South Africa arms at an inflated price and then used the money to buy large chunks of the local defence industry, which has effectively allowed them to double even triple dip. And indications are the figures have not been realised. Jane`s Defence Weekly correspondent Helmoed-Römer Heitman and others at the time – and since – have said “the offsets are more important [to government] than the equipment itself.”
Common sense dictates that the figures were unrealistic and amounted to, as CB alleges a swindle. Noted economist Mike Schussler in 1998 called the sums “voodoo economics.” The latest Armscor annual report contains more sensible figures. The arms deal will now cost R47 billion according to the Business Report of September 2 and will realise offsets of R15 billion by 2012, when all will be said and done. That is a far cry from the R110 billion promised and the R29 billion committed. So if the offsets aren`t offsetting, what good are they? Why does the law require all government purchases in excess of US $10 million to have an offset component – when that clearly runs counter to WTO rules? Why are Cabinet minister such as Alec Erwin, both in his current Public enterprises portfolio and during his incumbency at Trade & Industries so keen on something that does not work? Is Crawford-Brown right that the type of offset they seek in projects such as “Continental”, the Airbus A400M purchase and “Hoefyster” the new infantry combat vehicle is contributions to the party coffers?       
This is a sad book. Sad because it makes a convincing argument that every consideration other than the one that matters governs arms – and by extension other government purchases. The sole criterion should be the “best bang for the buck”, or more prosaically the item of kit that best allows a soldier, airman, sailor or medic to do his or her job and go home alive at the lowest possible price. But in this neither Mbeki nor his Cabinet is remotely interested. They are endangering the lives of our husbands, wives, sons and daughters.              
Terry Crawford-Brown
Eye on the Money – One man`s crusade against corruption
Umuzi (a Random House imprint)
Cape Town
2007