Advice for Armscor from Arms Deal investigators


While Armscor says it is still in the process of evaluating submissions, even though preferred bidders have been named for new SA Navy platforms, pertinent advice for the arms acquisition agency comes from investigators who have delved deeply into democratic South Africa’s first multi-billion arms buy.

Paul Holden and Hennie van Vuuren are names well-known to the South African defence establishment, be they suppliers or users of equipment ranging from massively expensive and technologically advanced fighter jets or stealth frigates. The pair, in addition to publishing “The Devil in the Detail: How the Arms Deal changed everything”, refused to appear before the Seriti Commission.

The only procurement currently approved for start-up this financial year is for the acquisition of a new hydrographic vessel for the SA Navy with another six hulls to follow in the 2018/19 financial term. These will be three each of in- and offshore patrol vessels with the primary task of protecting South Africa’s maritime assets, an important component of the blue economy sector of Operation Phakisa.

With the in-depth background and knowledge Holden and Van Vuuren have amassed over years of investigating the Arms Deal, defenceWeb approached them for their thoughts on how to prevent a recurrence of what happened the first time around.
“Broadly speaking the way to stop the rot happening again is to try and close the spaces where corruption can happen, which requires proper regulation of relationships between bidders and officials and far greater transparency. There are a range of things that can be done to achieve this, but there the five things that come to my mind immediately,” the pair said.

These are:

Require bidders to provide comprehensive list of all agents, middlemen, advisors and/or local subsidiaries either used or going to be used in the transaction and make it publicly accessible. This includes providing “true ownership” information where entities are registered in secrecy jurisdictions.

Put in place revolving door regulations to prevent any official involved in the procurement process in any way from taking up employment or entering any sort of commercial relationship with preferred bidders for at least five years. “Make it ironclad” is their advice.

All bidders must be required to publish an annual report of the companies, entities and individuals benefiting from National Industrial Participation or Defence Industrial Participation (offsets) that flow from the procurement. Holden and Van Vuuren point out with the Arms Deal it was long suspected that politically exposed individuals were receiving benefits from the offsets programme after the Arms Deal was signed.

Additionally, all procurement decisions must be audited and reviewed by Armscor’s internal audit team and the Auditor-General. All reporting must be made public immediately without redaction.

Finally, the pair recommend the acquisition be paid for from the Department of Defence’s normal procurement budget and not out of the Special Defence Account (SDA).
“The SDA was set up during apartheid to bust sanctions and allow government to buy military equipment secretly. Using the SDA means secrecy provisions can be applied to a procurement that should be as transparent as possible. The SDA, for example, allows the President to edit or redact reports of the Auditor-General in the National Interest. This is precisely what happened with the Joint Investigation Report into the Arms Deal, which changed radically after it had been given to the Ministerial Committee overseeing the Arms Deal acquisition for comment.”

According to Minister in the Presidency, Jeff Radebe, since its establishment three years ago, the blue economy sector of Operation Phakisa has “unlocked” more than R7 billion in public and private sector investment. It has also, according to the Minister, also chairman of the National Conventional Arms Control Committee (NCACC), created close on seven thousands jobs in that time.

Armscor has not yet given an indication of the value of either of the two projects but naval and industry sources estimate a total of around R6 billion for all seven platforms.