Paul Holden and Andrew Feinstein Final
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Joint Submission of Paul Holden and Andrew Feinstein to The People’s Tribunal on Economic Crime November 2017 1 Table of Contents List of Annexures.......................................................................................................................2 List of Figures............................................................................................................................9 Introduction..............................................................................................................................11 The Seriti Commission of Inquiry and the Implications for Methodology .........................11 A Further Note on Methodology..........................................................................................13 Structure of the Submission.................................................................................................14 Chapter 1: The Irrationality of the Arms Deal.........................................................................16 Introduction..........................................................................................................................17 1. Apartheid Era Military Spending and the Regional Military Balance..........................19 2. The Political Context: Popular Resistance to Large-Scale Defence Acquisitions........22 3. South Africa’s Post Apartheid Military Posture and Threat Assessment.....................28 4. The Economic Context and the Potential Economic Cost of the Arms Deal ...............31 5. The 1998 Defence Review and the Failure of Cabinet to Seek Necessary Parliamentary Approval for the Arms Deal ................................................................................................36 6. Lobbying Efforts and the Development of Networks of Enrichment Linked to the Arms Deal, 1994 to 1999.....................................................................................................38 7. Payment of Commissions and Inducements in the Earliest Stages of the Arms Procurement Process and the Implications for the Probity of the Initiation of the Arms Deal 45 Chapter 2: Irregularities in the Selection Process and Allegations of Corruption...................50 Introduction..........................................................................................................................62 1.1 Irregularities in the selection of the Hawk and Gripen aircraft .....................................64 1.2 The LIFT/ALFA Contracts and the Taint of Corruption...............................................77 2.1 Irregularities in the Selection of the Preferred Bidder in the Corvette Contract .........100 2.2 Irregularities in the Selection of Subcontractors for the Corvette Combat Suite ........110 2.3 The Corvette Contract and the Taint of Corruption.....................................................118 3.1 Irregularities in the Selection Process for the Submarine Contract .............................138 3.2 Submarines: the Taint of Corruption ...........................................................................148 4. The Selection of the Preferred Contractor in the Light Utility Helicopter Contract and the Taint of Corruption ......................................................................................................160 5.1 Irregularities in the Selection of Turbomeca in the Light Utility Helicopter Contract165 5.2 Irregularities in the Selection of RENK in the Corvette Contract ...............................172 6. The Arms Deal and ANC Party Funding.......................................................................177 7. Total Value of Suspicious Direct Payments and Undue Benefits..................................187 8. ANC Efforts to Conceal Corruption ...........................................................................190 8. The Testimony and Statements of Ajay Sooklal and the Implications for Investigations Into the Arms Deal.............................................................................................................208 9. The Constitutionality of the Arms Deal......................................................................211 Chapter 3: The Cost of the Arms Deal...................................................................................217 3.1 Introduction..................................................................................................................218 3.2 The Opportunity Cost of the Arms Deal......................................................................219 3.3 Evaluating the Economic Benefits of the Civilian Offsets Program ...........................227 3.4 The Cost of Corruption in the Arms Deal....................................................................247 2 List of Annexures Annex A ‘Affordability of the Defence Strategic Armaments Packages: An Assessment of Their Economic, Fiscal and Financial Impacts’, Confidential Report to the Ministers Committee, August 1999’ including Original Appendices. Annex B ‘Strategic Defence Packages: Draft Report of the Auditor-General’ Annex C Testimony of Johan Van Der Walt in The High Court of South Africa (Durban and Coastal Local Division) in the Matter of the State vs. Schabir Shaik (et al.), Case Number CC27/04, 22 October 2004 Annex D Testimony of Pierre Moynot in The High Court of South Africa (Durban and Coastal Local Division) in the Matter of the State vs. Schabir Shaik (et al.), Case Number CC27/04, 11 March 2005 Annex E Interview with AN Howell, 23 July 2001, K.56.0001, Investigating Directorate of Economic Offences (Ondersoek na die Geval van: SANDF) Annex F ‘Chapter 10: Cost to the State and Fiscal Implications of the SDPs’, Strategic Defence Packages: Draft Report of the Auditor-General, handwritten date of 22 October 2001, pp. 12– 14. Annex G ‘Draft Executive Summary to the Auditor-General: Strategic Defence Packages’, Annex G Annex H 2008 Estimates of National Expenditure, Vote 19: Defence’, p 379 Annex I World Trade Organisation Agreement on Government Procurement, Article XVI Annex J 3 ‘Search Warrant: Section 29(5) of the National Prosecuting Authority Act, No. 32 of 1998, Residence and/or Office Premises of Fana Hlongwane’, November 2008 Annex K ‘The National Industrial Participation Programme: South Africa, Into the Future’, undated Annex L Consolidated Summary of NIPP Obligations and Projects, 2012 Annex M Ferrostaal: Final Report, Compliance Investigation, Debevoise & Plimpton LLP, 13 April 2011 Annex N ‘Gripen News: Success Story: South Africa’ (Special Edition), September 2006, available for download from www.gripen.com. Annex O ‘Report on the Disposal Process Adopted by the Curators and Particulars of the Actual Transactions Concluded Pursuant Thereto and Certain Litigation Conducted in Relation to the Fidentia Group’, 10 March 2009 Annex P Ruling of the ASA Directorate, HIV/TAC/17071, http://www.asasa.org.za/ResultDetail.aspx?Ruling=5595 Annex Q Not included Annex R “National Industrial Participation (NIP), Defence Summary: Project Description, September 1999. Annex S Murphy, G. 2008. Affidavit submitted as Annexure JDP-SW12 in the High Court of South Africa (Transvaal Provincial Division) in the matter of Ex Parte the National Director of Public Prosecutions (applicant) in re: an application for issue of search warrants in terms of Section 29(5) and 29(6) of the National Prosecuting Authority Act, No. 32 of 1998, as amended 4 Annex T Fana Hlongwane Business Card Annex U MODAC Investigation: Frontispiece showing Fana Hlongwane authorship Annex V ‘Statement of Offence’ in the Matter of the United States of America v. BAE Systems plc, Violation: Title 18, United States Code, Section 371 (conspiracy), United States District Court for the District of Columbia. Annex W ‘Proposed Charging Letter re: Investigation of BAE Systems plc Regarding Violations of the Arms Export Control Act and the International Traffic in Arms Regulations’, May 2011 Annex X ‘Result of Saab’s ongoing internal investigation regarding South African consultant contract’, Press Statement, 20 May 2011 Annex Y ‘Saab completes internal investigation regarding consultant contract in South Africa’, Press Statement, 16 June 2011 Annex Z ‘Operational transfer agreement’ between Saab Aerospace, SANIP and BAE Systems (Gripen Overseas), September 2004. Annex AA1 Annual Financial Statements: SANIP (Proprietary) Limited at 31 December 2002 Available from www.saabgroup.com Annex AA2 Annual Financial Statements: SANIP (Proprietary) Limited at 31 December 2003. Annex BB In the High Court of South Africa (Durban Coastal and Local Division) in the Matter Between The State and Schabir Shaik and Others: Summary of Substantial Facts in terms of Section 144(3)(a) of Act 51 of 1977. Annex CC 5 ‘Memorandum from ThyssenKrupp Executive Confirming Bribe to “Chippy” Shaik, head of Procurement in the South African National Defence Force’ Annex DD ‘Report by the NPA to Scopa on Arms Deal Investigations’, 23 January 2009 Annex EE ‘In the Matter Between The State and Tony Sithembiso Yengeni (Accused No. 1) and Michael Joseph Worfel (Accused No. 2), Accused No.1’s Plea of Guilty’, Case No. 14/09193/01, 2003 Annex FF ‘The full list of vehicles supplied by EADS’, Cape Times, 2 July 2001. Annex GG National Assembly, Question 246, Written Reply, Internal Question Paper No. 4-2008, 25 February 2008. Annex HH Agreement made and entered into Between the Armaments Corporation of South Africa Limited and the Government of the Republic of South Africa through its Department of Finance and Industry and Government