Joint Investigation Report into Arms Procurement Package: Adoption of Final Committee Report

Meeting report

STANDING COMMITTEE ON PUBLIC ACCOUNTS
11 December 2001
JOINT INVESTIGATION REPORT INTO ARMS PROCUREMENT PACKAGE: ADOPTION OF FINAL COMMITTEE REPORT


SUMMARY
The parties tabled their proposals for a committee report and time was allowed for members to consider it. After consideration each of the opposition parties indicated that they could not support the proposed ANC report. The main reasons for non-support were: the differences that exist on the way forward for SCOPA, the substance of the ANC report and the nature of the Joint Investigation Team Report. No consensus could be reached and the ANC tabled their report and voted for its adoption. The DP, UDM and the NNP did not vote. The IFP noted its objection. The ANC report was passed as the Committee Report.

MINUTES
The Chair said that the ANC had called for the meeting and he wanted to know from them what the objective of the meeting will be.

Mr Smith (ANC) replied that the Committee must conclude the exercise of submitting a report to Parliament as requested by the Speaker. This is different from concluding the oversight role which will continue. Discussions had taken place over the weekend with the other parties and it is clear no consensus would be reached. The ANC had prepared a report to be tabled and would move for its adoption.

The Chair commented that the ANC must state if the report to be submitted is the final report as envisaged by the 14^th Report of SCOPA or if it is the final report in response to the JIT Report.

Mr Smith replied that the 14^th Report envisaged a forensic audit to prove or disprove allegations. The JIT Report has been presented. There are recommendations that by necessity mean that criminal investigations will continue. The committee report would be a conclusion of this exercise and another investigation is not envisaged. The individual agencies will continue their work and will report as normal. There is no need for anyone - from the executive to SCOPA - to report on any matter in the investigation. The report concludes the involvement of the JIT. The Auditor General will monitor if jobs are created and will report to SCOPA. The Scorpions will continue their work and report as normal.

Ms Taljaard (DP) indicated that she was confused about the status of the committee report that is to be submitted. Without clarity on this point, members will speak to a different purpose and it will inhibit the proceedings.

Mr Masithela (ANC) suggested that each party present their views on the Joint Investigation Report in the following order: UDM, NNP, DP, IFP & ANC.

The Chair indicated that there were two proposals:
- to table the draft ANC report or
- for all parties to give their view first.
The members agreed to the latter.

Dr Koornhof (UDM) read his party's proposal. One of the annexures tabled with the proposal are the questions put to the JIT and is included in the UDM'S reaction to the Arms Deal Joint Investigation Report.

Mr Blaas (NNP) on behalf of the NNP said that his party accepts the mandate and the JIT Report and that the findings and recommendations should be taken note of. A proper mechanism needs to be put in place to ensure the recommendations are implemented. SCOPA will need to engage with certain issues, for example, the executive needs to explain certain policy decisions.

Ms Taljaard read the DP proposal. Included therein was a proposal that the Committee does not submit a report now but continue working on the items as listed in the DP proposal.

The Chair said that this was a counter proposal and asked the members to vote on it. The counter proposal was rejected.

The Chair gave the view of the IFP. He said that SCOPA's 14^th Report had identified 29 issues and a large number thereof were not addressed. Some of the more serious are the cost to the state and the interest on debt servicing. The country was not told how much they have to pay. The country also needs to know how the cost will be funded. Serious questions around Industrial Participation (IP) need to be answered. The JIT had identified a number of problems but did not put it together in a big picture. A more comprehensive review of the procurement system is needed and this the JIT did not do. The serious problem of non compliance needs to be looked at and more specifically what happened to officials that exposed the state to risk. Not enough was learnt from the JIT on conflict of interests. It did seem that Mr Shaik influenced who got the contracts. SCOPA cannot merely say there is insufficient evidence - more homework needs to be done. The arms deal must be put behind us but it must be done properly.

Mr Smith commented that the views being expressed were close to those of the ANC except for one or two. He read the ANC proposal. Thereafter he said that the DP sees the JIT Report as interim but for the ANC it is a final report. There is no need for interaction with the executive on matters of policy. The place for this is in the Defence Portfolio Committee.

In reply to the Chair raising the point that the cost must be made known, Mr Smith agreed with this but said that SCOPA's role is to look at money spent while the Chair is talking about money to be spent in the future - that falls under the Finance Portfolio Committee. He reiterated that he saw no major discrepancies amongst the views. The only question is who does the monitoring.

The Chair agreed that there are many common issues but that there were many significant gaps. The question was how to deal with the varied views and if they can be accommodated in a single report.

Mr Masithela suggested that the Committee take a break to go through all the proposals.

Dr Koornhof asked if the ANC would allow changes to their draft, if their proposal is used as a basis, or if there will be a minority report.

Mr Masithela said that the draft is open for discussion. It can be added to and beefed up.

The meeting was adjourned until 14h00.

When the meeting resumed, the Chair asked for feedback from all the opposition parties.

Dr Koornhof thanked the ANC for the opportunity of making inputs on their proposal but indicated that the UDM would stick to their proposal. The UDM regards the JIT Report as interim. Because of its interim nature, the UDM cannot comment on the findings and recommendations. The JIT Report states that criminal investigations are inappropriate for inclusion in the report. This very statement suggests that the matter cannot be concluded. He said that the oversight role has not been discharged and that it is impossible to judge if the ongoing investigations and prosecutions will uncover other evidence that has broader political, criminal and contractual implications. SCOPA has not yet completed its work and must be allowed to complete its work.

Mr Blaas said that report of the ANC covers many main issues but that there are still issues outstanding and the NNP also cannot support the proposal.

Ms Taljaard said that there are many outstanding issues from the 14^th Report. The whole JIT Report was referred to SCOPA and at no time did the Speaker say that SCOPA must not deal with all the issues. The DP feels that further work is needed. The DP cannot feed into the report because of the gaps and the DP stands by its position that further investigation is needed.

The Chair on behalf of the IFP said that SCOPA must fulfill its investigative responsibilities. There are problems with the purpose of the JIT Report and with parts of the substance. He acknowledged that parts thereof were positive but the substance still had limitations. It was to centralised around the work of the JIT. Before the recommendations are taken forward there must be certainty that they are comprehensive. The ANC response seems to be to farm out the work. There is a question about the mandate of SCOPA and the other committees. The Chair suggested that a legal opinion be obtained to advise on the responsibilities of the committees. The Chair said that he had tried to change the report of the ANC to something he could live with - but that exercise was a far stretch and the changes were beyond what the ANC would accept.

Mr Smith in response to the critique said that there can be no doubt that the 14^th Report is a report of parliament. There is a clear instruction that by the 6 December, the seven committees must report. There can be no confusion that a report is therefore needed. In response to the Chair, he said the JIT Report was the central part of the focus and asked what else should be. In response to the UDM's call for a judicial inquiry, he said that Mr Ngcuka had pointed out that it was not common practice to name individuals under investigation. Therefore it was perfectly normal not to include this information in the report. He called for the Chair to take charge because at the moment the discussion was leading nowhere and the ANC would have to make a decision about continuing with the discussion if members could not meet each other halfway. He proposed that the Committee go through the ANC report paragraph by paragraph but at some point a decision must be made if the Committee is going forward.

Mr Gerber (ANC) commented that this is the most transparent arms deal in the history of the county because he can remember when arms were swapped for oil and gold. He said that the good work of the JIT was now being destroyed.

Ms Taljaard had gone through all the committee reports and found that many issues in the 14^th Report remains. Most of the remaining issues are SCOPA issues and are at the heart of the Committee's mandate.

The Chair noted that all sides had made their arguments but it was not merely a matter of the Chair resolving the issues because of the types of differences between the members. He said that the word 'final' was elusive and as long as the ambiguity continued the opposition would continue with the bottom line: that more work needs to be done. A result will just have to be forced if the bottom line is not allowed to creep in. He said that in discussion with the Speaker, she had said that SCOPA is different from other committees and that it has a job to do. It will have to be said that SCOPA has more work to do and if this is not said, then the ball is in the ANC court.

Mr Smith asked where in the report is the word 'final'. He agreed that if parties feel that there are areas that are not sufficiently addressed in the ANC report, they must indicate that. Members must say exactly what item because it does not help merely to say that issues in the 14^th Report are not addressed. The ANC is willing to concede if the opposition can convincingly argue that there are issues left out of the ANC report and the reports of the other six committees. If no convincing argument is made, then the Committee must decide if the ANC report is the Committee Report.

Dr Koornhof said that the opposition had submitted reports but members of the majority were selectively criticizing the position taken by the opposition. The ANC is threatening to force the report on the Committee. If no common ground can be found, then the threat must be carried through because at the moment the Committee is arguing in circles.

The Chair noted that all views had been aired and he put it to the Committee that the meeting must disband or the ANC must put their report on the table to be passed.

Mr Masithela pleaded for members to go through the ANC report paragraph by paragraph.

The Chair replied that there are members who feel that they do not want to do this.

Dr Koornhof indicated that going paragraph by paragraph would not provide a solution or common ground so there was no sense in doing that. The question was whether there is enough consensus about the arms deal investigation as a whole and on the role SCOPA still has to play.

Ms Taljaard indicated that the proposed process would not take away the gaps relating to the role SCOPA still has to play. There would be no benefit in going through paragraph by paragraph.

Mr Blaas was also not in favour of going through the report. The Committee would not achieve anything if there is no consensus on the road ahead and on the outstanding issues in the 14^th Report.

Mr Smith said that the ANC had tried as hard as possible to persuade members but democracy does not need consensus, it says that majority rules. He formally tabled the ANC report for adoption.

Dr Koornhof indicated that he had already gone through the report paragraph by paragraph and the UDM could not be part of it because its differences were too vast.

Ms Taljaard shared his sentiment and said she had gone through the report and could not support it.

Mr Blaas had also gone through the report and could not support it for the reasons already mentioned. There had been an attempt to open the door to create an opportunity to engage in certain issues, specifically the accountability of the executive but the ANC had closed that door.

The Chair indicated that he could not support the report for reasons already mentioned. He put the report to the Committee.

The ANC indicated its approval. The DP, UDM and NNP did not vote. The Chair on behalf of the IFP noted an objection.

The ANC report was adopted as the Committee Report of SCOPA.

The meeting was closed.

Appendix 1: UDM proposal
Standing Committee on Public Accounts Interim Report submitted to Parliament, dated 11 December 2001 on the Strategic Defence Procurement Packages

The Standing Committee on Public Accounts recommends that the Joint Investigation Report into the Strategic Defence Procurement Packages should be regarded as an Interim Report, which indicates areas of further in-depth investigation by an Independent Judicial Commission of Inquiry. The report presents a chronological sequence of events during the procurement process, with findings and recommendations attached to it. The report does not, however address some of the most serious allegations of misconduct by government officials and others involved in the Strategic Defence Procurement Packages.

The Standing Committee on Public Accounts has not yet fulfilled its parliamentary oversight and accountability role regarding the Strategic Defence Packages1 and intends to fulfil its role in this regard, after which it will report back to Parliament and the voters of South Africa.

MOTIVATION FOR SCOPA 'S REPORT TO PARLIAMENT
1. Joint Investigation Report into the Strategic Defence Packages
Due to the nature and structure of the mass meeting with the Joint Investigation Team on 4 and 5 December 2001, it was impossible to have a sensible, qualitative interaction on key issues with the JIT. Many of the answers lacked substance. Due to the fact that we are not satisfied with the manner in which SCOPA, who is an important role player in the investigation, is being treated, we hereby retable our questions to the JIT. We were not satisfied with many of the answers received. For this reason we cannot support the Joint Investigation Report into the Strategic Defence Procurement Packages as a final report.

The Report should be regarded as an interim report due to the fact that a number of issues are still under investigation.

2. SCOPA interaction with the Executive
On 22 November 2001 Mr Bantu Holomisa, Leader of the UDM, wrote to the Chairperson of SCOPA, requesting that the members of the sub - committee of Cabinet be brought before SCOPA. There are specific questions that remain unanswered, which members of the Executive could inform SCOPA on.

3. Main contracts and sub - contracts
Major shortcomings were identified with regard to the awarding of contracts, both in the Report and in the public domain. Idasa asks, rightfully, that if the subcontracts are ostensibly tainted by fraud as a result of conflicts of interest, is there not a case to be made for saying that the main contracts are flawed? Serious flaws were uncovered with regard to evaluation criteria, DIP evaluations, NIP evaluations, and allegations that are still under investigation, throughout the Report.

4. Cost to the State
Warnings by the affordability team were send to the Minister's Committee on costs and risks on the Arms Deals as early as August 1999. These revelations raise a number of serious questions. Only the members of the Executive can answer to that when they appear before SCO PA.

There are also process questions outstanding, for instance why was Parliament never granted the opportunity to approve the present arms deal?

5. Terms of Reference/SCOPA's investigation brief to the Agencies.
When the Executive started to intervene in the investigation process and in the work of SCOPA, the UDM recommended to the Speaker on 14 May 2001 and to the three Agencies on 18 July 2001, some Terms of Reference for the investigation. The JIT never cleared or communicated their Terms of Reference with SCOPA or Parliament, but only in a non-transparent manner with the Executive SCOPA was also never afforded the opportunity to issue an investigation brief to the Agencies for its input, as was agreed upon in the 14th Report of SCOPA, dated 2 November 2000.

Dr Gavin Woods
Chairperson
Standing Committee on Public Accounts
Parliament

22 November 2001

RE: REQUEST TO CABINET SUB-COMMITTEE ON THE ARMS DEAL TO COME BEFORE SCOPA TO ANSWER QUESTIONS RELATING TO THE ARMS REPORT

Dear Gavin

The past number of days we have witnessed a concerted campaign by members of the Executive and the Cabinet Sub-committee responsible for the Arms Deal. We do not begrudge them their right to express their views, but we are convinced that if they have such strong views these should be brought to this Committee. It is after all this Committee who initiated the investigation in the first place.

There are a number of critical questions that remain unanswered, which we believe can only be answered by the Members of Cabinet themselves. It would, in our opinion, detract from the final report of SCOPA if we had not solicited the opinion, and interrogated the views, of the people who were responsible for the Arms Deal. The Report itself is ambiguous or silent on many issues.

Specific questions that remain unanswered and which the Executive could inform the Committee on are:
-The 'prerogative' of the Cabinet to overrule the advice of its own experts and choose the more expensive Hawk Fighter Trainer option.
-The specific amendments, deletions or "improvements" that Cabinet insisted should be made to the Report before its tabling in Parliament, as was reported in the media and subsequently confirmed by the Auditor General.
-The matter of accountability and responsibility of Cabinet, specifically with regards to the fact that high-ranking officials who worked directly with them have been found by the Report to have committed serious transgressions. We require a proper explanation from the particular Cabinet members as to why they should not be held accountable for the behaviour of officials with whom they worked so closely together.

Kind regards
President United Democratic Movement

Appendix 2: DP Proposal
Proposed Further Areas of Investigation by the SCOPA
It is important to note that SCOPA never envisaged any limitations on the scope of this investigation. Such limitations were in the purview of the IT and was in essence also an outcome of access to information issues highlighted by the AG.

In its 14th Report the Standing Committee on Public Accounts indicated that it would continue its own probing of the arms deal while the JIT were conducting a formal investigation as there were a number of questions it had to pursue given its wide-ranging powers under Section 56 of the Constitution.

The Standing Committee on Public Accounts has the power to compel the production of documents, the attendance of witnesses, and to determine how its proceedings will be conducted. In key respects it therefore would be in a strong position to source further information and call civil servants and Cabinet members to explore issues and feed into the investigative process.

Sadly, as history will record, no fruitful relationship existed between SCOPA and the JIT during the course of the investigation despite no legal obstacles barring informal interaction. This distance between the Committee arid the JIT has led to a number of areas in the 14th Report of SCOPA being insufficiently addressed. This requires the Committee to conduct further work before closing the chapter on the arms deal through a final report to Parliament.

Despite the Joint Investigating Team submitting their report, Parliament has a clear duty to confront the executive and Ministers concerned about aspects and political choices and strategic considerations highlighted in the Report. For SCOPA this is particularly required in the light of the appearance of the Ministers of Trade and Industry, Finance, Public Enterprises and Defence before the Committee on 26 February 2001.

Parliament furthermore has to act swiftly in implementing and adding to the recommendations of the JIT to tighten up government procurement and adopt sweeping and comprehensive measures to ensure ethical conduct during procurement processes. Notwithstanding the value of the role Parliament has to play in implementing the recommendations of the JIT it is abundantly clear that there are a number of areas that require further probing and questioning.

Proposed Areas of Further Investigative Work for SCOPA in accordance with Rule 206(I)(c)

I. Thorough post mortem of DOD and ARMSCOR procurement policies in terms of appropriateness and application. A key focus would be the degree of discretion due to the package approach and the government's role in initiating the procurement. Greater detailed probing of the relationship between prime contracting and subcontracting would be required.

2. Full probe of all subcontracts across all programmes as the JIT only looked at three subcontracts. the gears for the Corvette and the engines for the LUH as well as the complaint by C212 aired at the public inquiry. Special attention should be paid to conflicts of interest in these areas and to possible 'cooling off periods' applicable to all role-players in subcontracts.

3. The value for money issues in the IP programme and the risks of implementation. The impact of the programme since contract signature ( 3 December 1999) would be a key focus area. Due to the Committees power in terms of Section 56 access to information could create less difficulty. Further joint hearings in this regard with the Portfolio Committee on Trade and Industry would play a role here. In addition the spillover of conflicts of interests into the counter trade of this deal needs probing.

4.Cost of the Hawk and Gripen (Committee's concern in 14th Report) not addressed.

5. Basis of risk loading for Corvette combat suite and reasonableness of this step. Given the difficulties which the JIT have had in terms of co-operation from a number of suppliers Section 56 could again be salient.

6. The role of SOFCOM and the evaluative function of SOFCOM.

7. The value for money questions and prescript compliance issues related to the appointment of the Chief Negotiator.

8. The role of Mr. Shaik vis-a-vis Cabinet.

9. Ministerial Accountability

Appendix 3: ANC Proposal and official Committee Report

Report of the Standing Committee on Public Accounts on the Joint Investigation Report into the Strategic Defence Procurement Packages dated 11 December 2001:

1. Introduction
1.1 In its Fourteenth Report of 2000 to the National Assembly, the Standing Committee on Public Accounts (the Committee) raised certain concerns regarding some aspects of the Strategic Defence Package procurement process.

1.2 The Committee recommended an independent and expert forensic investigation to, "prove or disprove once and for all", the allegations of corruption relating to the procurement process.

1.3 The Joint Investigation Report (the Report) was tabled in Parliament on
14 November 2001 and referred to seven Portfolio Committees. The report of the Committee must therefore be read in conjunction with the reports of the Committees on Defense, Ethics, Finance, Justice, Public Service and Administration and Trade and Industry.

1.4 The Committee, having considered the matters in the Report falling within its competence, reports as follows:

2. Joint Investigation Team
2.1 The Committee expresses its appreciation to the Joint Investigation Team (JIT) for the painstaking, diligent and thorough manner in which it conducted its investigations.

2.2 It further wishes to thank the JIT for the open and cordial manner in which it interacted with this and other committees of Parliament.

2.3 It affirms its confidence in the capacity, integrity and independence of the three agencies involved in the investigation.

2.4 The Committee believes that the manner in which the JIT has conducted itself has contributed to further strengthening accountability, transparency and respect for the Constitution and the institutions it creates to support democracy.

3. Findings and Recommendations
3.1 The Committee accepts the findings and recommendations contained in the Report of the JIT and in particular the finding that "No evidence was found of any improper or unlawful conduct by the government. The irregularities and improprieties referred to in the findings as contained in this report, point to the conduct of certain officials of the government departments involved and cannot, in our view, be ascribed to the President or the Ministers involved in their capacity as members of the Ministers' Committee or Cabinet. There are therefore no grounds to suggest that the Government's contracting position is flawed"

3.2 The Committee notes that Government has accepted the findings and recommendations made by the JIT in the Report without reservation.

3.3 The Committee further notes and supports the ongoing criminal investigations that are being conducted and urges that they be concluded speedily

3.4 The Committee commits itself to monitor, through its ongoing oversight role, the implementation of recommendations falling within its area of competency. In this regard the Committee wishes to draw particular attention to the following recommendations:

3.4.1 With regard to acquisition policy, the committee notes ACQ1/98 and suggests further refinement in line with the recommendations contained in paragraphs 14.2.1; 14.2.2; 14.2.4; 14.2.9; 14.2.10 and 14.2.11 of the Report.

3.4.2 The Department of Defence (DoD), Armscor, National Treasury and the Department of Public Service and Administration (DPSA) in conjunction with the Public Service Commission should take the necessary steps to develop the rules and guidelines as referred to in paragraph 14.2.12 of the Report to address the issues brought about by conflict of interest. DPSA and National Treasury should ensure that these rules and guidelines are implemented in acquisition/procurement processes at all government departments and state funded institutions.

3.4.3 In supporting the recommendation contained in paragraph 14.2.15 of the Report, the Committee recommends that the DPSA should give consideration to and explore the development mechanisms to ensure the declaration of interests by senior officials of government and state funded institutions.

3.4.4 The Report of the JIT makes mention of instances where officials failed to comply with established guidelines or deviated from prescribed frameworks. The Committee recommends that the conduct of these officials be subjected to internal investigations to establish whether disciplinary action is necessary. The Committee further recommends that the relevant departments should report to Parliament in this regard by March 2002.

3.4.5 The Department of Trade and Industry (DTI) should expedite implementation of the recommendations contained in paragraph 14.2.14 of the Report, and should take urgent measures to comply with the recommendation contained in paragraph 14.2.5 of the Report. The Committee further recommends that these measures be extended to all industrial participation offers submitted to the department.

3.4.6 The Committee further recommends that matters of internal controls, proper financial management and accountability be followed up urgently and implemented by the departments or parastatals concerned. Procurement processes have to be clearly defined and properly implemented. With this in mind the committee recommends that the refined policy (as referred to above) should be supported by detailed control measures and procedures, which should give effect to the recommendations made in paragraphs 14.2.3; 14.2.6; 14.2.7; 14.2.8 and 14.2.13 of the Report. The Committee draws attention the PFMA (Public Finance Management Act 1 of 1999 as amended by Act 29 of 1999) requires Accounting Officers and officials of departments to ensure proper financial and accountability arrangements are in place, and where these are lacking that they ensure appropriate corrective measures are in place as a matter of urgency.

4. Concluding comments
4.1 The Committee, in accepting the Report of the JIT, concludes one aspect of the process initiated in its Fourteenth Report of 2000.

4.2 The Committee, together with other committees of Parliament will now interact, on an ongoing basis, with the relevant departments and parastatals to monitor the proper implementation of the recommendations made in the Report of the JIT.

4.3 Ongoing criminal investigative work is being conducted by the relevant agencies that will report to Parliament in this regard in terms of their legal mandates and through their normal lines of accountability.

4.4 The Standing Committee on Public Accounts recommends that the National Assembly accept the report of the JIT.

Report to be considered.