Defence Procurement Package Investigation: Second Committee Report

Meeting report

STANDING COMMITTEE ON PUBLIC ACCOUNTS (SCOPA)
29 May 2001
DEFENCE PROCUREMENT PACKAGE INVESTIGATION: SECOND COMMITTEE REPORT

Chairperson: Dr G Woods (IFP)

Relevant Documents:
Fourteenth Report of the Standing Committee on Public Accounts
Draft Committee Report (see Appendix of previous meeting)
Amended Additional Paragraph to Conclusion of Committee Report, as agreed to by Committee
Proposed DA Amendments to Committee Report, rejected by Committee (Appendix 1)
Proposed UDM Amendments to Committee Report (Appendix 2)

SUMMARY
The Committee moved to finalise its second report on the arms deal investigation (follow-up to the Fourteenth Report). There was continued debate on how the minority views should be expressed in the report. The ANC majority affirmed that the minority report would be excluded from the Report. Mr Holomisa proposed an amendment reflecting the lack of unanimity in adopting the Report. This amendment was agreed to by the ANC, UDM and IFP. The DA dissented stating it preferred to have its views as previously articulated in the proposed minority report, presented for the record as proposed amendments to the Report. The ANC majority rejected the DA's amendments. The proposed Report as favoured by the ANC, including Mr Holomisa's approved amendment and a minor technical change, was adopted by the Committee along party lines.

MINUTES
The Chairperson opened the meeting 40 minutes late, due to a private discussion between the ANC and UDM Committee members. The Chairperson objected to the delay and requested more discipline and punctuality in future.

The Chairperson moved to address the finalisation of the Report on the arms deal. He advised the Committee that classified documents requested by the DA from the Department of Defense relating to the investigation of the arms deal had been delivered to the Speaker. The Chairperson said that he would make viewing arrangements with the Speakers office.
The Chairperson noted that there are additional classified documents which he would like to view. He asked for the Committee to give him a mandate to request the document as part of the Committee's ongoing investigation into the matter.

An ANC mandate insisted that no mandate was necessary since individuals were free to view the documents in their own capacity. Further, he said that this was consistent with the Committee's view, as reflected in the Report, that it would defer its investigation while investigation by other bodies proceeds.

The Chairperson asserted that stopping the Committee investigation at this point was not in accordance with its 14th Report for 2000.

An ANC member commented that any Committee mandate for further document review was dependent on the scope of the Committee Report to be adopted at this meeting. He added that such actions must be within the context of a "defined parallel process investigation" as determined by the Committee.

The Chairperson then elaborated that his interest in the documents pertained to the identification of preferred bidders on the arms deal. He indicated that this was relevant to the issues the Committee was considering.

Ms Taljaard (DP) supported the Chairperson. He added that despite the majority's proposed report, the Committee has not abdicated its continuing Section 56 Constitutional responsibility for investigating the matter. Further he said that when the other investigative bodies eventually report back on their findings parliament must be familiar with the facts in order to evaluate them. Hence, exercising the right to continue gathering information was necessary in order for the legislature to perform its duty.

Mr Smith (ANC) argued that the ANC had been "ambushed" by the Chairperson's request for the mandate. He indicated that the issue should have first been raised in a Committee planning meeting. He contended that the request would have to be discussed by the ANC to form a proper response. In the interim he said that individual members could review the document in their own capacity.

The Chairperson, noting the ANC hesitancy to move forward, argued that it was illogical that the Committee was unable to obtain further information from the Department of Defense.

The ANC speaker reiterated his view that the Committee must decide what it wanted to authorise in its name.

The Chairperson referred to "gaps in the Committee's understanding" of what had transpired in the arms deal. He inquired rhetorically whether the Committee should remain ignorant in regards to these "gaps".

An ANC member endorsed her party colleagues' statements.

At this point Ms Seaton (IFP) asked why the Committee would not want to obtain documents which it could obtain as a Committee, if individuals could obtain the documents in their own capacity. She said this was illogical if the Committee was committed to its continued investigation. Ms Taljaard (DP) concurred with this view.

Mr Nel (ANC) said that matter had been addressed using the correct procedure. He argued that the matter should have been initially addressed in a Committee planning session. He added that by introducing the matter in lieu of the correct procedure had led to a non-productive discussion. He endorsed Mr Smith's proposal that the matter be considered by the ANC before a formal response be given.

Mr B Nair (ANC) contended that the Chairperson's proposal was an attempt to stop the adoption of the majority endorsed Report at this meeting. He noted that in the ANC's view, the Committee did not have the capacity to fully investigate the matter and added that the matter should be left to other investigative bodies.

Mr Beukman (NNP) highlighted that the Chairperson's request for a mandate had been included in the pre-meeting materials circulated to Committee members, and hence was not an "ambush" upon the members.

Finally, the Chairperson ruled in favour of Mr Smith's proposal that the parties be given a week to consider their positions on his request for a mandate.

The Chairperson acknowledged that the ANC favoured majority Report had been tabled by Mr Smith. He allowed each party an opportunity to briefly state its position concerning adoption of same.

In his party capacity the Chairperson stated that the IFP rejects the Report, noting that its views were too dissimilar from those of the ANC to approve it. Further, while the IFP wants its views included in the record, the ANC has not supported inclusion of minority views. Hence the IFP will work with the other minority parties to have its views appended to minutes of the Committee meetings so that they are part of the public record.

Mr Smith, on behalf of the ANC indicated that bi-lateral discussions between the parties had been useful, and hopefully would lead to normalisation of relations amongst Committee members. He also commended the Chairperson and the UDM for their "political maturity" in not prolonging the debate on the manner of inclusion of the minority views. He added that he hoped that the other parties would also eschew confrontation and move toward "healing".

Ms Taljaard declared the DP's rejection of the Report. She stated that the interventions of the executive branch of government into the Committee's work had led to deep divisions within the Committee. Moreover, the bi-lateral party discussions had made it clear that minority views were not to be accommodated, and that being the case amendments to the Report will be moved in order to ensure that the minority views are on record. Further, in her view the manner in which minority views and differences in opinion are reported goes to the heart of democracy. She concluded by saying that the majority's attitude in this regard is problematic.

Mr Beukman (NNP) concurred with Ms Taljaard, adding that the conflict between the executive and legislative branches must be addressed. He observed that the executive's intervention in the legislative process is inimical to the separation and balance of power between the branches.

Mr Holomisa (UDM) stated that the process of investigation had revealed fundamental differences of opinion, with the ANC committed to having its view adopted and projected as the view of SCOPA. In order to clarify this for the record, he then proposed adding a paragraph to the concluding section of the Report. In essence the amendment was as follows :

1. The Report does not reflect unanimity of SCOPA members.

2. Consensus could not be reached among SCOPA members as to interpretation of its 14th Report of 2000, and the differences are reflected in the minutes of SCOPA meetings.

3. SCOPA recommends that the matter be debated by the National Assembly.

The Chairperson then asked for comments on the proposed amendment.

Ms Taljaard (DP) noted that in principle the amendment was attractive, particularly as it was to be included in the text of the Report, but indicated that the wording needed to be fine-tuned.

Mr Smith (ANC) indicated that circulation of the text of the amendment would be helpful, but that generally the UDM approach might be acceptable.

The Chairperson then ordered a brief recess so that the text of the amendment could be reviewed by the members. When the meeting reconvened, Mr Smith (ANC) indicated its acceptability, subject to striking the last point concerning SCOPA calling for debate of the matter in the National Assembly.

This proposal was acceptable to the ANC, IFP, and UDM members, but rejected by the DP and NNP. In effect the amendment was adopted.

Ms Taljaard then stated that amendments to the Report, largely based on the text of the proposed minority report which the Committee had refused to adopt, would be jointly proposed by the DA. The ANC requested that text of the proposed DA amendments be circulated. Ms Taljaard indicated that this was not immediately possible.

The Chairperson then allowed Ms Taljaard to propose a series of amendments (approximately 15). Each was rejected by the ANC majority. During the voting the following points were made:

1. An ANC member requested clarification of the DA's position viz a viz whether it believed the Auditor General had the capacity to properly investigate the arms deal. The ANC member implied that the proposed amendment suggested that the DA doubted his ability to do so. The Chairperson quelled further discussion on this point, noting that such polemics were not helpful to processing the proposed amendments.

2. Mr Smith (ANC) stated that the process of considering the proposed DA amendments was "farcical" without having their text to refer to, adding that "even if we had wished to engage in discussion" it would not be possible. The Chairperson agreed, suggesting that copies of the text should have been provided.

3. The reference on p 3 of the Report to the report of the Portfolio Committee on Trade and Industry was changed, with the agreement of the Committee, to reflect that the text of the report was not attached.

4. The revised UDM amendment to the conclusion of the Report was agreed to.

The Chairperson then asked for a vote on adoption of the Report, as amended, and the ANC majority then approved the Report, with the DA objecting, as reflected in its defeated amendments.

The Chairperson then pronounced the Report adopted by the Committee, thus closing that matter. However, he added that individuals could continue to pursue issues, as he intended to. The meeting was then adjourned.

Appendix 1:
DA AMENDMENTS TO THE 2^ND REPORT ON THE ARMS DEAL

AMENDMENT 1
Introduction:
We are unable to associate ourselves, or our parties, with the recommendations and comments by the majority of the members of the SCOPA.

We are of the opinion that the Majority Report is an inadequate response to unacceptable criticism and an attack by the Executive (four key Ministers and the Deputy President) on the integrity of Parliament's key watchdog Committee - the Standing Committee on Public Accounts and on the work of the Auditor-General that formed the basis of the 14^th Report.

We believe that the motivation for this constitutionally problematic attack must be questioned.

We believe that the broader constitutional issues that the attack by the Executive, and more particularly the letter of the Deputy President, raises must be addressed by the National Assembly as the integrity of the SCOPA was brought into question.

We believe that the Majority Report will tilt the executive-legislature relationship in favour of the Executive and distort the balance the Constitution envisages. In this respect the Majority Report will add to the marginalisation of Parliament, the key institution in our constitutional democracy. It is for this reason that the SCOPA and the National Assembly must assert its role vis-à-vis the Executive. We believe the Majority Report fails in this respect.

We note with concern the possible intervention by the Executive in the drafting of the Majority Report and the associated constitutional difficulties

AMENDMENT 2
Pursuant to the 13^th November 2000 the exploratory meeting between SCOPA and the four agencies mentioned in SCOPA's 14^th Report at the Office of the Auditor General subsequent meetings were held between the investigative agencies on 16 November 2000 and 1 December 2000 to clarify their respective roles.

The Heath SIU was not granted a proclamation by the President under the provisions of the SIU and ST Act (Act No. 74 of 1996). The Committee notes that the responsibilities envisaged for the SIU now falls in the ambit of responsibilities of the AG and expresses its concerns that the AG leaves the specific powers which the Heath SIU would have brought to the investigation.

The Committee received a progress report from the combined investigation team on 14 February 2001 from the Deputy Auditor General on behalf of the Joint Investigating Team. While the Committee welcomes the commitment by the JIT to produce a joint report to SCOPA towards the end of July 2001 which will contain "the findings of any status of matters still in progress at the time", the Committee anticipates having the opportunity to discuss the full approach used at the completion of the investigation, it hopes to be kept abreast of developments at regular intervals during the course of the investigation.

The House is advised that the original estimated cost of the forensic investigation is R13,5m. The investigation team currently comprises:

· Three members of the Auditor General (two CA's and one advocate)
· Five members from IDSEO/Scorpions (Two advocates and three investigators)
· Two senior investigators from the Public Protector (One advocate and one attorney - one of them with military experience)

Further expertise, including chartered accounts and auditors, forensic auditors/accountants, legal expertise and technical expertise, will be contracted in as and when required. The investigation focuses on all alleged irregularities and specifically the cost of the Hawk and Grip deals to the State.

The Committee has noted the decision by the JIT to convene public hearings/inquiries as part of their approach to the investigation. The Committee hopes to be informed of the relationship between the forensic investigation it has called for and the public hearings/inquiries approach adopted by the investigators as this did not form part of the information presented by the Deputy Auditor General on 14 February 2001. The Committee wishes to have such an interaction before the public inquiry proceeds as the concerns about the safety and constitutional rights of witnesses and the admissibility of evidence is material to the success of the inquiry. .

Further aspects of concern about the investigation remain. The Committee has noted, for example, that access to documentation remains a key challenge for the joint investigative team. This is of deep concern to the Committee as all role players have given numerous assurances that there will be full co-operation with the forensic probe.

The Committee has taken note of a meeting that Madam Speaker convened with the joint investigative team and two members of SCOPA to discuss their reporting lines to the SCOPA and access to information issues. The Committee would also ask the Speaker to make available her understanding of the accountability obligations of the three agencies to the National Assembly and SCOPA.

AMENDMENT 3
On 27 December 2000 Madam Speaker issued a Statement indicating that: "The Speaker is not aware of any resolution of Parliament or the National Assembly instructing the President to issue any Proclamation regarding the work of the Heath Commission. Any such action would be of dubious legal and constitutional validity".

On 8 January the Parliamentary Law Advisers advised Madam Speaker as follows: "Therefore, in our opinion the Report (as adopted by the House on 3 November 2000) does not amount to a recommendation to the Executive to refer the matter in question to the Unit for investigation (by proclamation under section 2 of the Special Investigating Units and Special Tribunals Act, 1996).

The 14^th Report of the Standing Committee on Public Accounts was given a specific interpretation by the Speaker of the National Assembly. This interpretation was subsequently quoted by the Minister of Justice in his recommendation to the President which resulted in the exclusion of the Special Investigating Unit from the forensic investigation called for by Parliament. The interpretation of the 14^th Report has caused difficulty for the SCOPA. Against this historical background to the 14^th Report, legal interpretation and substantive subsequent events clearly show the Committee's intention to have the SIU involved in the probe.

According to the Parliamentary Law Advisors advice to the Committee even the ANC's own Resolution, adopted on 28 February 2001 with only ANC members of SCOPA voting in support, inadvertently shows that the 14^th Report did indeed call for the Heath Unit's inclusion. Any subsequent attempts to walk away from this intention constitutes a distinct departure from previous SCOPA positions and procedures including a proud tradition spanning more than 8 years of unanimous SCOPA decisions.

It is clear from historical background to the 14^th Report, legal interpretation, and substantive developments pursuant to the exploratory meeting with the four agencies in Pretoria that there was a definitive intent to include the Heath Unit in the arms probe. This substantive interpretation and events at the exploratory meeting in Pretoria led the Chairpersonperson of SCOPA to write to the President, after further being urged to do so by the Joint Investigative Team and the AG, requesting a proclamation for the involvement of the Heath Unit in the probe.

With Parliament having passed the Special Investigative Units and Special Tribunals Amendment Bill and given the continued lack of clarity as to whether the current three agencies have sufficient powers to investigate the arms deal the SCOPA believes that the possibility of including the Special Investigative Unit in the arms probe, after the appointment of the new head, must be considered.

AMENDMENT 4
The Committee has given careful consideration to the points made and positions taken by the Ministers of Finance, Defence, Trade and Industry and Public Enterprise at their press conference on 12 January 2001 and the 26 February 2001 appearance before the Committee.

In their appearance before SCOPA on 26 February 2001 the Ministers of Trade and Industry, Finance and Defence failed to allay or rebut any of the concerns expressed in the 14^th Report of the SCOPA on the substantive matters relating to:

· the selection of prime contractors and sub contractors
· the choice of the Hawk trainer
· the independence of role players
· the adequacy of industrial participation guarantees
· the adequacy of Department of Defence and Armscor procedures and negotiations
· the cost to the State

These concerns of the SCOPA remain and the Committee must continue its work on these matters with other Committees of the National Assembly including Finance, Defence, Trade and Industry and Public Enterprises.

The Committee believes that it is problematic for the Ministers concerned to attempt to delimit their accountability for decision making entirely to the realm of primary contractors. Evidence is clearly emerging that shows a degree of government involvement in sub-contracting, and possible quid pro quo links between prime contracts and sub-contractors. To aim to limit the decision-making role and responsibility in this manner is to reduce the scope of executive accountability.

While the Ministers make a compelling case that Government should not be involved in subcontracting as there are two different legal liabilities at stake the Committee is not convinced by the Ministers' arguments that government did not play a role in the subcontracting dimensions of the SDP.

These concerns of the Committee are closely linked to the insufficient checks and balances to guard against conflicts of interest and the prominent role played by the technical side of the civil servants in the negotiating team in terms of the subcontracting level.

The key question here is the fact that the Ministers chose to justify a deviation from procedure and their decision to opt for the Hawk/Gripen consortium as opposed to the Aeromacchi on two key grounds:

a. That the technical arguments that graduation from the Hawk to the Gripen would be more feasible than from the Aeromacchi to the Gripen, and
b. that the downstream DIP benefits were more attractive and more stable from an implementation perspective in the hands of the successful bidder.

As there was a clear deviation in the Hawk/Gripen case from a costed to a non-costed option the Committee believes that this area must receive attention.

The Committee believes that the Auditor General should consider whether all bidders were given due notice and opportunity that the decision makers were prioritizing DIP criteria over cost and whether they were given the opportunity to alter their DIP proposals before the decision was finally made.

While the Minister of Trade and Industry is correct to highlight that this was a decision by the Ministerial sub-Committee that Committee had to work within the confines imposed by the procurements process and the boundaries drawn by the requirements of just administrative action. The Committee therefore believes that many questions remain unresolved with reference to the weight attached to the DIP obligations over cost considerations and about the technical arguments about the ease of the training transition from the Hawk to the Gripen versus the transition from the Aeromacchi to the Gripen. As both these factors are material to an assessment of the Ministerial decision to opt for the Hawk, the Committee will be investigating both these matters further when considering the Report of the JITeam.

In October last year the Committee looked into the processes that led to the evaluation processes for the SDP and the interaction with the Ministers as the final decision makers on Monday 26 February 2001 has left many questions unanswered.

Particularly in the realm of the decision-making process and the steps taken to minimize the risks of conflicts of interest the Committee is not satisfied that the Ministers involved in the SDP took all the necessary precautions to guard against problems in this area. The Ministers made a strong distinction between the evaluation process and the decision making process arguing that the very new features of decision making, including the decision to opt for a total package as opposed to an incremental year-on-year acquisition as well as and the distinctive structures of the evaluation teams, International Offer Negotiating Team (IONT), Committee of Directors General and the role of the Cabinet sub-Committee itself in decision making ensured that, by the very nature of the complexity and staged approach, no single individual had the capacity to influence the process disproportionately.

The Committee believes, however, that the Chief of Acquisitions played a prominent role, albeit in a complex and institutionally unprecedented negotiating structure, and that its concerns about the pivotal role played by someone who had not sufficiently been subjected to a formal screening of conflicts of interest concerns.

The Committee notes from the comments by the Minister of Finance that the structure of the team itself and its complex nature was the only mechanism of conflict regulation that existed and that in the final analysis Cabinet was the ultimate 'checking mechanism' due to its overall responsibility. The Committee does not believe that this would constitute best practice and registers its concern that a more formalized arrangement was not made to minimize conflict of interest issues.

In the light of the fact that the Committee's concerns about conflict of interest were insufficiently addressed by the Ministers the concerns around conflict of interest issues and how conflicts could have impacted from the evaluation process straight through to the decision making process itself remain valid.

Because of the role of NIPs and DIPs in minimising the negative impact of the deal the Committee remain concerned at the risk of default. The Committee believes that it is imperative that the Portfolio Committee on Trade and Industry request regular reporting from the Ministry of Trade and Industry on NIP implementation and that the Portfolio Committee on Defence receives similar updates on DIP implementation from the Ministry of Defence.

The Committee reiterates its concern at the inadequate regulation of conflict of interest in the DoD and Armscor procedures and regulations.

While the Minister of Finance expressed a view that an independent checking mechanism was not required to curtail conflicts of interest because the mechanism and institutional arrangements of the negotiating team and its structure was in itself sufficient and ad hoc in nature - and therefore not requiring special codified measures to regulate conflicts - the Committee remains concerned that in the clear absence of distinct guidelines on conflicts of interest in the ARMSCOR procedures and the structure of the negotiating team, conflicts of interest did have a bearing on the outcome of the deal. The Minister of Finance's argument that the due diligence was built into the mechanism is therefore not convincing. The Committee therefore believes that the Ministers failed to substantiate their criticisms, contained in their press release of 12 January 2001, of the SCOPA's 14^th Report in their appearance before the Committee on 26 February 2001.

The Committee finds the Minister of Finance's "Net Present Value" argument insufficient The Committee remains concerned that the R30,3 billion figure quoted at 1999 prices does not give an adequate reflection of the overall cost to the State of the defence deal. The Committee notes the Budget 2001/02 projected cost for the deal of R43bn included in the Estimates of Expenditure. The Committee remains concerned at the fact that the total cost of this deal comprises:

· The tender/contract price and the requisite escalation clauses included in the contracts
· Statutory and freight costs
· Project management costs
· ECA premia and escalations
· Financing costs for the more favourable cash flows negotiated
· An absence of sufficient hedging arrangements

The Committee remains concerned that the R30,3bn figure quoted at 1999 prices does not give an adequate reflection of the overall cost to the State of the Strategic Defence Package inclusive of the factors listed above. The Committee further notes that the Minister of Finance declined to answer questions about the arms deal and its financing in response to questions before the Portfolio Committee on Finance citing that he was to answer such questions at a following meeting with SCOPA. The Committee expresses its concern that the financing and further cost escalation questions received inadequate attention in the SCOPA hearing with the Ministers on 26 February 2001. The Committee stands by its recommendation in its 14^th Report that the cost to the State of the Strategic Defence Procurement Package needs to be investigated thoroughly in a joint sitting between the Committee and the Portfolio Committee on Finance as recommended in the 14^th Report.

The Committee believes that this meeting must be convened as soon as is practically possible with regard to the programme of the Portfolio Committee of Finance.

The Committee notes that Ministers took strong exception to the following paragraph of the 14^th Report in the hearing on the 26^th February 2001: "The Committee's scrutiny of the documentation presented to it by the various Departments, and from which Cabinet made its ultimate decision, indicates that the Cabinet was sufficiently well informed to have made the public aware of the fuller cost possibilities of the deal".

The Committee notes the Ministerial objection to this statement in the 14^th Report but believes, in accordance with the oversight functions ascribed to Parliament and its Committee in the Constitution and the doctrine of the separation of powers, that the Committee was fully in its ambit of responsibility to question the manner in which Cabinet communicated the cost of the deal and the driving factors that could drive future costs upward, to the public in a more comprehensive manner than a mere price tag in Rands at 1999 prices.

AMENDMENT 5
The Committee has evaluated the matters detailed in the Deputy President's letter of 19 January 2001 to the Committee's Chairpersonperson. with the exception of the Deputy President's position regarding the Chairpersonperson's action in favour of the inclusion of the SIU, which has been dealt with by a majority vote in the Committee, the Committee finds that all other aspects of its report which were challenged by the Deputy President remain relevant and appropriate. The Committee believes that the Deputy President raises significant Constitutional issues which the Committee wishes the National Assembly to address.

AMENDMENT 6
Having confirmed the validity and soundness of its 14^th Report, which is also a report of the National Assembly, the Committee refers to the Ministers and Deputy President's incorrect assertions of incompetence, irresponsibility, dishonesty and dubious motive, which they attributed to the work of the Committee and therefore to the National Assembly itself. The Committee would wish the National Assembly to address this matter. In addition the Committee believes that the Constitutional questions around the Executive's comments on the work of the Office of the Auditor General requires attention.

AMENDMENT 7
The Committee has had access to a vast volume of confidential documents that are in Parliament's possession. The Committee notes that the Minister of Defence has released further information to the Committee and the Committee welcomes this gesture of openness and transparency. The Committee believes that it is in the public interest that access be given to these documents and that their confidential status must be revised in accordance with the rules of Parliament. The Committee believes that the public interest in this matter outweighs the confidentiality considerations applicable to the documents in Parliament's custody and the mechanism in Rule 157 to secure publication and/or disclosure of the documents must be considered. The Committee will take this matter under advisement in consultation with Madam Speaker.

AMENDMENT 8
SCOPA will continue to exercise its oversight role in accordance with the relevant constitutional provisions and the rules of the National Assembly.

The Committee believes that the JIT should keep Parliament informed about their approach to the investigation and submit progress reports in this regard as envisaged by SCOPA's 14^th Report.

Appendix 2:
UDM proposals on ANC report

Introduction
Add two bullets:
· Inclusion / exclusion of the SIU
· Documentation

Add paragraph:
Since the adoption of the 14^th Report to the National Assembly, and up to the submission of this Second Report to the National Assembly, various events (including correspondence) took place within SCOPA, and also between SCOPA and the Executive, the Speaker of the National Assembly and the Leader of Government Business.

For record purposes, and for members to have a full picture of what exactly happened since the adoption of the 14^th Report, the following correspondence is attached as appendixes to this report:

1. A letter from the leader of Government Business, dated 19 January 2001, addressed to the Chairpersonperson of the Standing Committee on Public Accounts, with attachments, namely:

a. The 12 January 2001 Government Statement of the Defence Acquisition (Media statement, background notes, summary of background information)
b. The 12 January 2001, letter to the President of the Minister of Justice and Constitutional development on the issue of the "Health Unit"

2. A letter from the speaker to the Leader of Government Business, dated 29 January 2001.
3. A letter from the leader of Government Business to the Speaker , dated 31 January 2001.

The Joint Investigating Team
The UDM is of the opinion that this was an informal report back to SCOPA by the Deputy Auditor General and has simultaneously stated that this report back meeting carried no status, as the JIT had not yet received their terms of reference, as was stated in the 14^th Report. At the time of writing this report, the letter situation is still the case. The UDM believes that the investigation must be officially gazetted with a clear terms of reference and time frames.

With regard to the investigation brief to the Joint Investigation Team, the UDM is of the view that an investigation brief should be given to the JIT by either SCOPA, or by an Authority responsible for directing the investigation. The following points should be considered in drawing up the terms of reference:

(1) The probe must be officially gazetted with clear Terms of Reference and time frames.

(2) In the light of further revelations of the possible proliferation of irregularities in the entire deal, the investigations must go beyondexamining sub-contracting procedures and cover the entire arms procurement transaction including the maincontractors.

(3) Attention must be drawn to the sub-Committee, which was Chairpersoned by the President, which apparently positioned itself as the "TenderBoard" in the allocation of contracts with the view to bringingclarity in its role in the whole saga.

(4) The need to empower the investigating agencies with the sameauthority previously enjoyed by the Heath Special InvestigativeUnit i.e. powers to cancel irregular contracts, etc.

(5) Were any monies paid to individuals or political groups bytendering companies in order to facilitate the granting ofcontracts to themselves, such as in the case of British Aerospacewhich paid the ANC an amount of R5 million just prior to the awarding tenders?

(6) Special focus be made on the possibility of individuals or groupsholding public office being beneficiaries of monies or shares frominternational companies which have been awarded contracts.

(7) The role played by individuals in the sub-Committee Chairpersoned bythe President in the awarding of contracts and whether any ofthem received any payments or shares.

(8) Are there any family members of the Mbeki sub-Committee or close associates benefiting from the awarding of these contracts?

(9) Whether the Black empowerment companies who were awarded sub-contracts have the capacity to perform or they were mere fronts for the main contractors?

(10) What were the motives for EADS in donating 30 motor vehicles to politicians and V.I.Ps as they have publicly confessed?

(11) Whether the executive deliberately misled parliament and the public about the true cost of the arms procurement exercisewhen they quoted it at R30billion when in reality it is +R50 billion to date.

(12) Whether the Defence Review which identified the defence needs which culminated in the current arms procurement was agenuine analysis of our national defence needs or asmokescreen to cover self-enrichment by individuals in the ruling party circles.

(12.1) With special reference to the estimated R4 billion which will be earned by ANC members who ownsub-contracted companies in the arm procurement deal;viz:-
-African Defence Systems (ADS)
-Futuristic Business Solutions
-Applied Logistics Engineering
-Nkobi Tom
-Temoso Technology
-M.K. Technologies
-X Cell
-Dynamic Cables

(12.2) Are these companies conduits for channelling arms procurement funds back to ANC coffers? This must be investigated.

(12.3) Were these companies lobbied by the main international contractors who were awarded procurement contracts? Were they paid any monies by them and if so how much?

(12.4) Did these sub-contractors lobby any members of parliament and Ministers? If so did they pay them any monies and how much?

The inclusion/ exclusion of the Special Investigation Unit (SIU)
The UDM believes that the JIT should be empowered with the provisions of the Special Investigating Units and special Triburials Act, 1996 (Act 74 of 1996), and as was amended in 2001, and that SCOPA should recommend accordingly, it is that a SIU be included into the existing JIT.

Interaction with Members of the Executive
The UDM believes that SCOPA's time should not be wasted to respond to the public attack by members of the Executive on the work and intentions of this Committee, in which they question the oversight and accountability role of SCOPA.

In the 14h Report, SCOPA stated that:"----- the Cabinets' announcement omitted to mention other cost implications which, it would seem, will significantly add to the State's commitment."

Following from the meeting with the Ministers, it is clear that the total cost of the purchase on the date of the contract was R30, 3 billion ($4,77 billion).This was the amount announced by government, all cost to the fiscus and the South African taxpayer.The final cost to the state of the acquisation package, is going to be substantially more than the contract price, and should be reflected accordingly.The issue on the cost of the defence acquisation package needs to be clarified.

It is suggested that SCOPA and / or the JIT should be more specific on the total cost to the State.In this regard SCOPA should meet with the Portfolio Committee on Finance to finalise this issue.Any negligence, from whichever side, should be reported to Parliament.

Leader of Government Business's letter
The UDM believes that SCOPA should not waste its time to respond to the letter from the Leader of Government Business, in which vicious attacks were launched on the Committee on its oversight and accountability role.

Documentation
It must be noted that a sub-Committee of SCOPA, consisting of the Chairpersonperson and a number of the ruling party members, not only had access to such documentation, but also extended invitations to members of SCOPA who are interested to view such documentation, to indicate it as such, so that it could be arranged.

A complete list of relevant documentation which was received by SCOPA since the adoption of the 14^th Report should be attached as appendixes to this report.