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Cape Town - A damning audit shows how badly South Africans were conned out of billions in offset deals, but parliament did get a warning, said former ANC MP Andrew Feinstein.
The audit makes it clear that government made it possible for arms companies to write off billions they owed South Africa, according to City Press.
This is the first time any audit of the offset deals has been made public. Offset deals are contracts obliging foreign companies to provide investments and jobs in return for buying their arms.
The report comes as former trade and industry minister Alec Erwin is set to take the stand on Monday at the Arms Procurement Commission headed by Judge Willie Seriti.
The audit was conducted by the department of trade and industry (the DTI and the report, dated October 2012, was obtained by DA MP David Maynier.
He said the report was likely to create some difficulty for Erwin.
“The internal audit report provides terrifying insights into the maladministration of the arms deal offsets. There is little doubt now that the arms deal offsets were a monumental fraud.”
Devil in the detail
The audit of 40 out of 121 offset projects reveals just how badly South Africans were conned:
- Arms deal companies, including two that would not have won deals were it not for their massive offsets offerings, later negotiated dodgy deals that saw their actual investments massively inflated by the DTI. This, in effect, enabled them to write off billions of rands owed to South Africa;
- Out of 24 audited projects in which arms companies had promised the creation of 56 531 jobs, only 3 815 jobs (6.7%) had materialised;
- The dti’s reported figure of 3 815 jobs was unreliable because the audit team “could not verify from the supporting documents if the total number of jobs reported were created and whether they were sustained or not sustained”;
- French arms company Thales was credited with an investment worth $171.2m, for a failed medical waste plant, that cost them just more than $1.1m;
- German Submarine Consortiums (GSC) failed to meet specified conditions, resulting in a €15.2m shortfall in investment; and
- The failure of an entire “carbon manufacturing” project by British Aerospace/Saab (BAE Systems) was never reported and only discovered when the audit team asked about it.
A catastrophe
The audit shows that the arms deal offsets were a catastrophe, said Feinstein, who was forced to resign from the party over his stand on the arms deal corruption.
"[It] shows that the offsets are a complete disaster, which is exactly what we said at the time”.
“We warned them when I was still in parliament about the dangers of offsets.... But the imperative of getting the bribe was so profound they would not heed any advice.”
Feinstein, who studied the methods used by arms companies the world over, said experience showed that arms companies very seldom made good on the “vast majority” of economic promises.
Paul Holden, a co-author of a definitive book exposing arms deal malfeasance, said the DTI's report was “incredibly damning”.
“It basically shows that the actual economic benefit is far less than what was promised,” he said.
The commission into the arms deal was established by President Jacob Zuma in October 2011.
Judges Francis Legodi and Hendrick Thekiso Musi were appointed to help Seriti probe allegations of fraud and corruption relating to the government's controversial multi-billion-rand defence procurement package.
Read the full City Press report.
The audit makes it clear that government made it possible for arms companies to write off billions they owed South Africa, according to City Press.
This is the first time any audit of the offset deals has been made public. Offset deals are contracts obliging foreign companies to provide investments and jobs in return for buying their arms.
The report comes as former trade and industry minister Alec Erwin is set to take the stand on Monday at the Arms Procurement Commission headed by Judge Willie Seriti.
The audit was conducted by the department of trade and industry (the DTI and the report, dated October 2012, was obtained by DA MP David Maynier.
He said the report was likely to create some difficulty for Erwin.
“The internal audit report provides terrifying insights into the maladministration of the arms deal offsets. There is little doubt now that the arms deal offsets were a monumental fraud.”
Devil in the detail
The audit of 40 out of 121 offset projects reveals just how badly South Africans were conned:
- Arms deal companies, including two that would not have won deals were it not for their massive offsets offerings, later negotiated dodgy deals that saw their actual investments massively inflated by the DTI. This, in effect, enabled them to write off billions of rands owed to South Africa;
- Out of 24 audited projects in which arms companies had promised the creation of 56 531 jobs, only 3 815 jobs (6.7%) had materialised;
- The dti’s reported figure of 3 815 jobs was unreliable because the audit team “could not verify from the supporting documents if the total number of jobs reported were created and whether they were sustained or not sustained”;
- French arms company Thales was credited with an investment worth $171.2m, for a failed medical waste plant, that cost them just more than $1.1m;
- German Submarine Consortiums (GSC) failed to meet specified conditions, resulting in a €15.2m shortfall in investment; and
- The failure of an entire “carbon manufacturing” project by British Aerospace/Saab (BAE Systems) was never reported and only discovered when the audit team asked about it.
A catastrophe
The audit shows that the arms deal offsets were a catastrophe, said Feinstein, who was forced to resign from the party over his stand on the arms deal corruption.
"[It] shows that the offsets are a complete disaster, which is exactly what we said at the time”.
“We warned them when I was still in parliament about the dangers of offsets.... But the imperative of getting the bribe was so profound they would not heed any advice.”
Feinstein, who studied the methods used by arms companies the world over, said experience showed that arms companies very seldom made good on the “vast majority” of economic promises.
Paul Holden, a co-author of a definitive book exposing arms deal malfeasance, said the DTI's report was “incredibly damning”.
“It basically shows that the actual economic benefit is far less than what was promised,” he said.
The commission into the arms deal was established by President Jacob Zuma in October 2011.
Judges Francis Legodi and Hendrick Thekiso Musi were appointed to help Seriti probe allegations of fraud and corruption relating to the government's controversial multi-billion-rand defence procurement package.
Read the full City Press report.
