Bloomberg News

South Africa to Revive Probe Into $5 Billion Arms Deal

September 15, 2011

(Updates with pro-democracy group’s comment in sixth paragraph.)

Sept. 15 (Bloomberg) -- President Jacob Zuma agreed to reopen an investigation into graft allegations surrounding an arms deal by South Africa’s government, including the purchase of jet fighters from BAE Systems Plc and Saab AB, following opposition pressure.

Zuma requested that the Ministry of Justice set up a commission of inquiry to investigate “allegations of wrongdoing” in connection with the deal, the Presidency said in an e-mailed statement today. “Closure on this subject will be in the public interest,” according to the statement.

London-based BAE said in an e-mailed statement, “We have not currently been notified of any impending investigation but will obviously cooperate fully with any official bodies in the event we are required to do so.” Peter Liander, a spokesman for Stockholm-based Saab, declined to comment immediately, saying he hadn’t heard about the reopening of the investigation.

The South African probe was concluded by the so-called Hawks unit of the police last year on the grounds that it was unlikely to secure further convictions after a decade investigating claims that officials took bribes from companies that won weapons contracts totaling $5 billion.

The main opposition Democratic Alliance in June called on Zuma to look again at corruption allegations surrounding the purchase of 26 Gripen fighters in 1999 after it circulated documents showing a Saab unit agreed to pay 98 million rand ($13.3 million) for consultancy services to a company owned by Fana Hlongwane, a one-time adviser to the late Defense Minister Joe Modise.

Criticism Cited

The pressure from the opposition and civil-society organizations may have led Zuma to review the decision to end the investigation, according to Francis Antonie, director of the Helen Suzman Foundation, a Johannesburg-based democracy group.

“The criticism must have carried some weight, because he’s opening this inquiry,” Antoine said. “We would welcome this. We are also very concerned to know what the terms of reference would be and who the commissioners would be.”

Zuma’s former financial adviser Schabir Shaik was convicted in 2005 of accepting bribes relating to the arms deal on Zuma’s behalf.

BAE, Europe’s biggest defense company, agreed in February 2010 to pay almost $450 million in fines to resolve bribery and fraud investigations in both the U.S. and U.K., some of which were linked to the arms sales in South Africa.

About 300 million rand may have illicitly changed hands in South Africa’s dealings with BAE, the head of the Hawks unit, Anwa Dramat, said in September 2010.

--With assistance from Ola Kinnander in Stockholm. Editors: Heather Langan, Gordon Bell

To contact the reporter on this story: Franz Wild in Johannesburg at fwild@bloomberg.net.

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net.


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