Bloomberg News

South Africa Gives Panel Probing Arms Deal Sweeping Powers

October 27, 2011

(Updates with comment from justice minister in third paragraph.)

Oct. 27 (Bloomberg) -- South Africa’s government said a panel appointed to probe graft allegations related to its purchase of weapons in the late 1990s from companies including ThyssenKrupp AG, BAE Systems Plc and Saab AB will be given sweeping powers to do its work.

The commission, which will have a 40 million rand ($5 million) budget, will have search and seizure powers as well as the ability to subpoena witnesses and compel them to answer questions, Justice Minister Jeff Radebe said.

The investigation is “a watershed moment in the history of democratic South Africa,” he told reporters in Cape Town today. “This commission will work independently of everyone, including the executive. Its credibility remains paramount.”

The government has been fending off allegations that officials received bribes from companies that won contracts to supply it with jet fighters and trainers, warships, helicopters and submarines worth about 29 billion rand over the past 12 years. The Hawks, the investigative unit of the police, last year halted its probe into the allegations, saying it was unlikely to secure further convictions.

President Jacob Zuma on Sept. 15 said the inquiry would be reopened, and on Oct. 25 he announced that a three-judge panel headed by Judge Willie Sereti be given two years to bring the matter to rest.

Dodge Lawsuit

His decision came after anti-arms campaigner Terry Crawford-Browne filed a lawsuit aimed at forcing the government to revive the investigation on the grounds that it had failed to meet its constitutional obligation to fight corruption.

The establishment of the panel “is a fantastic step forward,” Crawford-Browne told reporters in Cape Town today. “The appointment of sitting judges may have the arms companies challenging the legality of the whole commission. We recommended retired judges. We have already advised the president of our concern. We will see what his response is” before deciding whether to drop the case.

BAE, Europe’s biggest defense company, agreed in February last year to pay almost $450 million in fines to resolve bribery and fraud investigations by U.S. prosecutors and the U.K.’s Serious Fraud Office, 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, Hawks head Anwa Dramat said on Sept. 8 last year.

‘Rake Back’ Billions

In June 2008, German state public prosecutors dropped a two-year bribery investigation of ThyssenKrupp, Germany’s largest steelmaker and part of the group that supplied four frigates to the South African Navy.

“There is an opportunity here to rake back 70 billion rand of taxpayers’ money that has gone down the tubes on the arms deal, simply by canceling four contracts, asking for the money back” and returning the weapons, Paul Hoffman, a lawyer who heads the Institute for Accountability in Southern Africa, told reporters in Cape Town. “It’s perfectly feasible in law.”

Hoffmann’s estimate of the cost of the weapons includes financing costs and adjustments made for changes in the exchange rate.

Two people have been convicted in South Africa on charges connected to the arms deal.

In 2003, Tony Yengeni, a former lawmaker for South Africa’s ruling African National Congress, was found guilty of defrauding parliament by failing to disclose a discount on a luxury car from one of the bidders. He served four months of a four-year sentence before being released on parole after qualifying for a government amnesty.

Criminal Route

In 2005, Zuma’s then-financial adviser Schabir Shaik was convicted of trying to solicit a bribe for the politician from arms dealers. Shaik served 28 months of his 15-year prison sentence before being freed in March 2009 on medical parole, which is supposed to be granted to terminally ill inmates,. He is still alive. Charges against Zuma were dropped in April 2009, the month before he was appointed president.

“I’m not sure going down the criminal route is going to work,” said Hoffman, who represented Crawford-Browne in his lawsuit. “So many years have gone by since the commission of these crimes that it’s going to be very difficult organize a fair trial for anybody.”

--Editors: Vernon Wessels, Hilton Shone, Heather Langan

To contact the reporter on this story: Mike Cohen in Cape Town at mcohen21@bloomberg.net

To contact the editor responsible for this story: Nasreen Seria at nseria@bloomberg.net


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