Minutes in arms deal
missing
June 10 2014 at 12:12pm
By LOUISE FLANAGAN
By LOUISE FLANAGAN
THE STAR
Former
chief negotiator in the 1999 arms deal Jayendra Naidoo during the ongoing Arms
Procurement Commission in Pretoria. Picture: Thobile Mathonsi
Johannesburg -
It was a massive project, but there were some gaps in the ministers’ filing.
The
government’s chief negotiator for the 1999 arms deal, Jayendra Naidoo, told the
Arms Procurement Commission that “the negotiation process was conducted with great
intensity and professionalism by the departments and officials participating.
The result was a consensus between the government departments and ministers
that an improved outcome had been secured and one which was affordable.”
Naidoo was
appointed in December 1998 by then-deputy president Thabo Mbeki as the chief
negotiator, shortly after the cabinet announced the preferred bidders.
He worked with
a team of negotiators, who, in turn, used teams of officials and experts.
The final
contracts were signed in December 1999 and the finance contracts in January
2000.
Naidoo reported
to the ministers’ committee, which was a sub-committee of the cabinet that
oversaw the arms deal.
He listed six
meetings of that ministers’ committee and referred to presentations he had made
to it.
But on Monday,
commission evidence leader attorney Matshego Ramagaga told the hearings that
the minutes of four of those ministers’ committee meetings could not be traced.
Naidoo
described a complicated negotiating process.
“It was an
enormous project, comprising altogether 30 separate major activities, almost
all of which had to be conducted in parallel,” said Naidoo.
“The initial
scope of the work was as follows – six sets of contract negotiations, each with
a separate defence company,” he said.
Each contract
had three separate sub-agreements – for equipment supply, defence offsets (DIP)
and industrial offsets (NIP) – and each had a separate finance contract with an
international bank. There were also negotiations with export credit agencies in
the UK, Sweden, Germany and Italy.
“In addition,
there was an exercise of investigating ‘affordability’, which included a
macro-economic modelling analysis, and analysis of the major NIP project
proposals.
“An ‘internal
negotiation’ among the participating government departments on the size of the
package that was deemed to be affordable also had to be managed,” he said.
They were up
against “a separate well-resourced team representing either a preferred bidder
or a bank on each of the 24 major contracts”.
To manage this
“imbalance of resources”, the negotiators planned “careful sequencing of
negotiations”.
The negotiators
had to reduce the cost of the package and get “substantial and solid” offset
deals after the preferred bidders had been chosen, when those bidders already
felt they had won contracts so were reluctant to improve bids.
The
negotiators’ bargaining leverage included the possibility of dropping some of
the purchases due to affordability. The NIP offsets system was changed.
Naidoo said the
initial cabinet decision in 1998 reflected offsets valued “in excess of R100
billion even though the rand value amount committed did not exceed R30 billion
for DIP and NIP combined”.
The NIP system
was amended, with the Department of Trade and Industry’s consent, to avoid such
“exaggeration of benefits”.
The start of
Monday’s hearing was delayed, and commission spokesman William Baloyi told
those waiting that “there were some certain legal issues that they were trying
to close the loopholes of”.
The hearings
continue.
louise.flanagan@inl.co.za
The Star
