/ 13 November 2009

Armscor: More under the radar

It is impossible to believe that the sudden decision to purge Armscor chief executive Sipho Thomo is unrelated to his stance on the Airbus A400M heavy-lift aircraft — though Armscor chairperson Popo Molefe denied the connection this week.

Government cancelled the A400M contract after Thomo last month publicly blurted out R47-billion as the cost of the aircraft in a move that appeared calculated to kill the deal.

Sure, the disclosure was a bit embarrassing for Defence Minister Lindiwe Sisulu, who was conducting closed-door negotiations with Airbus, but if government believed cancelling the A400M was the best option, why come down on Thomo?

Then again, it’s not the first time that opposition to the A400M has threatened to cost Thomo his job.

In March 2005 the Mail & Guardian reported that Thomo’s suspension the previous month was linked to his refusal to rubber-stamp a detailed “declaration of intent” on the A400M that was due for signing on March 28 of that year.

Allegations against Thomo were contained in a forensic investigation ordered by then-secretary of defence January Masilela relating to the export of several Ratel infantry vehicles and the sale of expired ammunition.

The Armscor board, led by Molefe, appointed its own audit team, which cleared Thomo.

A legal expert told the M&G at the time that government could not avoid legal constraints on procurement by dressing it up as a “programme for the development of skills” — an explanation offered at the time by Masilela.

This was the same conclusion reached much later by the auditor general, who categorised payments towards the A400M programme as unauthorised expenditure.

But why was there this obsessive insistence on doing this deal — and trying to protect it?

The deal was pushed very hard by former public enterprises minister Alec Erwin as a means of resuscitating South Africa’s aerospace industry, especially Denel, which was already struggling under the weight of Erwin’s previous scheme to “save” the parastatal through the infamous 1999 decision to buy fighter jets from BAE Systems.

Business Day commentator Tim Cohen probably got closer to the truth when he wrote last month: “It seems to me the deal was the indirect consequence of one of South African Airways’ many bungled aircraft-buying sprees, when then-chief executive officer Andre Viljoen bought 38 Airbus A320s and A340s in 2002.

“After SAA’s first hedging disaster, this was pared back and SAA cancelled orders for 15 Airbus planes in 2004. It seems a deal was struck in which Airbus allowed SAA to renege on the deal if the contract was swapped for A400Ms.”

But a well connected businessman told the M&G this week that another key factor regarding the sensitivity of the A400M deal was the ubiquitous “commissions”, which seem to dog all arms deals. The story goes that there was a complicated commission arrangement involving both the civilian Airbus orders (cancelled) and the A400M (now also cancelled). One wonders if the “agents” are still going to get their money — or whether someone is going to cry foul. Watch this space.