News South Africa:
R47bn arms deal scandal rocks shocked MPs
In one of the most serious tests to President Jacob Zuma's cabinet yet, it will have to cancel a R47-billion freight aircraft transaction gone wrong within the next month, or pay the price of a potential arms deal scandal part II.
Armscor chief executive Sipho Thomo admitted to shocked MPs yesterday that the cost of acquiring eight A400M Airbus heavy-lift planes had rocketed from a steep R17bn in 2006 to a whopping "estimated" R47bn.
Parliament's committee on defence yesterday grilled Armscor and acting Secretary of Defence Tsepe Motumi about their annual reports. The Department of Defence received its 10th consecutive qualified audit report from the auditor-general, who noted that the government could have blown R2.9bn in an irregular tendering process on the Airbus planes.
The soaring cost of the eight aircraft came to light as MPs questioned Thomo about the R2,9bn paid out of the secret Special Defence Account.
Armscor has acknowledged that there had been no tendering processes and that the decision to buy the aircraft was made by the cabinet, after which it requested the state arms acquisition company to handle the process. Then-defence minister Mosiuoa Lekota announced the decision in 2005, and the deal was concluded the following year.
The aircraft is a new model that has yet to take to the skies. It is a joint project between France's Airbus and the European Aeronautic Defence and Space Company (EADS), with participation from British Aerospace (BAE), French armament electronics company Thales and South African aerospace companies Aerosud and Denel Saab Aerostructures. EADS, Thales and BAE were beneficiaries of South Africa's Strategic Defence Procurement Package that has cost taxpayers at least R60bn.
Thomo told the committee yesterday that the government had withheld a further R1,1bn payment to the aircraft - in addition to the R2,9bn - after Airbus told Armscor last week about the price escalation and that the aircraft were four years behind schedule. They are to be delivered in 2016, 10 years after the order.
Thomo said the cabinet had a one-month window period to cancel the order.
Armscor and the Defence Department delegation would not answer detailed questions about the fiasco, saying they needed to brief Defence Minister Lindiwe Sisulu.
"Some of the questions are sensitive and we are not at liberty to discuss (this) in an open forum," Thomo said, adding that the cabinet could terminate the contracts. Our concern is that we don't have time - that decision needs to be made by the end of October."
Committee chairman Nyami Booi (ANC) noted that the payments would have to come from the defence budget, which was only R32bn a year.
David Maynier (DA) wanted to know what the total cost of the acquisition would eventually be, as well as the cost to taxpayers if the cabinet decided to cancel the deal. He called on the government to start terminating the procurement and to launch a "full and independent inquiry into the Airbus deal".