Opinion South Africa's Democracy in Trouble

South Africa's democracy isn't looking too good these days. Not only is violent crime rampant, but so too is corruption in the upper echelons of government. German companies bear some of the guilt.

By Andrew Feinstein

High crime and poverty remains a fact of life for many in South Africa -- as in this densely populated quarter of Cape Town.

High crime and poverty remains a fact of life for many in South Africa -- as in this densely populated quarter of Cape Town.

South Africa’s young democracy is starting to look tawdry just eight years after the retirement of Nelson Mandela. And it appears one of Germany’s largest companies is complicit in this decline.

Mandela’s successor, Thabo Mbeki, has frequently been upbraided for his views on the HIV/AIDS catastrophe in South Africa. He has denied that the two are connected and has done little to stem the flow of new infections.

But it is the persistence of violent crime and the pervasive spread of corruption that is most bedevilling Mbeki. The viciousness of the crime, an inevitable consequence of the decades of brutality under apartheid, is reflected in one of the highest murder rates in the world. Perhaps worse though is the involvement of senior members of government and officials of the ruling African National Congress (ANC) in significant business deals linked to the state -- which has created the perception of a new elite benefiting inappropriately from political patronage.

A recent African Peer Review Report into South Africa says that because of “creeping corruption” and conflicts of interest proliferating in public life, South Africans “feel betrayed, regarding corruption as a negation of democratic gains after a long period of struggle." An opinion poll released recently showed 63 percent of South Africans now think their leaders are dishonest.

Massive socio-economic backlogs

This decline has its roots in a bizarre 5 billion pound ($9.75 billion) arms deal that was signed by South Africa with German, British and French arms companies in 1998-1999.

The first democratic government was strongly criticized for spending so much money on arms and weapons when the country had no enemies and was facing massive socio-economic backlogs. Most pertinently the government was claiming at the time that it could not afford to provide antiretroviral medication to the many millions of its people living with HIV and AIDS.

As an ANC Member of Parliament I attempted to investigate the vast web of corruption allegations that tainted the controversial deal. Der Spiegel’s recent story “Bribery Allegations Cloud German Ship Sale to South Africa” adds to these allegations.

The story alleges that “Chippy” Shaik, Head of Acquisitions in the South African Defence Force at the time of the deal, solicited and received a $3 million bribe from successful bidders, ThyssenKrupp. The information is gleaned from the investigation by Düsseldorf prosecutors into alleged payments of $25 million of “commissions” in the deal by the German industrial giant. In an ironic example of famed German thoroughness, officials at ThyssenKrupp are supposed to have kept notes of their meetings with Shaik when he requested the money.

As the ranking ANC member on Parliament’s Public Accounts Committee I was told in detail of the flaws in the procurement process used to award these lucrative contracts. What struck me immediately was that “Chippy” Shaik was involved in every stage of the process and was very close to the South African Defence Minister at the time, Joe Modise.

Tens of millions in "commissions"

One of the questionable deals is currently being investigated by the United Kingdom's Serious Fraud Office. In late 1998, a British Aerospace/Saab fighter and trainer jet was chosen over an Italian competitor even though the Italian jet was half the price and preferred for technical reasons by the South African Air Force. To validate the choice, a cabinet sub-committee chaired by then-Deputy President Thabo Mbeki decided to remove cost as a criterion in this contract -- the most expensive single public contract since the advent of democracy in South Africa.

Former Secretary of Defence Pierre Steyn recently admitted that he resigned in 1998 over the deal -- specifically because he felt Minister Modise had made up his mind before the bidding and even started and had intervened to ensure his preferred outcome -- and the Serious Fraud Office is now looking in to 70 million pounds ($136.5 million) in "commissions" being paid by BAe in South Africa, including a 3 million pound ($5.84 million) payment to an advisor to then Defence Minister Joe Modise.

South African President Thabo Mbeki acknowledged last week his country's high crime rate. Corruption may be an even larger problem.

South African President Thabo Mbeki acknowledged last week his country's high crime rate. Corruption may be an even larger problem.

Thomsons CSF, a French arms company now known as Thales, has likewise come under suspicion for having paid South Africa’s then Deputy President, Jacob Zuma, half a million rand a year. Specifically, the company was interested in being shielded from any investigation into the deal after they were awarded the contract for the combat suites that went into the German-made frigates.

Zuma’s financial advisor and brother of “Chippy,” Schabir Shaik, has been sentenced to 15 years in jail for the fraud and corruption involved in this and other transactions. Initial charges against Zuma, still Deputy President of the ANC, were thrown out last year but it is likely he will be recharged later this year.

President Thabo Mbeki was involved in the German deal. The German bidder, the German Frigate Consortium (GFC), had been excluded from the short list early on as it didn’t meet the technical requirements specified. However, after an official visit to Germany Mbeki returned to South Africa and reopened the tender. He then appointed another Shaik brother, Mo, as South Africa’s consul-general in Hamburg where the German Frigate Consortium is based -- despite the fact that he had no diplomatic or consular experience. Ten months later, with the deal safely in German hands, the consulate was closed down and Mo went on to become South Africa’s ambassador to Algeria.

Informal meetings

While investigating the deal in Parliament, I was approached separately by two of the bidders. They told me virtually identical stories of how they had gone to see “Chippy” Shaik at his office in the South African Defence Force headquarters in Pretoria. They each spoke of informal meetings with "Chippy" during which he said if they were serious about winning the contracts, they needed to strike a deal with his brother, Schabir, for the sub-contracts. Bell Helicopters withdrew from the bidding after this meeting. The German Frigate Consortium made one of Schabir’s companies, ADS, their partner in the deal, suggesting they had taken “Chippy’s” advice.

When he appeared before Parliament’s Public Accounts Committee I asked “Chippy” repeatedly why he hadn’t signed a declaration of his conflict of interest. He claimed he had recused himself from meetings in which his brother’s interests were discussed. Minutes of such meetings, however, show otherwise.

Even worse, soon after this public hearing, the ANC went to great lengths to neuter our investigation. In addition to replacing me as head of the public accounts committee, the government also refused permission for the country’s main anti-corruption unit to look into the deal. The result was a weak and incomplete investigation -- and a report that was even further watered down by the presidency before it was presented to the Parliament.

One doesn't have to look far to find further indications of corruption. There are allegations that the ANC used donations from some of the successful bidding companies to partially finance its 1999 election campaign. It is likewise known that Modise received tens of thousands of rands worth of shares in defense company Conlog who were recipients of a sub-contract in the deal. He then became chairman of the company within weeks of leaving office.

Wherever there is corruption, the corruptors are as guilty as the corrupted. This is especially so when the corruption occurs in developing countries facing massive challenges in overcoming poverty and its consequences.

As more details of the murkier aspects of the South African deal begin to emerge around the world, it is imperative that the German prosecutors press on with their investigations so that the German public will eventually know the full extent of the involvement of any of their country’s companies in this shameful episode in the history of South Africa’s nascent democracy.


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