Written evidence submitted by The Corner
House
INTRODUCTION
1. The Corner House is a UK NGO that works
for environmental and social justice by carrying out analysis,
research and advocacy. The Corner House has worked on corruption
issues from a development and human rights perspective for a number
of years.
2. The Corner House notes that the Foreign
and Commonwealth Office (FCO) is one of the departments involved
in delivering the UK government's commitment to support NEPAD.
With sufficient civil society involvement and consultation and
real local ownership, it is clear that, as some African NGOs have
said, NEPAD has potential to improve political governance and
decrease corruption in Africa. However, in the context of NEPAD,
there is a tendency by G8 and donor governments to emphasise corruption
and political governance as an African problem, and ignore the
significant role played by the business communities of G8 and
other Western countries in exacerbating corruption in Africa through
bribery and money-laundering. Unless G8 and other Western governments
fully address the institutional failures in their own countries
that allow such activities by their business communities to go
undetected and unpunished, their support for NEPAD will be seen
as at best equivocal and at worst hypocritical.
3. Under the G8 Africa Action Plan of 2002,
the UK government has committed itself to "intensifying support
for the adoption and implementation of effective measures to combat
corruption, bribery and embezzlement". The G8 committed to
do this, among other things, by assisting implementation of the
OECD Convention on Bribery, which criminalizes bribery of foreign
public officials, and intensifying international cooperation to
recover illicitly acquired financial assets. In the UK, the FCO
plays a lead role in implementing the UK legislation that enforces
the OECD Convention on Bribery: under a Memorandum of Understanding
between UK government departments and law enforcement agencies,
the FCO is responsible for reporting corruption allegations from
overseas to law enforcement agencies and monitoring all investigations
by these agencies of bribery offences. The Corner House therefore
suggests that the Foreign Affairs Committee inquiry on South Africa
would be an excellent place to examine how the FCO is implementing
the UK government's commitments under the G8 Africa Action Plan
to take action on bribery and recovery of assets in its own back
yard.
4. A recent test case of the UK government's
commitment to address the UK's role in exacerbating corruption
in Africa, and to implement the OECD Convention on Bribery is
presented by the corruption allegations surrounding the South
African government's defence procurement package of September
1999. These allegations, some of which involve a UK contractor
for the package, arose just two years after the UK government
signed up to the OECD Convention on Combating Bribery in 1997
and one year after it came into force. The Corner House notes
that given the considerable involvement of the UK government in
helping negotiate the South African defence package and in facilitating
the industrial participation (or offset) arrangements that accompany
the package, and given the potential for controversies surrounding
the defence package to impact upon the UK's diplomatic and political
relations with South Africa, the Committee should give some time
and space to examining the defence package, and the corruption
allegations that have dogged it.
BACKGROUND TO
THE CORRUPTION
ALLEGATIONS IN
SOUTH AFRICA'S
DEFENCE PROCUREMENT
PACKAGE
5. In September 1999, the South African
government signed a $4.8 billion defence procurement package with
European contractors from Germany, Italy, France, Sweden and the
UK. BAE Systems (then British Aerospace) in a joint venture with
SAAB from Sweden had been chosen as preferred bidder to provide
24 Hawk trainers and 28 Gripen fighters in November 1998 as part
of this package.
6. Corruption allegations first surfaced
in June 1999, when ANC intelligence operatives approached a South
African NGO, the Coalition for Defence Alternatives, stating that
they had evidence of corruption by senior politicians and government
officials in connection with the defence package.[22]
In September 1999, a memo addressed to the Pan Africanist Congress
MP, Patricia De Lille, from "concerned ANC MPs" raised
similar concerns of corruption in the package.[23]
The allegations centred on claims that senior members of the South
African government had taken bribes from foreign defence contractors
and that they had pressured these contractors to award subcontracts
to South African firms in which either they or their relatives
had substantial stakes. In November 1999, De Lille forwarded the
allegations to South Africa's foremost anti-corruption body, the
Special Investigating Unit, headed by Judge Willem Heath. De Lille
subsequently received death threats.
7. As a result of the allegations, the Standing
Committee on Public Accounts of the South African Parliament (SCOPA)
called for an official enquiry. Heath's Special Investigating
Unit was on the verge of launching a full-scale investigation,
when the Auditor-General of South Africa announced its own enquiry.
The Auditor-General concluded in September 2000 that there had
been "material deviations from generally accepted procurement
practice" particularly for the trainer jet component of the
package and that "the explanation provided by DoD (Department
of Defence) for this material deviation does not appear to be
satisfactory". In addition the Auditor-General recommended
a full forensic audit of subcontracting processes.[24]
In response, SCOPA issued a resolution in November
2000 calling for an investigation to be carried out by South Africa's
Special Investigating Unit, the Public Protector, the Auditor-General
and the National Director of Public Prosecutions. In January 2001,
President Thabo Mbeki refused permission for the Special Investigating
Unit—widely seen as the most independent and vigorous of
the country's anti-corruption institutions—to take part
in the investigations. An investigation involving the Public Protector,
the Auditor-General and the National Director of Public Prosecutions
went ahead as a Joint Investigation Team.
8. In November 2001, the Joint Investigation
Team (JIT) report cleared the South African government of "any
improper or unlawful conduct" in connection with the package
and concluded that "there are no grounds to suggest that
the Government's contracting position is flawed"[25]
However, there were several serious flaws with the JIT report
that have led to accusations of whitewash and political interference,
not least by the former head of the Special Investigating Unit,
Judge Willem Heath. These flaws have meant that the controversy
surrounding the package has not gone away. They are as follows:
Firstly, as the Auditor General himself noted
before a hearing by SCOPA in August 2003, the exclusion of the
Special Investigating Unit from the enquiry created mistrust and
speculation from the start.[26]
Secondly, credible South African sources have
claimed that the Auditor-General's office was given a direct steer
by the President as to who and what it could investigate. The
recent allegations that the Deputy President, Jacob Zuma, requested
a bribe from a French company to ensure it was not subject to
investigation have only increased speculation as to political
interference.
Thirdly, suggestions were raised in May 2003
that the JIT report had been heavily edited by the executive before
being submitted to Parliament, following a court action by a subcontractor
who lost out in the bidding on one part of the package led to
the draft report being made available to the subcontractor.
And finally, the report appears to have only
looked at a very limited number of the 50 or so allegations of
corruption that were raised. Allegations involving BAE Systems
included in an annex to this submission do not appear to have
been investigated and it is not clear whether they are subject
to a continuing criminal investigation by the National Director
of Public Prosecutions (NDPP).
9. New allegations of corruption, meanwhile,
continue to emerge in the South African press, and there is little
sign that they will go away. This has led to calls by respected
South African NGOs such as the Institute for Democracy in South
Africa (IDASA) for the Joint Investigation Team to re-open its
investigation to answer all outstanding questions, and for the
National Director of Public Prosecutions to clarify which allegations
it has investigated and which are still under investigation, and
to ensure that all allegations of criminal activity are swiftly
dealt with.[27]
10. The ongoing controversy and persistent
leaking out of allegations risks undermining the credibility of
the defence package. As a recent submission on the defence package
to the South African Parliament by IDASA observed, "the perception
of corruption is often as harmful as actual corruption. While
the allegations remain unanswered, the public will draw their
own, often negative conclusions".[28]
The lack of clarity on the allegations surrounding the package
furthermore threatens to have a negative impact on the reputation
of the South African government both domestically and internationally,
the UK company concerned, and even the UK government itself. The
Corner House believes that the FCO has a potential role to play
in helping establish clarity on the allegations involving the
UK company in order to restore credibility to at least the UK
component of the defence package.
11. The UK government is of course aware
of the corruption allegations. On 5 September 1999, the Campaign
Against the Arms Trade, on behalf of a South African coalition
of Churches and Human Rights groups, the Coalition for Defence
Alternatives (CDA), referred allegations involving BAE Systems
to the Secretary of State for Trade and Industry, Stephen Byers
(see annex). In December 1999, one of the convenors of CDA directly
informed the Export Credit Guarantee Department, which was then
arranging the finance for the UK component of the defence package,
of pending investigations by investigatory authorities in South
Africa. In December 1999, the ECGD in a letter to CDA acknowledged
the pending investigations but stated that it was working to the
timetable of the South African government for concluding the financing
arrangements.[29]
In April 2000, as Heath's Special Investigation Unit was reported
to be on the verge of requesting presidential authority to launch
a full-scale investigation,[30]
the ECGD issued the guarantee for BAE Systems' sale of Hawk jets
to South Africa.
In January 2000, according to a recent response
to Parliament, the FCO had also received allegations of corruption
against BAE Systems in January 2000.[31]
It is not clear whether these were the same allegations earlier
submitted to the DTI by CAAT or whether they differed both in
source and in substance. The FCO stated: "These, and earlier
allegations to other Government Departments, were passed to the
MOD Police and Metropolitan Police." Again in January 2000,
the FCO told the CDA that "The Metropolitan Police have confirmed
that they found insufficient evidence to substantiate the allegations"[32]
Both the ECGD and the FCO meanwhile in recent responses to questions
in Parliament have focused on the fact that the official investigation
by the South African the Joint Investigation Team found BAE Systems'
contract to be sound, and found no evidence of wrongdoing.[33]
RECOMMENDATIONS TO
THE FOREIGN
AFFAIRS COMMITTEE
12. The Corner House recommends that the
Committee consider in its examination of the impact of NEPAD and
the G8 Africa Action Plan on South Africa, the role and record
of the FCO in helping to meet UK government commitments to implement
the OECD Convention on Bribery and to help recover illegal financial
assets, made under the G8 Africa Action Plan. In so doing, the
Committee may wish to consider asking the FCO to disclose to it:
— What steps it has taken together
to raise awareness amongst British businesses operating in South
Africa and Africa in general that the payment of bribes is a criminal
offence, and to encourage the responsible use of agents and intermediaries
by British businesses.
— What steps it has taken to ensure
that complaints of bribes received by the UK representative in
South Africa are given due weight and forwarded to the appropriate
authorities either in the UK or South Africa.
— What steps it has taken to ensure
that its staff in South Africa and Africa in general are aware
of the criminal nature of bribe payments and the necessity to
pass such information on to the relevant law enforcement authority
in the UK.
13. The Corner House urges the Committee
to give time and space to considering the South African government's
defence procurement package, its associated industrial participation
(or offset) arrangements and the corruption allegations surrounding
it, given the strong role that the UK government has played in
promoting and facilitating the involvement of UK contractors in
the package and in the industrial participation arrangements,
and given the potential impact that the controversies surrounding
the package could have on political and diplomatic relations between
the UK and South Africa.
14. Specifically with regard to the corruption
allegations in the South African defence package, the Corner House
believes that the FCO could and should play a pivotal role in
helping put an end to the damaging speculation that has persisted
about the role of one of the UK contractors in the package. It
is in the interests of both the South African and UK governments
and of the UK contractor concerned for this to happen. The Corner
House believes that in order to play such a role:
— the FCO should disclose advice it
has given to other UK government departments such as ECGD, DTI
and DESO on the scope and gravity of the corruption allegations;
— the FCO should clarify whether allegations
it received in December 2000 were the same in content and source
as those received by other UK government departments in September
1999, and if not, what they were and whether they were separately
investigated by the Metropolitan Police;
— the FCO should be encouraged to offer
the full support of the UK government to South African authorities
for any criminal or other official investigation into allegations
against BAE Systems or other UK contractors;
— the FCO should disclose what it has
done so far to assist South African investigators examining allegations
involving BAE Systems or other UK contractors; and
— the FCO should disclose what steps
it has taken to monitor the allegations of corruption in relation
to BAE Systems and any other UK contractors in the defence package.
15. The Corner House also believes that
the FCO, in conjunction with other UK government departments,
particularly the Department of Trade and Industry, the Defence
Export Services Organisation and the Export Credit Guarantees
Department, could play an important role in urging, indeed, requiring—given
that taxpayers' money has underwritten the UK component of the
package—BAE Systems to help put an end to the speculations
and allegations. In particular, the FCO with other government
departments could urge BAE Systems and its subsidiary BAE Systems
Holdings (South Africa):
— to disclose the exact amount of money
it paid in commission fees to its South African agent Osprey,
for what services the fees were paid, on what dates, whether the
payments were made into South African or offshore accounts, and
to which company in the Osprey group the fees were paid;
— to disclose the grounds on which
BAE Systems decided to use an agent given that it had a subsidiary
within South Africa who could have performed at least some of
the duties that Osprey is said to have performed;
— to dislose audit reports of the donation
given by BAE Systems to the Airborne Trust, and a detailed account
of how the donation was used;
— to disclose whether the former defence
minister of South Africa, Joe Modise, met with anyone from BAE
Systems or anyone acting on behalf of BAE Systems when he visited
the UK in 1998, and to disclose what steps BAE Systems took to
ensure that money it donated to the Airborne Trust was not used
to fund this trip;
— to make public details of all gifts,
payments and donations made or offered to South African government
officials, MPs, or organisations;
— to give a full account of members
of the ANC, or relatives of members of the ANC that were employed
by BAE Systems, BAE Systems Holdings (South Africa) or any company
in receipt of consultancy or agency fees from BAE Systems, and
on what grounds they were employed;
— to disclose details of any payments
made to third parties in connection with the South African procurement
package; and
— to disclose whether John Bredenkamp
or companies in which he is an investor, such as Aviation Consultancy
Services, played any role in negotiations between BAE Systems
and the South African authorities and if so what role he or these
companies paid, how much commission fee he received, for what
services and whether that commission fee was included in the contract
submitted to the ECGD.
The Corner House
October 2003
22 Terry Crawford-Browne, "A Betrayal of the Struggle
Against Apartheid: a summary of South Africa's R48 billion weapons
acquisition programme, related offsets and allegations of corruption",
28 September 2000. Back
23
"Briefing to Honourable Patricia De Lille, Member of Parliament",
by concerned ANC MPs, September 1999. Back
24
Auditor General of South Africa, 15/9/2000, "Special Review
of the Selection Process of Strategic Defence packages for the
Acquisition of Armaments at the Department of Defence", para
4. Back
25
Joint Investigation by the Public Protector, Auditor-General
and National Director of Public Prosecutions into Strategic Defence
procurement Packages, Report to Parliament, 14 November 2001. Back
26
Standing Committee on Public Accounts (SCOPA), 20 August 2003,
"Special Report by the Auditor General on Arms Deal Report:
Hearing" Back
27
IDASA, "Democracy and the Arms Deal, Part 3", A Submission
to Parliament, 5 August 2003. Back
28
Ibid. Back
29
Letter from Chris Leeds, ECGD to Terry Crawford-Browne, 23 December
1999. Back
30
The Star, 18/4/2000, "Heath Keen to Blow Open Arms Deal Probe" Back
31
Hansard, 10/7/03, Column 985W, Response from Mr Mullin to Matthew
Taylor MP. Back
32
Letter from Peter Hain, FCO to Terry Crawford-Browne, 26 January
2000. Back
33
Hansard, 10/7/03, Column 985W, Response from Mr Mullin to Matthew
Taylor MP; Hansard11/9/03, Column 385W, Response from Mike O'Brien
to Matthew Taylor MP. Back
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