Select Committee on Foreign Affairs Minutes of Evidence

Written evidence submitted by The Corner House


  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.


  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]


  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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