Arms deal ‘handled professionally’Comment on this story
Pretoria - Transactions in South Africa's 1999 arms deal were handled in a professional manner, chief government negotiator in the procurement process Jayendra Naidoo said on Monday.
“From the period... after government selected bidders up to the final signing of contracts, the negotiation process was handled with great intensity and professionalism,” he told the Seriti Commission of Inquiry in Pretoria.
Naidoo was led by commission evidence leader Matshego Ramagaga as he went through his sworn statement in Pretoria.
“The result was a consensus between the government departments and ministers that an improved outcome had been secured and one which was affordable to the South African government to enter into,” said Naidoo.
“In any large procurement it is standard to have a risk assessment done, that is the manner in which a risk assessment was done.”
He said the risks identified, prior to the purchases included increases in domestic interest rates on the announcement of the military packages, and a more rapid depreciation of the rand exchange rate than had been assumed in the costing calculations.
The risks included non-performance of the offset commitments and “an exogenous economic shock”.
“The economic impact of the modelling exercise included both high and low risk scenarios as regards to the interest rate (risk). The affordability team consulted with the SA Reserve Bank and (international investment bankers) Warburg Dillon Read in assessing the probabilities of the two scenarios,” said Naidoo.
“Other private banks could not be consulted because of the need to avoid premature leaks to the financial markets.”
Naidoo said the modelling exercise for the military purchases took into account the anticipated inflation and exchange rate depreciation.
“The broad conclusion of the modelling exercise was that the impact of the procurement would be approximately neutral over the full eight-year period even at the highest expenditure levels if the high risk scenarios were avoided.”
Naidoo's sworn statement to the inquiry indicated he had been asked to provide evidence as the chief negotiator representing the presidency in 1999 in the multi-billion rand strategic defence procurement packages deal.
He was appointed chief negotiator on the defence packages by then deputy president Thabo Mbeki on December 9,1998.
Naidoo reported directly to Mbeki, who subsequently became president.
He also reported to a committee of ministers involving then defence minister Joe Modise, former finance minister Trevor Manuel, former trade minister Alec Erwin, and former public enterprises minister Stella Sigcau.
President Jacob Zuma appointed the commission, led by judge Willie Seriti, in 2011 to investigate alleged corruption in the deal.
The government acquired, among other hardware, 26 Gripen fighter aircraft and 24 Hawk lead-in fighter trainer aircraft for the air force, and frigates and submarines for the navy.