Sisulu in aviation court row

Sunday Independent


The Defence establishment failed this week to meet a court date to explain its seemingly bizarre actions in negotiating two separate and mutually exclusive tenders for the same VIP air transport contract at the same time.

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Minister of Defence Lindiwe Sisulu takes part in the political education classes for the ANCYL at the  Ingwenya  Country Escape in Muldersdrift. Julius Malema was present. 130510. 
Picture: Chris Collingridge  
Political Bureau 
In one of the most serious tests for President Jacob Zuma’s cabinet yet, it will have to either cancel a R47 billion freight aircraft transaction gone wrong within the next month, or pay the price of a potential arms deal scandal Part 2. 
Armscor chief executive Sipho Thomo admitted to shocked MPs yesterday that the cost of acquiring eight A400M Airbus heavy-lift planes had rocketed from an already 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 escalating cost of the eight planes came to light as MPs questioned Thomo about the R2.9bn paid out of the secret Special Defence Account. 
Armscor has already admitted that there were no tendering processes and that the decision to buy the planes was made by the cabinet, after which it requested the state arms acquisition company to handle the process. Former defence minister Mosiuoa Lekota announced the decision in 2005, and the deal was concluded in 2006. 
The aircraft, a new model that is yet to take to the skies, 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. The package has cost taxpayers at least R60bn, in what is now known as the arms deal. 
Thomo told the committee yesterday that the government had withheld a further R1.1bn payment for the aircraft – in addition to the R2.9bn – after Airbus told Armscor last week about the price escalation and that the planes were four years behind schedule. They will 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 still needed to brief Defence Minister Lindiwe Sisulu. “Some of the questions are sensitive and we are not at liberty to discuss (it) in an open forum,” Thomo said. 
He said the cabinet could still 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 and ANC MP Nyami Booi noted that the payments would have to come from the defence budget, which is only R32bn a year. “It is very serious. We must understand how much we are spending on the aircraft and the delay vis-à-vis the soldiers who earn dismal salaries and who protested in front of the Union Buildings.”
DA MP David Maynier wanted to know what the total cost of the acquisition would eventually amount to, as well as the cost to taxpayers if the cabinet decided to cancel the deal. 
Maynier has already called on the government to start terminating the procurement and to launch a “full and independent inquiry into the Airbus deal”. 
Booi has summoned the Defence Department and its secretary, the minister and Armscor’s board and management to the committee meeting on October 28 to bring all relevant information pertaining to the transaction.
Armscor’s board chairman, Popo Molefe, was also castigated by MPs for not attending the committee meeting, leaving Thomo to answer questions on why the Armscor annual report reflected an 89 percent salary and benefits increase paid to him as CEO. 
R47bn arms storm brewing

With Defence and Military Veterans Minister Lindiwe Sisulu as first respondent, and the Defence Secretariat and Armscor included in the list, the military were required by an order of the Pretoria High Court to provide reasons for the cancellation of an R826 million contract awarded to aviation outfit AdoAir earlier this year.

Thereafter the court would decide whether to order the military bosses to reinstate the contract.

By an earlier high court decision, the government was compelled to cancel a separate contract concluded with provider ExecuJet in terms of a second tender process – entered into while the AdoAir contract was still being finalised, and without AdoAir being informed there were any problems.

But no record of the decision was provided to clear the confusion, nor was any affidavit opposing the AdoAir application lodged with the court. Now a new court date has been set for December 29 for the matter to be argued and finally decided.

Confirming that an affidavit opposing the AdoAir application for the reinstatement of its five-year lease contract was in preparation, Defence ministry spokesman Ndivhuwo Mabaya said the matter would from now be handled by the Department of Defence. “We will be asking for the minister’s name to be removed from the list of respondents,” Mabaya said. “This is a question of procurement and she is not in charge of procurement.”

Mabaya went on to explain that the reason no record had been furnished to the court of the cancellation of the AdoAir contract was that no such decision had been taken in the first place.

He said that, though the contract was initially given to AdoAir “the parties couldn’t agree on terms and no contract was actually entered into”.

AdoAir contests Mabaya’s version, specifying in court papers that after the contract was originally awarded in March this year – and the company entered into fine tuning negotiations with the Defence department – no glitches were encountered. Nor was there any failure to agree on terms, nor any objections or reservations registered by the military.

It was, by AdoAir’s account, all systems go, when the bombshell hit – in a report published on the South African Air Force’s website stating the contract had been taken away from AdoAir and a new lease had “been concluded with a large and respected South African company”, later identified as ExecuJet.

The ExecuJet contract, it transpired, had been concluded on the basis of an entirely separate tender for the same service, this one issued by Armscor rather than the Defence department.

Then it got really confusing. With the Defence department failing to respond to AdoAir’s requests for clarification, the chief of the Air Force, Lieutenant Carlo Gagiano stepped in, reassuring AdoAir’s executives that the contract remained valid and would be going ahead – and indicating he would sign off the deal himself.

But on July 4, apparently overriding Gagiano’s intervention, then Secretary of Defence Mpumi Mpofu dispatched a letter indicating the department had reservations around the deal and all bets were off. AdoAir insists that no such reservations had been registered in the appropriate forum of meetings with government stakeholders to finalise the contract.

Mpofu’s claim was therefore regarded as claims not made in good faith.

In the fallout, both Mpofu and Gagiano tendered their resignations, though in the event Mpofu’s was accepted while Gagiano was persuaded to stay on.

Contacted by The Sunday Independent, AdoAir’s lawyer Dr Gerrie Ebersohn dismissed as “absolute nonsense” later justifications from the government that the company had been unable to raise financing to buy the two jets required in terms of the lease agreement. As is recorded in the court papers, Nedbank had guaranteed funding for the deal.

To date, AdoAir has successfully sued for the cancellation of the wildcard Armscor contract awarded to ExecuJet, but confusion still reigns around its own on-off deal with the Defence department.

As recently as August – after the cancellation of the ExecuJet contract – a flurry of meetings took place where, according to AdoAir executive Daniel Joubert in a supplementary affidavit, the department indicated it was “finalising a review of the ‘process’ so the parties can proceed with the tender awarded to the applicant”.

This was especially motivated in light of the fact that South Africa’s presidential Boeing was due to be grounded for maintenance from September and urgent interventions needed to be made.

Then silence again until, finally, on November 1 – with the court order to explain the de facto cancellation of the contract already in force – Sisulu’s attorneys Xulu Liversage Inc said they had been instructed to reopen negotiations and to agree on time frames with a view to validating the AdoAir contract.

But this also proved another false start and the trail went cold yet again.

Meanwhile, VIP aircraft are chartered in terms of special legislation governing so-called “transversal” contracts – those that fall outside of the supply chain management system because they are designed to service more than one government department – administered by the National Treasury. As such they are not subject to the usual checks and balances to which public sector tenders are subjected.

The provision of VIP aircraft has resulted in ongoing scandals in recent months, with Deputy President Kgalema Motlanthe left stranded in Finland and President Jacob Zuma piloted to New York by an airman convicted of mercenary activity.

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