The witnesses ranged from South African bureaucrats steeped in pre-transition thinking - who regarded apartheid as merely a phase in our country's history that yielded obstructions to worldwide commerce and contact - to international rogues who saw apartheid and the arms embargo as an opportunity to turn a coin for themselves. One of the legal representatives rightly observed that some of the foreign witnesses had shown the Armscor operatives to be relative amateurs in this world - 'small boys' when their experience and skill were measured against that of the 'big boys' with whom they dealt.
The evidence was at times intensely detailed. Days were spent plotting the course of cheques, the particulars of financial calculations and the nuances and possible nuances of notes, memoranda, faxes and records. Our factual account omits much of this detail. The Commission had to hear evidence exhaustively to enable it to reach a fair approximation of the truth. But an extended account of the evidence will serve little or no purpose at this stage. What follows is therefore a description of the main institutions and characters involved, and a synoptic overview of the origins of the debacle and the debacle itself.
Some of its letterheads entitle Armscor 'a statutory body operating under the Minister of Defence'. This description carries with it a hint of institutional ambivalence: Armscor operates 'under' a Ministry, but is constituted as a separate and autonomous entity. In terms of section 2 of its founding statute, the Armaments Development and Production Act, 57 of 1968 ('the Armscor Act'), Armscor is incorporated and registered as a company, with its own board of directors. But the Minister of Defence exercises extensive powers over Armscor's activities, from approving corporate loans (section 3(2)(f)), to appointing and dismissing its directors (sections 5(2) and (4)). The resulting ambivalence played a part, as will be shown, in the events that led to the Commission's appointment.
Before 1992, Armscor's operations encompassed arms manufacture, sales (including exports) and acquisitions. On 1 April 1992, a major re-organisation took effect. The manufacturing and sales functions formerly performed or coordinated by Armscor became vested in a corporation called Denel, while Armscor's main business became acquiring military equipment on behalf of the SANDF. The defence acquisition budget in the financial year ending 1994 was R4,4 billion, with Armscor's operating expenses taking up R196,5 million. Armscor has retained only one arms sales function: selling surplus stock on behalf of the SANDF. In addition, however, it continues to provide marketing assistance to the arms industry.
The corporation's objects under its statute are -
to meet as effectively and economically as may be feasible the armaments requirements of the Republic, ... including armaments required for export (section 3(1)).The statute empowers Armscor -
on its own account or as the representative of any other person to buy, sell, import or export and, through advertising or otherwise, to promote the sale of, armaments, including armaments required for export (section 3(1)(l);and -
to exercise control over the development, manufacture, acquisition, supply, export or marketing of armaments (section 3(2)(lA)).Armscor operates under a nine-strong board of directors. The Board meets monthly. Its chair at the material times was Mr I J Moolman; its chief executive (first entitled 'executive general manager', and, after 27 August 1994, 'managing director') was Mr T J de Waal.
Responsibility for day to day management rests with a twelve-person management board, which meets every week. This consists of the managing director and the company secretary, plus ten general managers who function as heads of departments.
One of the departments, Import and Export Control, headed by Mr P C Smith, encompasses market development, counter trade, legal services, and SANDF stock sales.
3.2.2 SANDF Stock Sales and Armscor - the log pamphlet
Over the last four years, the defence budget has been cut by approximately two fifths. Against this background, as the witnesses explained, sales of surplus SANDF stock are a valuable source of income. According to Mr Smith, there was 'severe, almost unprecedented' pressure from the SANDF to sell its surplus stock. In 1992/3, these sales totalled R42 million; in 1993/94, R55 million; and up to the end of October in the financial year 1994/95, R58 million. SANDF stock sales are a small part of Armscor's overall budget, including procurement, though they form a not insubstantial proportion of its operating expenses. In any event, because of defence cut-backs, these sales have been vigorously promoted within Armscor, and have accordingly increased in scale and importance.
The Armscor Act authorises the Minister of Defence to require a permit as a prerequisite for the lawful export of armaments (section 4C(1)(a)(ii)). This the Minister did: GN R 2665, Government Gazette 7947 of 4 December 1981 ('the 1981 regulations'). These regulations, however, exempted the SANDF and Armscor from permit requirements (regulation 11(b)). The 1981 regulations were superseded on 13 May 1994 - in the midst of the events that are the subject of this report - by GN R 888, Government Gazette 15720 ('the 1994 regulations'). The 1994 regulations do not explicitly exempt Armscor or the SANDF from permit requirements. On the contrary, the Minister purports simply to 'prescribe' that specified armaments 'shall not be exported from the Republic ... except under the authority of or in accordance with the conditions stated' in a statutory permit. But from 1992, Armscor in any event applied the export permit requirement, as an internal rule, to SANDF stock sales. And the Minister has furthermore now expressly prescribed that 'all marketing, export and import actions' of the SANDF and Armscor are subject to the May 1994 regulations: GN R 466, Government Gazette 16325 of 24 March 1995.
In practice, all arms import and export control was entrusted principally to Armscor. The controls applicable to SANDF stock sales were detailed in a 'logistics pamphlet', or 'log pamflet', dated 15 October 1993 (referred to as 'Log 17 Pam 19'), which emanated from the Logistics Section of the Chief of the SA Defence Force. The 'log pamphlet' sets out standard procedures to regulate and control armaments sales between the Defence Force and Armscor. Armscor operates as the agent of the SANDF. It is under an obligation to act in the best interests of the State. In selling stock it must also act 'strictly according to business principles'. In return, Armscor is entitled to a 5% commission on sales.
Annexed to the log pamphlet is a world-wide country categorisation, reflecting whether armaments may or may not be sold to each of 179 countries. The Defence Foreign Policy Committee (DFPC) is responsible for the list, which is subject in the final instance to Cabinet approval. The SANDF, Armscor, the National Intelligence Service, the South African Police Services (SAPS), the Department of Trade and Industry, the Ministry of Defence and the Department of Foreign Affairs (DFA) currently serve on it. Armscor's Mr Smith functioned as alternate chair of the DFPC. The committee assigns each country respectively to Group I (countries with no limitation in respect of marketing and exports); Group II (countries to which only 'non-sensitive' armaments may be exported); or Group III (countries to which no marketing or exports may occur).
At the time the Commission considered the public release of the log pamphlet, the Cabinet had before it a proposed reclassification of some 49 of the 179 countries, as well as a whole new suggested basis of classification. The Cabinet also has before it a suggestion, not endorsed by the DFA, to make the new country classifications public.
Both the October 1993 log pamphlet and its predecessors at all relevant times indicated clearly that Yemen and the states or entities constituting former Yugoslavia were prohibited destinations for South African arms and ammunition.
3.2.3 Corporate reporting and controls within Armscor
The management board receives a monthly report on stock sales and submits this to the directors. The report sets out quotations reflecting proposed sales (three columns indicate the country destination (though not the actual purchaser); the product; and the value). The report also reflects sales transactions which have been realised. Mr Vermaak's section compiles this report, but Mr Smith (to whom the report went direct) was the responsible signatory. The reports detail many transactions. The agents involved in the transactions are not indicated.
There is a further monthly report which covers the total activities of Armscor (acquisitions; marketing; stock sales; personnel and so on). The management board discusses this report, which then goes to the directors. A summary is prepared for the Minister of Defence.
The General Manager: Import and Export Control, Mr P C Smith, was responsible for SANDF stock sales. Apart from this, his responsibilities included market research internationally; contact with the Department of Foreign Affairs; organising arms trade exhibitions; and bringing sales personnel and buyers together. The senior manager with line responsibility for stock sales was Brigadier A Savides, who reported to Mr Smith. The manager of stock sales was the official at the centre of the debacle, Mr M T S Vermaak.
Mr J J van Dyk has been Armscor's Manager: Armaments Control since 1 April 1992. His divisional head is the senior manager who heads Armscor's legal services. Van Dyk's chief responsibility is control over the total process of armaments marketing: from liaison with the SANDF, through release of new products, to marketing itself. It is his section's responsibility to issue export permits.
3.2.4 End User Certificates (EUCs)
An end user certificate is an authoritative statement, issued by the purchaser of armaments, certifying the institution or entity which is the end user of the consignment, and undertaking that the goods will not be passed on to another destination without the consent of the seller. In terms of regulation 4 of the 1981 regulations, an application for an export permit 'shall be accompanied by an end-user certificate, or, with the permission of Armscor, a copy of the end-user's order'. Armscor has since May 1994 required EUCs for arms exports. Before that date, an official order from the buyer would suffice.
Different countries require different forms of EUCs. Armscor, the Commission was informed, prefers that the EUC should be provided, or at least confirmed or ratified, by the importing country's ministry of defence, or by its foreign office. A specimen EUC Mr van Dyk supplied to Mr Vermaak in August 1994 with a view to the impugned cargo of AK 47s reads thus:
It is hereby stated that the following armament bought from the Armaments Corporation of South Africa (Armscor) from surplus SA National Defence Force Stock is for the sole use of the security forces of the Lebanese Government and will under no circumstances be exported or allowed to be exported, given or allowed to be given or alienated or allowed to be alienated to any other third party or country without the expressed written consent of Armscor.The armaments export control system applied by Armscor involved two stages: an application for a marketing permit and then an application for an export permit. The application for a marketing permit refers to the necessity for obtaining an EUC. The application form for an export permit requires the EUC to be submitted together with the application. van Dyk is responsible for the issue of the export permit.
There is now what was called 'proactive' - that is, advance - verification of EUCs. This is accomplished by approaching either the local representatives of the country of destination, or the South African DFA (via its missions and offices abroad). The system still has vacuums and growing pains. It will be some months before it can be stated with one hundred percent assurance that documentation is above suspicion.
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