ADDRESS TO NATIONAL ASSEMBLY BY AUDITOR GENERAL, NATIONAL DIRECTOR OF PUBLIC PROSECUTIONS AND PUBLIC PROTECTOR ABOUT THE JOINT INVESTIGATION REPORT

15 November 2001

Madam Speaker,
Honourable members of Parliament,

1. The Joint Investigating Team comprising of the Public Protector, National Director of Public Prosecutions and I have pleasure to submit to you our joint investigation report into the Strategic Defence Procurement Packages. The joint investigation was unique in that the three organs of state, for the first time, conducted an investigation into alleged irregularities and criminal conduct simultaneously. This was by no means an easy task as all three agencies had to pioneer their way through uncharted and, at times, difficult territory. Due process and consultation has taken place in finalising this report.

I wish to explain and clarify the due process and consultation that has taken place as it is the subject of much controversy and unwarranted scepticism recently:

Yes we have furnished our draft report to the relevant and affected government agencies offering them an opportunity to make inputs/comments on the factual accuracy of the report before it is finalised. This is normal process whether it's an audit or investigation.

Irrespective of what the nature of the audit, investigation or inquiry is - I have to perform my duties in terms of my constitutional mandate and the Auditor-General Act. The same principles apply two my other two colleagues.

The current investigation encompasses accounts established by the Defence Special Account Act and it is therefore evident that the Report on the Arms Investigation falls within the ambit of section 4(6) of the Auditor-General Act, which in no uncertain terms, obligates me to consult with the specified parties.

Furthermore, the joint investigation team tried to adhere to the constitutional principles of legality. It goes without saying that, in adhering to these principles, the investigation team's independence or perceived independence is in no way infringed. Furnishing a draft report to the relevant and affected parties under these circumstances, emanates from the doctrine of legality and affords these persons, as affected parties, an opportunity to present explanatory information regarding certain aspects in the draft report. It is our view that the quality of the final report has been greatly enhanced by following this approach.

The input we received on the draft report was mainly around

• the format and flow of the report
• the lack of details to support the findings (hence the report changed from a 250 page report to a 400 page report)

Throughout this process we have taken all precautions to ensure confidentiality. Regrettably some information has recently been leaked, the source of which we do not know. A copy of the final report was delivered to Madam Speaker a day ago1 and the only other copy available, at the time, was in my possession. Any reports that may have been prematurely leaked, can therefore only be copies of earlier draft versions of the report.

We do apologise for delays in submitting this report - I also wish to explain the delays so that it is understood and put into proper context.

This report changed its status from an interim report to a final report. DSO will continue its criminal investigative work - Originally we intended to put out an interim report in about July/Aug

Towards the end of June early July we evaluated the progress and situation and decided to rather finalize the work undertaken by the Auditor-General and Public Protector

We had to go through manage and control some 700 000 documents

Setting up interviews with witnesses and their legal representatives was not easy to co-ordinate.

2. We have limited supplies of hard copies of the report - but they are available in electronic format on CD as well as the websites of the Joint Investigative Team. The website addresses are:

• Auditor-General: www.agsa.co.za
• Public Protector: www.polity.org.za/govt/pubprot/
• Director of Public Prosecutions: www.npa.gov.za

3. I will now hand over to the National Director of Public Prosecutions who will make a few comments, thereafter the Public Protector will make an intervention before I take you through the format and layout of the report.

Over to the National Director of Public Prosecutions who will deal with the preface and status of criminal investigation

Over to the Public Protector who will deal with the Public Phase and chapter 13

4. The format of the Report:

• Chapter 1 and 2 provide some background information and the methodology adopted for this investigation
• Chapter 3 deals with the review of the procurement process and policies - rules of the game
• Chapter 4 - 7 explains the four procurement packages i.e. Alfa/Liff, LUH, Submarines and corvettes – background, what happen, how it happened (give the full story) with findings and recommendations at the end of each chapter.
• Chapter 8 - 12 deals with IONT, Cost to State, Selection of sub contractors and conflict of interest, C212 complaints and National Industrial Participation and Defence Industrial Participation
• Chapter 13 deals with drafting of the contracts - which Mr Baqwa already briefed you on
• Chapter 14 is the Final chapter which summarise all the key findings and recommendations from the individual chapters

The report comprises nearly 400 pages and is a joint report incorporating the work of the three investigation agencies where appropriate. Due to the nature of the investigation by NPA sensitive information was not included in the report.

Evidence obtained on a particular issue or topic by the different agencies has been combined and used to support our findings. The report has been formulated in a user friendly and logical matter Where ever this was possible.

The report is full of abbreviations and terminology which may not be commonly understood - Appendix A explains what the abbreviations stand for and what the terminology means.

Our key findings and recommendations are as follows:

• No evidence was found of any improper or unlawful conduct by the Government. The irregularities and improprieties referred to in our report, point to the conduct of certain officials of the government departments involved and cannot, in our view, be aibed to the President or the Ministers involved in. their capacity as members of the Ministers' Committee or Cabinet. There are therefore no grounds to suggest that the Government's contracting position is flawed.
• The decision that the evaluation criteria in respect of the Lead-In Fighter Trainer (Hawk) had to be expanded to include a non-costed option and which eventually resulted in a different bidder being selected, was taken by the Ministers' Committee, a sommittee of Cabinet. This decision was neither unlawful, nor irregular in terms of the procurement process as it evolved during the SDP acquisition. As the ultimate decision-maker, Cabinet was entitled to select the preferred bidder, taking into account the recommendations of the evaluating bodies as well as other factors such as strategic considerations.
• The Affordability Team and International Offers Negotiation Team took adequate measures under the circumstances to present to the Government a scientifically based and realistic view on these matters. The Ministers' Committee was put in a position by Affordability Team to apply their minds properly to the financial impact of the procurement.
• There was a conflict of interest with regard to the position held and role played by the Chief of Acquisitions of Department of Defence, Mr S Shaik, by virtue of his brother's interests in the Thomson Group and ADS, which he held through Nkobi HoldingMr Shaik in his capacity as Chief of Acquisitions, declared this conflict of interest in December 1998 to the Project Control Board, but continued to participate in the process that led ultimately to the awarding of contracts to the said companies. He did not recuse himself properly.

Amongst the recommendations in our report are the following:

• We recommend that the policy document, developed during the Strategic Defence Packages Procurement process be further refined with specific reference to the lessons learnt from the acquisition process under investigation as reflected in this report. Tstaff of the Department of Defence and Armscor involved in procurement should be properly trained to ensure that they assimilate and fully understand the policy with a view to its effective implementation.
• The Department of Defence and Armscor should develop specific rules and guidelines to address conflict of interest issues and to ensure that personnel are properly informed in this regard. These rules and guidelines should be developed, taking into acnt the principles contained in the Code of Conduct of the State Tender Board and the King Report on Corporate Governance, 1994, regarding improved ethics and probity as well as international norms in this regard. Steps should also be taken to ensure that a particular individual irrespective of his/her position is not tasked with incompatible functions in multifaceted procurements. This will prevent a conflict or perceived conflict of interest, which could have a detrimental effect on the overall acquisition process.

Parliament should consider taking urgent steps to ensure that high ranking officials and office bearers, such as Ministers and Deputy Ministers, are not allowed to be involved, whether personally or as part of private enterprise, for a reasonable period of time after they leave public office, in contracts that are concluded with the State.

In conclusion Madam Speaker we feel confident that we have given this investigation our best shot notwithstanding its unique nature and the difficult territory we had to charter. Our pursuit to conduct a proper and diligent examination we hope will be borne by the contents of the report.

Thank you