Fighter planes back on SA horizon

The South African National Industrial Participation (Pty) Ltd channel was not even a particularly significant one for the transfer of funds to arms deal “consultant” Fana Hlongwane – it accounted in total for less than one quarter of the estimated R200 million in questionable money transfers between UK armaments giant British Aerospace and politically connected South Africans that continue to exercise investigators around the world.

But with the carefully constructed admission by Swedish aerospace manufacturer Saab that the account of its subsidiary, Sanip, was used in 2003 to pay Hlongwane R24m in “commission”, the biggest scandal in the history of the South African democracy looks set to flare up yet again.

This week – as the Swedes announced their investigations were continuing – South African opposition parties said the latest revelations amounted to a prima facie case of bribery or corruption, and called for a reopening of Hawks investigations into South Africa’s endlessly controversial arms procurement deal. Investigations, first pursued by the now defunct Directorate of Special Operations, but then reduced to a one-man show under the DSO’s successor, the SAPS’s Hawks, were finally scotched completely by Hawks chief General Anwa Dramat in late 2010. Dramat said there was insufficient evidence. But this week, in the face of Swedish media revelations, Saab president and chief executive Håkan Buskhe said the company’s own enquiries “revealed that about R24m was paid from BAE Systems to Sanip. These payments were transferred to the South African consultant (Hlongwane) shortly thereafter.”

At the same time Buskhe was careful to distance his own company, blaming British Aerospace, Saab’s partner in the aeronautical arms procurement package deal with the South African government. The deal involved the provision of 26 Gripen fighter planes and 24 lead-in Hawk trainer aircraft at a cost of more than R20 billion to the South African taxpayer.

This week, as the crisis raged, BAE announced it was selling off 11 million of its shares in the Saab group, ending a 16-year association with the Swedish manufacturer. Valued at £152m, the shares represent about 10 percent of Saab’s stock. Though BAE said the decision was in line with long-range planning, the divorce could serve to insulate the British manufacturer from Swedish investigations into BAE’s business practices in its partnership with Saab.

In a classic money laundering scenario, Bushke claimed the money had, in fact, come from BAE, first paid into Sanip’s account and then channelled to Hlongwane. The whole transaction, he said, had been handled by an unnamed BAE employee working inside Sanip. The BAE official failed, he said, to enter the transaction into the company’s accounts, and signed off “the audited and apparently inaccurate financial statement for 2003”. But how it all worked was already spelt out in an affidavit drawn up by former Directorate of Special Operations investigator Johan du Plooy (now transferred to the SAPS’s Hawks and for some years a one-man investigations unit into the arms deal) in seeking a series of search warrants in 2008. The searches, carried out in November that year, were pursued in partnership with the UK’s Serious Fraud Office (SFO) which was engaged in an ongoing probe into bribery and corruption in BAE’s activities worldwide.

Tracing the relationship between Sanip and BAE, Du Plooy notes “Sanip is 100 percent owned by Saab”, but at the same time is a “trading name of a UK registered company, BAE systems (Gripen Overseas) Ltd”.

At the time he deposed his affidavit (November 11, 2008) Du Plooy was able to highlight a total of R51m paid through the books of Sanip to the account of Hlongwane in pursuance of an agreement dating to August 1, 2003. In terms of the agreement, Hlongwane was to advise on the implementation of BAE’s offset obligations in pursuance of the Gripen/Hawk arms procurement deal. By the same token, payment schedules to BAE by South Africa for the costly aircraft were linked to the fulfilment of these offset obligations.

The system – whereby the arms would be paid off in three tranches – follows an initial proposal, supported by Modise, but blocked by South African finance authorities, in which the aircraft would be paid off by transferring South Africa’s gold reserves.

In exchange for his consultancy, in the tranche payment scenario, Hlongwane would receive:

·A one-off fee of R8 175 000.

·A retainer of R1 875 000 a quarter (R7 500 000 a year).

·A bonus of R22 500 000 if the South African government finally approved a third tranche of payments linked to fulfilment of offset obligation.

· A further bonus of R30m if targets were met by April 2011.

Originally contracted with Hlongwane Consulting, the deal was transferred in 2004 to Ngwane Aerospace (Pty) Ltd, registered in August 2003, with Hlongwane listed on Cipro as sole director.

In a separate deal, BAE agreed, according to the UK’s SFO, to pay Hlongwane R4 200 000 for a report on black empowerment in South Africa.

By 2008, Sanip’s then spokesman in South Africa, Jonathan Walton, claimed the BAE had met 60 percent of its offset commitments in terms of the Gripen deal.

According to the SFO, in almost all his alleged dealings with BAE, Hlongwane was classified as a “covert” rather than an “overt” adviser to the armaments giant. The distinction between overt and covert agents and advisers came, according to the SFO, in response to mounting pressures internationally to clamp down on the formerly sanctioned practice of paying bribes and sweeteners to secure arms sales in the third world.

The Sanip payments are part of a tapestry of payments involving Hlongwane and a group of BAE front companies.

Multimillion-rand accounts controlled by Hlongwane have been frozen in the banking havens of Switzerland and Liechtenstein as investigations by UK, German and now Swedish authorities continue.

Hlongwane could not be reached for comment.