South African/Saudi arms deals could be jeopardised by the debacle surrounding the Cell-C cellular licence bid Ivor Powell As the government seeks to contain the damage, Communications Minister Ivy Matsepe-Casaburri has been dropped from a Cabinet subcommittee appointed to assess the fallout from the third cellular debacle on a package of oil and weapons deals apparently tied up with the cellphone licence.
In a development that places question marks over her continued position in the government, the Mail & Guardian has learned that a select group of top government ministers has been assessing the crisis on behalf of the Cabinet without Matsepe- Casaburri under whose portfolio as minister of posts, telecommunications and broadcasting the licensing process falls taking part in strategic deliberations. Instead Minister of Finance Trevor Manuel, together with Minister of Public Enterprises Jeff Radebe and Minister of Trade and Industry Alec Irwin, have been entrusted with the highly sensitive task confronting the government after the finalising of the licence was put on hold in a court interdict last week. Government sources said concern focuses on the possible unravelling of a skein of business deals between South Africa and the Saudi backers of the Cell-C cellular consortium. Cell-COs foreign partner, Saudi Oger, is closely associated with the Saudi royal family, who also calls the shots in terms of government-to-government dealings. The awarding of the licence for which the Cell-C consortium was officially recommended by the now-defunct South African Telecommunications Regulatory Authority (Satra) was put indefinitely on hold last week in terms of an interdict granted by the Pretoria High Court to bidder NextCom. Especially at risk as the cellular licence goes into limbo is a complicated package of oil-for-weapons deals whereby South Africa would receive Saudi oil in payment for South African-manufactured G6 mobile artillery pieces a deal that has been in the pipeline for nearly five years. In late June the government was on the verge of tying up a set of deals with the Saudis that could have led to securing crude oil at more favourable prices than are currently on offer. South Africa currently imports around 62-million barrels of Saudi oil up from just more than eight million barrels five years ago, before the oil-for-weapons talks were initiated. The Saudi government the worldOs biggest arms buyer is reportedly considering buying 78 self-propelled G6s for an estimated R8-billion, largely to be paid in the form of crude oil. In terms of the proposed deal, South Africa would secure a supply of crude without being at the mercy of the fluctuating fortunes of the rand. The successful wrapping-up of the G6 deal would also offset the cost of nearly R100- million already secretly paid out by the government to Saudi influence brokers and South African middlemen to sweeten the deal.
Meanwhile the M&G understands that the on/off deal gained a new ramification with Saudi financiers expressing interest in buying portions of the Denel armaments family currently in the process of privatisation.
Via the Al-Baraka bank, the Saudi royal elite has indicated an interest in buying a stake in Denel-owned Lyttleton Engineering Works (LIW), which is currently up for sale. Saudi financiers are also believed to have an indirect stake in Vickers OMC, the renamed Reumech, one of the Reunert group of defence manufacturing companies recently and controversially sold off to largely foreign interests led by British Vickers. The company was unbundled for R85-million, a sum that defence experts have said was a mere fraction of its worth. Both Remech and LIW are involved in manufacturing the G6, with Reumech manufacturing the so-called mobile platform (the vehicle carrying the big gun) and LIW making the mobile turret for the military monster. With Saudi interests close to the all-powerful royal family standing to gain from the manufacture of the guns, military sources said South Africa was hoping to tie up the frequently postponed G6 deal. Reportedly on the verge of being signed off in 1997, the G6 deal was summarily derailed after media reports in The Sunday Independent defied government injunctions and named the potential purchaser. However, despite the fact that the media were blamed for the setback, it subsequently became clear that the United States government was also exerting pressure on the Saudis in the wake of the Gulf War to buy American in payback for US investments in the conflict. Now after years of behind-the-scenes negotiation, the whole house of cards could be toppled again. NextComOs interdict is expected to lead eventually to a judicial review of the controversial process that led to SatraOs recommendation of the Saudi- backed Cell-C consortium for the potentially lucrative licence. In terms of the judgement handed down by Judge A Coetzee in the Pretoria High Court last Friday, the respondents have 30 days in which to register their objections to a review of the process by which the recommendation was made. But the judge set up high hurdles for Matsepe-Casaburri and her co-respondents in the telecommunications regulatory sector to overcome.
Going beyond merely ordering the interdict, Judge Coetzee delivered a comprehensively reasoned argument that gave prima facie credence to every head of argument in the NextCom objection bar one (the claim that two Satra councillors, deputy chair Sonwabo Eddie Funde and Noluthando Gosa, could have been compromised by conflicts of business interests).
Notably, Judge Coetzee found prima facie evidence that government representatives had unduly influenced the process to the benefit of the Saudi-backed consortium. Judge Coetzee ruled that the governmentOs position could have been compromised by involvement in what was statutorily to have been an independent process.
In particular this ruling placed the spotlight on presidential legal adviser Mojanku Gumbi, who had been implicated by Satra chair Nape Maepa in forcing his recusal from the final adjudications for the cellular licence in February. Maepa was, apparently unfairly, accused of harbouring a conflict of interests in terms of an alleged business relationship with an investor in one of the bids. Gumbi also prevented Maepa from resuming his chairship after he had been cleared of the compromising allegations. Judge Coetzee was the second jurist to support the NextCom objection. Earlier, acting Judge Eberhard Bertelsmann granted an interdict to prevent Matsepe-Casaburri from awarding the licence until bidders had been given five days to study the relevant recommendations and register their objections.
Prior to NextComOs aggressive judicial intervention, the minister had been strongly expected to confirm the recommendation.