weapons deal Director Keith Mokoape’s personal stake in this lucrative deal is the latest in a series of scandals surrounding South Africa’s arms procurement Ivor Powell A director of the South African defence parastatal Armscor and former head of African National Congress military intelligence is the head of a newly formed company that stands to make billions of rands from government’s R32-billion weapons deals, in which the parastatal played a central role. Former Umkhonto weSizwe commissar Keith Mokoape, once one of the ANC’s top three military commanders, has been named chair of Applied Logistics Engineering (ALE), a newly formed merger of old-guard defence logistics outfit Log-Tek with the controversial empowerment company Futuristic Business Solutions (FBS). Mokoape’s personal stake in the arms deal is the latest in a series of apparent irregularities to have surfaced since the deal was put to bed last year. Mokoape was appointed to the board of Armscor in July 1997, at a time when the weapons deals were being negotiated. During this process Armscor carried a special responsibility for identifying and registering companies to supply product and services on government tender, thus tying the parastatal closely into a process that led to the awarding of major contracts to FBS.
Mokoape defended his position on Armscor by saying he not only recused himself from decisions regarding Log-Tek (with which he has been associated since 1998) but that he had also “walked out of the meetings” where conflict of interest issues could have arisen.
Mokoape confirmed his role as ALE chair but said ALE was still a shell company pending the final signing off of deals for submarines and frigates for the South African navy. He told the Mail & Guardian that the alliance between Log-Tek and FBS came about as a result of prodding by the German-led Frigate Consortium, which wanted Log-Tek – identified as a preferred bidder for logistical support – to “acquire an empowerment partner”. Despite the fact that Log-Tek commands the relevant expertise in defence logistics – with 20 years’ experience in the field – FBS holds 70% of the new company, with Log-Tek having only 30%. FBS – which includes on its board of directors retired Lieutenant General Lambert Moloi, one-time aide de camp to former minster of defence Joe Modise – was virtually force-fed to overseas bidders for the lucrative weapons deals. The M&G reported in May that the inclusion of FBS as logistics supplier in the bid packages was effected on the insistence of Armscor representatives as well as defence procurement committee head Shamin “Chippy” Shaik.
This was despite the fact that, according to defence insiders, FBS – described by one defence insider as “nothing more or less than a clearing house for taxpayers’ money, a mechanism whereby a military elite transforms itself into an economic elite” – on its own lacked both the infrastructure and the track record to actually deliver the services for which it was contracted. Prior to the merger with Log-Tek, FBS has had to subcontract outside companies to do initial studies in terms of weapons procurement. FBS, whose procurement contracts put it in line for about R750-million, recorded an annual turnover of less than R4-million in the past financial year, almost exclusively from selling Armscor products. With the awarding of weapons contracts, however, FBS, despite its lack of expertise in the field of logistics, is positioned to handle nearly R1-billion in defence logistics over the next five years, and many times that sum in the estimated 30-year lifespan of the weapons bought under the procurement programme. As logistics supplier the company would be responsible for procuring replacement parts, upgrading the equipment and maintenance. Closing the circle on the South African involvement in the weapons-procurement deals, FBS has also reportedly acquired a 20% stake in African Defence Systems, another defence industry that was controversially awarded major contracts in terms of the weapons deals. Formerly wholly owned by the French defence giant Thomson CFC, ADS now also includes on its board Shabir Shaik, brother of defence procurement committee head Chippy Shaik, whose wife also works for the company. Armscor logistics officer Dave Erasmus confirmed this week that ALE would indeed take over contracts awarded to its predecessor FBS in terms of the procurement package.
In one controversial instance reported earlier this year in the M&G, a United States helicopter manufacturer withdrew from bidding for the South African National Defence Force contract after allegedly being told that FBS would have to be included in its package if it wanted to secure the contract. After pursuing initial negotiations with FBS, the company backed out of the deal when FBS demanded a management fee running into hundreds of thousands of dollars as well as a success fee on delivery of the contract. The helicopter manufacturer feared that the deal would place it in violation of the newly promulgated Foreign Corrupt Practices Act, which aims to eliminate bribery from overseas business dealings. In the event the helicopter contract went to Italian manufacturer Agusta – with FBS tied into the bid package. Log-Tek director Malcom Boyle said his company had dissolved an earlier association with another company, Conlog Holdings, prior to concluding the deal.
However the M&G understands that initial negotiations for the partnership between Log-Tek and FBS were conducted while Log-Tek was operating under the name of Conlog, one of its subsidiaries, acquired in 1998. Until two weeks ago Conlog’s chair was former defence minister Joe Modise. As reported in an article in Noseweek this week, Modise’s association with Conlog Holdings dates back to a time shortly after his resignation from the defence portfolio – after signing off the submarines deal. Noseweek also alleged that Modise bought into the company with money secretly loaned by a German connection, but the M&G has been unable to corroborate the claim. Conlog supplies, among other things, prepaid electricity meters. Boyle said Log-Tek unbundled Conlog a fortnight ago after “synergies that we expected to create” came to nothing. At around the same time, Modise resigned from Conlog and, according to Boyle, has no continuing involvement in ALE “from the Log- Tek side”.