Just 24 hours before Minister of Finance Trevor Manuel announces his 2004/05 Budget in Parliament, a United Nations-accredited NGO called in papers before the Cape High Court on Tuesday to have the government’s multibillion-rand arms deal declared null and void.
Economists Allied for Arms Reduction-South Africa (Ecaar-SA) and its chairperson, Terry Crawford-Browne, want the arms deal loan agreements scrapped, citing a number of reasons for this. These include tendering irregularities, there being no parliamentary or executive authority for the arms deal, and government ministers ”failing to apply their minds” to an affordability study despite repeated warnings that expenditure on armaments would crowd out social expenditure on housing, health and education.
Ecaar-SA has had a drawn-out battle with the Department of Finance since launching a challenge in 2001 to get more information about the deal. Crawford-Browne took the ministry to court to demand documents related to the government’s affordability study and won in March 2003.
In papers before the court Ecaar-SA was particularly severe with Manuel, saying he had ”encumbered” South Africa’s existing and future assets, and ”ceded control of economic and financial policies for the next 20 years to the British government and the International Monetary Fund”.
Ecaar-SA, quoting extensively from the government’s affordability study, said the R31,2-billion arms procurement package was distinguished from other government procurements by a number of factors, such as its size.
”Expenditures of this order will inevitably involve both a move away from government’s existing fiscal targets and a significant restructuring of the national Budget towards defence expenditure,” said the government document, which represented conclusions and recommendations of the affordability study.
The study also highlighted other issues of concern, such as the procurements entailing fixed, contractual commitments extending over a number of years, with high breakage costs. They were also heavily import-biased and could be affected by foreign exchange fluctuations, while the offset investments, such as at Coega in the Eastern Cape, could not be guaranteed.
”The most fundamental point that emerges from the risk analysis is that as expenditure increases the risks of the procurements escalate significantly … Relative to a situation where no arms were purchased, under the ‘combined adverse scenario’, by 2008 GDP [gross domestic product] would be 1,6% (R16-billion) less, the budget deficit would be 0,8% higher, there would be 115 000 fewer jobs, government would be spending 2,5% more of its revenues on debt service, and the total public sector debt stock would be five percent higher,” said the government study.
This in essence meant the South African economy would be smaller, there would be fewer jobs, government debt would be higher and government expenditure would be skewed away from social priorities to military expenditure.
According to Crawford-Browne, the state’s own documentation proved that the government was aware of risks but ”recklessly ignored the warnings”.
”Minister Manuel lied, when they said the loan agreements stood independently from the arms deal. The loan agreement proves that they lied under oath,” he said. — Sapa