The cost of the controversial Strategic Defence Procurement programme – the ”arms deal” to you and me – continues to gobble up about 40% of the total annual defence budget, estimated at just more than R20-billion for 2004.
The strengthening of the rand saved about R1-billion on the arms deal loan repayments for last year, which totalled R5,8-billion. Savings of a further R1,8-billion over the initial estimates have been pencilled in for the corning two years, based on the assumption that the currency will continue to hold up. The total bill for four corvettes, three submarines, 30 light utility helicopters, 24 trainer aircraft, and 28 fighter aircraft is now estimated at R48, 7-billion, of which the largest annual projected expenditure is R7-billion in 2005/06.
The 2004 Budget as a whole shows little evidence of the displacement of social expenditure by the cost of the arms deal – one of the points still being argued in the Cape High Court as Minister of Finance Trevor Manuel was delivering his Budget speech. The court case is the culmination of a long-running legal battle being fought by Terry Crawford-Browne of Economists Allied for Arms Reduction (Ecaar), which is seeking to have the arms deal overturned.
Appearing before Judges Andre Blignaut and Ntlupheko Yekiso, Ecaar this week mounted a strong attack on the legality of the loan agreements signed by Manuel to pay for the deal. Lawyers argued that Manuel signed the contracts without the required legal authority and that he acted irrationally or failed to properly apply his mind in exposing the country to severe foreign exchange risk, when the need for spending on social security far outweighed the need to prepare for a non-existent military threat.
Advocate Michael Kuper, appearing for the state, argued that Ecaar’s dire predictions of the decline of the rand – and therefore the cost of the deal – had already been proven wrong. However, his argument that Cape Town was not the proper jurisdiction to bring the case was somewhat undermined by the fact that Manuel was making his most important official annual statement a few hundred metres away.
The case, funded by Crawford-Browne to the tune of R500 000 – largely from his own pocket – will be one of the stiffest tests yet of the accountability of the government to the socio-economic prescriptions contained in the Constitution. Judgement has been reserved. While the arms deaI costs appear to have had little effect on other state spending, they have arguably crowded out other defence expenditure, leaving the South African National Defence Force operationally cash-strapped.
The budgeted growth in defence spending for the next three years is, at 4,1%, probably below inflation. Projected savings from retrenching staff may be hard to achieve and cost overruns on the bedding-down of the new defence systems will likely continue to put pressure on operational expenditure and training Manuel’s supposed allocation of R1-billion extra for foreign peace-keeping missions appears not to be ring-fenced, but is spread out among increases to infantry, armour, command and control, and joint logistics.
