India has cancelled all deals with South African state arms manufacturer, Denel.
This includes a contract signed in March this year for 400 anti-material rifles (AMRs), as well as deals for an ammunition plant and artillery.
Had the business gone ahead, it would have earned the financially troubled company billions of rands.
Indian media reports say the South Asian country’s government decided, on the basis of information furnished by Denel, that the South African company had violated contractual clauses by using undue influence and agents or agency commissions to win the AMR contract.
”A decision had therefore been taken to initiate action to cancel all contracts entered into with … Denel,” SP’s Land Forces journal reported.
”The contract signed on March 7 2005, for procurement of 400 AMRs, had been cancelled. Investigation had been ordered into the matter and further action would be taken on receipt of the investigation report.”
South Africa had high hopes for defence cooperation with India as part of its South-South axis with that country and Brazil.
But for now, the Indian market can be considered closed to the state arms maker and any other company associated with it.
No comment from Denel
Denel was asked for comment on the report, but said ”commercial confidentiality”, apparently imposed by the now-cancelled contracts, prevents it from commenting.
”As you are aware, Denel’s relationship with the Indian ministry of defence [MOD] is contractual in nature,” spokesperson Priya Pillay said.
”This relationship and all the details of these contracts are confidential and protected by confidentiality clauses as per the contract. Denel is, therefore, not in a position to comment on or discuss our relations and communications with the Indian MOD.”
The ministry of public enterprises also declined to comment.
Denel insists it has not broken any South African or Indian laws.
”Denel has sought legal advice in both South Africa and India, and no laws were transgressed in this process. The company is working in cooperation with government and legal counsel to see how we can overcome the issue,” Pillay said on Monday afternoon.
Indian politics
Officials have also privately said Denel was being used as a handy foil in domestic Indian politics, where the ruling Congress Party is keen to appear tough on arms-deal corruption — after being voted out of power in 1989 on the back of a scandal involving an agent paying bribes to officials to buy 155mm artillery from Bofors of Sweden.
While this may be so, breaking or bypassing tender procedures by making irregular use of agents will not endear the company to any other potential buyer, particularly those keen to avoid the impression they are on the take.
If alleged undue influence cost Denel its market in India, it appears the alleged asking of bribes by a senior manager has poisoned the Middle East as a market as well.
The manager, whose name is known to the South African Press Association, left Denel at the end of July.
But in the wake of his activities, several Gulf states are said to be reluctant to deal with South Africa, leaving just Africa as a ”natural market” for the company.
Selling arms on the continent is no easy task, with the two constraints being the ability of willing buyers to pay and the willingness, or otherwise, of the national conventional arms-control committee to approve such sales. — Sapa