Army's untouchable business wing
The Namibian Defence Force (NDF) is building a shadowy business empire that does not account to the public or Parliament, and is seen in some quarters as a potential threat to the country’s democracy.
The secretive conglomerate is August 26 Holdings, formed by the defence ministry in 1998.
It initially warehoused rights in a controversial diamond mine in the Democratic Republic of Congo (DRC), but has since spread its wings by launching eight industrial subsidiaries: August 26 Logistics, Windhoeker Maschinenfabrik, August 26 Industries, Sat-Com, August 26 UBM, August 26 Textile and Garment, NamForce and Agri-Tour.
Many of them are run by serving or retired senior officers of the defence force appointed by the ministry.
Some of the subsidiaries were set up to service the defence force and its members, but the group has increasingly spread its tentacles into the general state sector and state-influenced industries such as construction, diamonds and agriculture.
Despite landing government contracts worth billions of rands, August 26 has never produced an annual report, is not publicly audited by the auditor general and has never appeared before a parliamentary committee to account for its activities.
Defence Minister Nahas Angula declined to comment and referred all questions to the company’s board.
In the past Angula has argued that the military’s business dealings cannot be made public because of national security.
August 26 has a well-connected board of directors and is chaired by the secretary of the Cabinet, Frans Kapofi, a technocrat with a military background. Its chief executive is James Auala, a retired brigadier general and businessperson whose private interests include the diamond industry. He is a “sightholder” of the government-De Beers joint venture Namdeb, which hands out regular consignments of diamonds to selected empowerment beneficiaries.
Kapofi told amaBhungane that some August 26 businesses are in financial trouble: “Some of the companies are in intensive care.
We are looking at getting them out of trouble. They will definitely need financial backing from the state.”
He mentioned Windhoeker Maschinenfabrik, an engineering firm, as a loss-making enterprise.
Kapofi conceded that August 26’s subsidiaries do not produce up-to-date financial reports, but said preparations were being made for them to be published.
“I realised that I haven’t seen annual reports. There wasn’t much to report on because some of the subsidiaries were not fully functional but they’re getting there.”
Kapofi, who has chaired August 26 for close to a year, is high on the ruling Swapo parliamentary list after the party’s recent electoral victory and will join Parliament as an MP in March.
Refusal to give details
The acting chief executive of August 26, Josiah Kasheeta, also refused to give information about the company, citing security reasons. “Since we deal with defence and security of the country, we do not want to expose ourselves.”
He revealed that some of the companies are state-funded. He also said that annual reports are compiled each year and forwarded to the defence minister and the Cabinet.
Last month the Tender Bulletin, a weekly newsletter that monitors state contracts, attacked August 26’s secretive practices as an open door for corruption and warned that it could pave the way for military control of the state.
“A more sinister agenda is one that typifies the transition to totalitarian political rule, where the party in power buys its political allegiance from the armed forces to ensure its survival,” the Bulletin warned.
“[It] will place [Namibia] on a further slippery slope to the militarisation of the state apparatuses and eventual rule through the barrel of the gun.”
The Bulletin pointed out that the defence ministry has been exempted from public tender processes for a range of state contracts – including the supply of everyday materials such as stationery.
Calls to investigate ignored
“Despite various comments from the ministry of finance that tender exemptions need to be investigated, no explanation has been given [for] why … the ministry continues to get away with tender exemptions for everyday nonstrategic items such as wine glasses,” the Bulletin complained.
Last year, August 26 Logistics found it itself at the centre of a storm over procurement irregularities that allegedly benefited the cronies of military top brass.
The Namibia Chamber of Commerce and Industry said the government-created defence companies became a problem when they were awarded nonmilitary state contracts.
The chief executive of the chamber, Tarah Shaanika, said: “It is strategically wrong for the government to win tenders for daily goods and services that can be supplied by other companies. This stifles the private sector and suffocates entrepreneurship.
“Why should the military get a catering tender when so many other companies can supply food? You cannot use our tax money to compete against us. How can that be right?”
Shaanika added that the main purpose of August 26 was to provide jobs for retired generals.
August 26’s subsidiary operations include:
•?August 26 Ultimate Business Machine (UBM), which was launched in September.
The company’s entry into the construction sector sparked concerns that it will gobble up most government building and civil engineering contracts.
Initially set up to modernise army barracks, it recently scooped a R450-million tender for the construction of the new military hospital – without submitting a tender.
UBM’s managing director is Colonel John Namoloh, who is related to former defence minister and current Housing Minister Charles Namoloh.
The South African Sunday Times quoted Namoloh as saying that the plan is to compete with other companies. The newspaper cited concerns that the Namibian army is trying to follow in the footsteps of the Egyptian military, which gained power and wealth through a network of businesses.
•?August 26 Logistics, which focuses on security, allegedly to supplement treasury spending on defence, was engulfed by a major scandal in early 2013.
The weekly newspaper Confidente published allegations that top generals had manipulated the tender system to hand contracts worth more than N$1.5-billion for the supply of food at military bases to “briefcase companies” owned by relatives and friends.
The contracts had previously been awarded to private companies after a tender process. The value of the contracts rose over a 10-year period from an initial R3-billion to R5-billion amid allegations of kickbacks and hidden shareholdings.
A month after Confidente’s damning report, the defence ministry withdrew the tender.
The Namibian then reported that certain generals had received kickbacks to lobby for a new system that would allow the ministry to hand the contracts to selected individuals.
In July, Defence Minister Angula announced that the contract had gone to August 26, which then signed a subcontract with its subsidiary, August 26 Logistics, in which it has a 51% stake.
It was revealed that the balance of the shares in August 26 Logistics are held by the former Swapo mayor of Windhoek, Matheus Shikongo, with 24%, and a South African businessman, Sarel Oberholzer, with 25%.
Documents suggested that Shikongo was essentially a front for South African interests – although he denied this.
The national tender board confirmed that the defence ministry “did not apply for an exemption [from tender processes] and no exemption was granted”.
In 2001 the defence ministry handpicked August 26 Logistics to procure bombs from a Cyprus-registered company, Harvey Logistics.
After R3-million went missing, Harvey Logistics was dissolved.
The Namibian government launched an investigation in 2008, but no official has yet been held to account.
August 26 Logistics also had rights in a DRC diamond mine granted to the Namibian government in 1999 by former Congo president Laurent Kabila as a reward for military support.
For years secrecy shrouded the identity of Namibia’s international partner in the 25km2 open-cast mine at Maji Munene, 45km from Tshikapa.
It also remained unclear whether mining actually took place, the value of production, if any, and who benefited from it. However, the Mail & Guardian revealed that Maurice Tempelsman, a Belgian-American diamond magnate and friend of Namibia’s first president, Sam Nujoma, was Namibia’s partner in the deal. Tempelsman’s lawyer in Southern Africa, Christian Merkling, insisted that the mining never went ahead as planned.
•?August 26 Holdings has three subsidiaries in the manufacturing sector, the troubled Windhoeker Maschinenfabrik (WMF), which makes trucks, trailers and tankers; August 26 Industries, which started in 2007 and manufactures footwear and boots for soldiers; and August 26 Textile and Garment. The latter focuses on making combat fatigues, trousers and protective clothing.
The former deputy permanent secretary of defence, retired colonel Mwetufa Mupopiwa, is the general manager of the textile company, and the former deputy minister of defence, Victor Simunja, runs WMF.
A number of army generals, including SN Haihambo and Ben Kadhila, serve on WMF’s board.
•?August 26 owns 75% of Sat-Com, a telecommunications firm involved in the installation and manufacture of equipment such as two-way radios, satellites and radio transmitters. But the company’s main role is to conduct research on electronic communication for the ministry.
•?NamForce, a newly registered insurance company, will become fully operational over the next two months and will take over the army’s insurance policies, including disability and funeral cover. In the past, military insurance was handled by private companies – FIS Life Assurance and later Hollard Insurance.
Rainer Ritter, ex-chief executive of the state-owned Namibia Financial Institutions Supervisory Authority and a former consultant for FIS, is Namforce’s managing director.
•?August 26 also has an interest in agriculture through its subsidiary Agro-Tour Development Initiative, which farms livestock on 57?000 hectares north of Grootfontein. The nine-camp farm sells meat to the state-owned Meat Corporation of Namibia.
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The M&G Centre for Investigative Journalism (amaBhungane) produced this story. All views are ours. See www.amabhungane.co.za for our stories, activities and funding sources.