UNIVERSITY OF PENNSYLVANIA - AFRICAN STUDIES CENTER
South Africa: Arms Purchases
Date distributed (ymd): 991212
Document reposted by APIC
Region: Southern Africa
Issue Areas: +economy/development+ +security/peace+
This posting contains a statement following a non-governmental Swedish-South African conference to discuss recent South African arms purchases. The groups who sponsored the conference are critical of the 30 billion rand deal, and call for a moratorium on the sales until further review. The posting also contains excerpts from a April 1999 brief by the Southern African Centre for Defence Information (SACDI) in Cape Town, as well as additional references to sites with background information on this and related issues.
SOUTH AFRICAN COUNCIL OF CHURCHES PUBLIC POLICY LIAISON OFFICE
9 December 1999
Statement on Defence Expenditure and Poverty Alleviation
On 24 November 1999, the South African Council of Churches, the Christian Council of Sweden, the Coalition for Defence Alternative, and the Swedish Fellowship of Reconciliation convened a seminar on Defence Expenditure and Poverty Alleviation as part of the "Civil Society Encounter" held in conjunction with the state visit of the Swedish Prime Minister, Goran Persson. The meeting was addressed by the Rt. Rev. David Beetge, Anglican Bishop of the Highveld, Rev. Bo Forsberg, Director of Diakonia (Sweden), the Hon. Nozizwe Madlala-Routledge, the South African Deputy Minister of Defence, and Mr. Roger Hallhag, International Policy Advisor to the Prime Minister of Sweden.
The convenors thank the seminar presenters and participants for their commitment to open debate on defence and development issues. The South African participants also thank the Swedish government and people for their assistance in the struggle against apartheid and for their continuing support for transformation and development in South Africa.
In light of the information presented at the seminar, the four convening organisations ACKNOWLEDGE that:
* In a situation where the majority of the population live below the poverty datum line, poverty constitutes the most significant threat to South Africa's security and democratic government;
* South Africa's Constitution, in terms of the Bill of Rights and section 198(a), gives priority to human security over traditional notions of military security;
* There is no discernible military threat to South Africa to warrant expenditure of R30 billion on new arms, including BAe/Saab JAS-39 Gripen fighter aircraft;
* As a percentage of GDP, defence spending has declined substantially from pre-1995 levels to less than 1,5% today;
* Although expenditure on the current arms procurement package will be spread over eight or more years, it will necessitate a 14,9% average annual increase in the defence budget over the next three years--more than double the average annual increase planned for any other sector;
* The European Union's Code of Conduct on Arms Exports (Criterion Eight) requires consideration of socio-economic conditions in the recipient country;
* The proposed arms procurement package includes industrial participation, trade and investment agreements (offsets) valued at R110 billion;
* The South African government claims that the offset arrangements will generate 65,000 new jobs;
* International research exposes the malpractice of offsets relating to military expenditure as a scheme to provide political legitimisation for the large outlays by allowing policy-makers to point to ultimately non-existent economic benefits;
* Northern industrialised countries prohibit the use of offsets in agreements among themselves on the grounds that they distort markets and encourage corruption;
* Notwithstanding South Africa's desperate need for jobs, the moral implications and the sustainabilty of job creation initiatives must be taken into account;
* The armaments industry is capital-intensive rather than labour intensive and is therefore an poor creator of jobs, particularly at less skilled levels;
* The armaments industry is invariably heavily subsidised, diverting public resources away from socio-economic upliftment;
* The armaments industry's record of corruption gives cause for alarm;
* South Africa's rearmament may trigger an arms race in the subcontinent and elsewhere;
* Churches and many civil society organisations in Sweden and South Africa have consistently called for the abandonment of the arms sale and the redirection of these funds into sustainable social investment to enhance human security.
Further, WE RECOGNISE that, in spite of the persistent calls for a reconsideration of the arms deal, the South African government and industry representatives from Sweden, Britain, Germany and Italy met in Pretoria on 3 December 1999 to finalise the deal.
THEREFORE, WE CALL UPON:
1. The South African government to demonstrate its commitment to fighting poverty and corruption by:
a. Publishing complete details of the offset agreements associated with the arms procurement package;
b. Establishing a broadly representative committee (including civil society representatives) to assess the likely impact of the offset agreements, to analyse their potential for reducing poverty and unemployment, and to consider alternative options for deploying these funds to promote genuine human security through socio-economic development;
c. Initiating an independent judicial inquiry into the allegations of corruption which have been made in connection with the arms procurement deal;
d. Declaring a moratorium on implementation of the deal until both the commission of inquiry and the review committee have completed and published their reports and the public have had an opportunity to study and debate their conclusions;
e. Reconsidering its arms procurement plans in light of these reports.
2. The South African government to promote compliance with the arms export criteria of the National Conventional Arms Control Committee by entrenching these conditions in law.
3. The South African government to work closely with church, community, and other civil society organisations to develop and implement creative plans for the conversion of military bases and defence industries to productive civilian use.
4. The Swedish government and Saab to cooperate fully in these inquiries, to suspend the sale of arms to South Africa until the review process is complete, and to urge the British, German, and Italian governments and suppliers to take similar action.
5. Churches and NGOs in Sweden and South Africa to continue to challenge their respective governments to accelerate demilitarisation, to abandon arms production, to devote public resources to the reduction of poverty, and to resolve conflicts without violence.
South African Council of Churches
Christian Council of Sweden
Coalition for Defence Alternatives (South Africa)
Fellowship of Reconciliation (Sweden)
This information is produced and distributed by the Public Policy Liaison Office of the South African Council of Churches. The Public Policy Liaison Office monitors and analyzes key public policy issues under consideration by parliament and government ministries, alerts government to the concerns of the SACC, and assists people of faith to be more familiar with and involved in public policy debates. To be added or dropped from this distribution list, please write to firstname.lastname@example.org.
For more information, contact:
South African Council of Churches
Public Policy Liaison Office
P.O. Box 2591
Cape Town, 8000
Tel. (021) 423-4261
Fax. (021) 423-4262
Southern African Centre for Defence Intormation (SACDI)
A joint project of the Centre for Conflict Resolution and the
Idasa Budget Information Service
UCT, Private Bag, Rondebosch, 7701, South Africa
Tel: 27-21-4222512; Fax: 27-21-422622;
Brief No. 2: Guns or Butter?
The SANDF's R30 billion weapons procurement package
On the 18th November  cabinet approved the planned purchase of R30 billion worth of weapons for the SANDF. The 'procurement package' includes jet fighters from Sweden and Britain, maritime helicopters from Britain, light utility helicopters from Italy and corvettes and submarines from Germany.
Not surprisingly the cabinet decision has provoked widespread criticism and condemnation from many sections of civil society, including private sector economists, human rights organisations, peace groups and church leaders. Much of this criticism has centred on the opportunity costs of the procurement package - is it appropriate for government to be spending vast sums of money on weapons when social services continue to be desperately underfunded, and when poverty alleviation and development issues continue to be neglected or ignored?
Firstly, it is important to note that the cabinet's approval of 'preferred suppliers' of jet fighters, helicopters, corvettes and submarines merely confirms the recommended force design equipment option contained in the 1998 Defence Review, which was approved by parliament in April this year after a fairly exhaustive and inclusive two-year public participation process. During this process, civil society and parliament had a number of opportunities to critique the financial and military implications of the various force design equipment options.
Thus, while many people may still question the military rationale or justification for jet fighters etc; parliament and the cabinet have decided in principle that such equipment is necessary to modernise the SANDF and to meet South Africa's future defence needs.
However, the approval of these weapons purchases does raise a number of important financial, economic and political issues.
>From a financial point of view, can South Africa afford to spend R30 billion on armaments, given the government's funding constraints, its commitment to fiscal discipline and its stated desire to reduce the country's budget deficit? ...
Government has constantly emphasised the industrial participation or 'offset' aspects of the weapons package. Furthermore, it has stated that the contracts and offset proposals which are attached to the procurement package will generate investment worth R110 billion in the next 17 years, and create up to 65 000 jobs over the next 7 years.
Offsets are a common feature of the international arms trade, whereby conditions are imposed on the foreign supplier of weapons (e.g. Germany) thereby enabling the purchasing government (e.g. South Africa) to recover or offset some or all of the purchase price. Offset schemes are usually designed to achieve a relocation of economic activity from the country of the equipment supplier to the purchasing nation. Direct offsets involve participation of the purchasing nation's industry in some aspect of the contract for supplying foreign defence equipment (e.g. South African weapons systems being purchased for use in German built submarines). Indirect offsets involve goods and services unrelated to the purchase of the specific foreign defence equipment (e.g. the German submarine consortium's proposal to invest US$1 billion in a flat stainless steel plant at Coega in the Eastern Cape)
In 1997 cabinet approved national industrial participation (IP) policy which covers direct and indirect offsets related to all government purchases from foreign suppliers. The Department of Defence, in conjunction with the DTI, has also approved policy on defence industrial participation (DIP) policy). Under this policy all defence imports over US$10 million are required to have at least a 50% (i.e.US$5 million) industrial participation component, which is targeted at the local defence industry.
Before attempting to assess the economic dimensions of the offset aspects of the weapons package, it is worth noting that in our current economic climate government has every incentive to 'inflate' the purported economic benefits of the industrial participation components of the procurement package.
While the industrial participation component of the procurement package may result in some tangible net benefits to the South African economy (e.g. direct investment, jobs) in the absence of detailed information on the foreign suppliers' offset and industrial participation proposals, government's claims are difficult to quantify and thus largely speculative. In addition, if the figures are to be believed, this means that each new job will cost R1, 7 million to create. This seems somewhat expensive in the current South African context.
Government has attempted to create the impression that because of the offset arrangements, South Africa will not have to pay for the weapons. This is simply not true. Certain parts of the economy, including the defence industry, stand to benefit from the procurement package. However, government (i.e. the Finance Ministry) will still have to find R30 billion to pay for the weapons. If our exchange rate depreciates significantly over the payment period, then government will have to find additional resources.
It has been reported that the offset and industrial participation agreements only carry a 5% penalty clause. If this is the case, then there will be little or no incentive for the European suppliers to honour their offset and industrial participation agreements.
Furthermore, it is unclear whether government, both within the Department of Defence and the Department of Trade and Industry, has the requisite capacity to monitor and evaluate the implementation of the industrial participation agreements. For example, will the Minister of Defence be able to report to parliament on an annual basis on the actual number of jobs that have been created as a result of the weapons purchases? Who will take responsibility if the number of jobs created as a result of the weapons package is significantly below what was stated at the time of the signing of the industrial participation contracts?
There are also a number of concerns about the extent to which the investment attached to the defence industrial participation agreements represents genuinely new business, which would not otherwise have been obtained without the weapons package. If European companies are only willing to invest in South Africa as a result of major weapons purchases, what does this say about our desirability as a destination for direct fixed investment? Put differently, would these European defence companies have (ever) considered investing in South Africa without the 'incentive' of the procurement package?
Given the fact that government will in all likelihood proceed with the planned purchase of jet fighters, helicopters, corvettes and submarines, it is important that civil society engages with government to ensure that the country extracts the maximum economic benefits from the weapons purchases in terms of investment and job creation in the non-defence sectors of the economy. Furthermore, civil society should also assist government in monitoring the European weapon suppliers' commitment to honouring their offset and industrial participation agreements.
On-Line Sources for Additional Information on this and
South African Ministry of Defence: Defense Review 1998
Contents.htm [type URL on one line]
Institute for Security Studies (ISS)
Centre for Conflict Resolution (CCR)
African Centre for the Constructive Resolution of Disputes
Message-Id: <199912122328.SAA21214@smtp6.mindspring.com> From: "APIC" <email@example.com> Date: Sun, 12 Dec 1999 18:28:16 -0500 Subject: South Africa: Arms Purchases
Editor: Ali B. Ali-Dinar
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