Jay Naidoo quizzed on Arms Deal’s economic benefits

2014-06-09 17:27

The purchase of arms could have lowered the GDP and resulted in low employment figures in the country.

This was the argument of Lawyers for Human Rights (LHR) at the Arms Procurement Commission in Pretoria.

Jayendra Naidoo struggled to counter the arguments of the LHR, which represents Andrew Feinstein, Hennie van Vuuren and Paul Holden.

He also conceded that the number of jobs, 65 000, that were supposed to have been created was unreasonable due to the nature of such projects.

“The number arose in the days leading up to the finalisation of the procurement. It was associated with direct and indirect jobs and the ratio was 1:4. When we looked at the employment figures, we did not associate that number with the programme. There was no way to calculate that,” he added.

He also conceded that the cost estimates of the arms back in 1999 did not include interest rates and a host of other aspects.

“The cost on a cash-price basis was R29.9 billion, as announced at the time of the Cabinet decision in September 1999,” he said.

Naidoo was appointed chief negotiator, representing then president Thabo Mbeki. He led the international offers negotiating team (IONT) representing the government in negotiating the contracts.

This team also included Shamin “Chippy” Shaik who was the chief of procurement for the department of defence at the time.

Naidoo testified that he was also part of the team that researched and compiled the affordability report that identified the following risks if the arms were bought:

» Increase in domestic interest rates upon the announcement of the packages;

» Nonperformance of the offset commitments, which were known as the national industrial participation (NIP);

» More rapid depreciation of the rand exchange rate than assumed in the costing calculations; and

» Exogenous economic shock.

He said: “However, a conservative approach to NIP risk was adopted, and even the ‘low-risk’ scenario assumed only adequate performance, that is, 65-80% delivery of NIP commitments. By contrast, the high-risk scenario assumed substantial underperformance, at 33% of delivery commitments.”

But when Advocate Anna-Marie de Vos asked him whether the purchase of the arms had a negative effect on GDP and employment figures, he could not dispute it.

De Vos put it to him as follows: “In each particular scenario, even the best-case scenario, the country’s GDP would have been lower if the SDP [strategic defence package] had not been pursued.”

Naidoo replied: “Any procurement of a noneconomic purpose, especially of this size, would have had a negative effect on the GDP. The whole purpose of the affordability report was to try to mitigate against such risks.”

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