Arms Deal Cost Study Kept Under Wraps

What did the Cabinet know about serious financial risks associated with the arms deal? And why does the public not have the same information? Those are the questions emerging from the way Finance Minister Trevor Manuel has handled his legal dispute with arms deal activist Terry Crawford-Browne.

At the centre of the mystery lie hundreds of pages of the arms deal affordability study which are being kept under wraps.

The legal saga began in 2001 when Crawford-Browne launched a high-court attempt to stop the deal. He focused on Manuel's role in signing off the international loans used to fund the arms purchase.

While Manuel was known privately to have misgivings, his signature on the loan agreements gave Cabinet the decision to go ahead.

The affordability study was the internal government document which considered the financial risks associated with the acquisition, notably the risk of exchange-rate depreciation leading to mounting costs.

An executive summary, which made it clear that Cabinet had been warned about the risks, was leaked in 2000. It noted: "The analysis of these risks suggests that as the expenditure level increases, these risks escalate significantly. In fact even expenditure of R16,5-billion may create a situation in which government could be confronted by mounting economic, fiscal and financial difficulties at some future point ..."

As part of his case Crawford-Browne demanded that government make the full study available. Manuel baulked repeatedly at complying, despite court orders to do so, claiming disclosure would compromise government's ability to negotiate international funding arrangements.

In 2003 he handed over 224 pages, but by that time Crawford-Browne had become entangled in a series of legal missteps which ultimately saw his action dismissed and the 224 pages were not made public.

Now they are at issue again as Crawford-Browne attempts to fight off two court applications by Manuel: one of which would prevent him from claiming publicly that Manuel acted illegally and another to have Crawford-Browne declared a vexatious litigant.

As part of his defence, Crawford-Browne argues that the finance minister never disclosed the full affordability study, as Manuel avers he did.

Manuel's spokesperson, Thoraya Pandy, told the Mail & Guardian the courts have ruled in a series of decisions that Manuel had indeed complied: "In the circumstances it has been found -- not once but twice -- by a court of competent jurisdiction that Minister Manuel disclosed the documentation he was obliged to disclose."

Crawford-Browne cites page numbering on the version he received which suggest the full document may have been more than 10 times its length. In papers filed in his defence Crawford-Browne claims: "The 224 pages of the affordability report that are in my possession ... confirm beyond doubt that the Cabinet was warned about the risks of the arms deal.

"The findings include:

* the prospects both of a balance of trade crisis and of a financial crisis about 2007/08. These warnings are now substantiated, albeit dramatically worse than even the study anticipated;

* that foreign exchange markets are prone to shocks, including political events. Such risks are illustrated by the collapse of the rand against the dollar during 2001 and by the collapse of the rand against the euro in the past two years by almost 60%; and

* that offsets could not be guaranteed."

While the impact of the arms deal has diminished -- South Africans have made about half the due payments already and factors, such as the price of oil, now loom much larger in our balance of payments woes -- it may still be important.

But Crawford-Browne refused to provide access to the documents, citing warnings he had received from lawyers acting for the minister that he might be in contempt of an interim gagging order Manuel won against him earlier this year.

The M&G revealed last week that Manuel's lawyers, Hofmeyrs, had also written to the media, warning them against publishing anything based on Crawford-Browne's allegations.

While searching for the 2001 court file, to which the 224-page record should be attached, the M&G found the entire contents of the file missing from the Cape High Court library.

The court file for Manuel's two current actions against Crawford-Browne also could not be located, except for some of Crawford-Browne's submissions.

Hofmeyrs said the court files were "in the care of the registrar".

The M&G also attempted to ascertain what responses Manuel had given from his own papers.

Hofmeyrs declined to supply the minister's court filings, saying: "We refer you to our letter of July 2 2008, which motivates more fully our client's wish to prevent Mr Crawford-Browne from breaching the interdict against him. Our client can scarcely make pleadings in this dispute available to the media, while preventing Mr Crawford-Browne from doing so."