South Africa’s Ex-Finance Minister Manuel Defends Arms Purchase

Former South African Finance Minister Trevor Manuel defended the government’s $5 billion purchase of weapons in the late 1990s that opposition parties criticized for robbing health care and education of funds.

Manuel testified today before a panel President Jacob Zuma set up last year to probe allegations that the purchase of jets, warships, helicopters and submarines from companies including ThyssenKrupp AG and BAE Systems Plc was dogged by graft. The deal was signed by former President Thabo Mbeki’s government.

“I was convinced that the selected package was affordable and within government’s fiscal envelope,” Manuel said in a sworn affidavit. The “National Treasury went to great lengths to ensure that government could borrow at the most favorable terms, and that the loan agreements could be restructured or the loans redeemed or repaid earlier than anticipated,” he said.

Canceling the loans that finance the arms purchase now would damage South Africa’s credit rating and its ability to borrow to finance investment, he said.

Opposition political parties including the Democratic Alliance criticized Mbeki’s administration for concluding the deal at a time when the government was restricting its budget and under pressure to expand health care and education five years after the end of white minority rule.

Graft Allegations

Anti-arms campaigner Terry Crawford-Browne and Andrew Feinstein, a former lawmaker for the ruling African National Congress, have alleged the agreements were tainted by graft.

While there have already been several official probes of corruption in the weapons contracts, only two people have been convicted in South Africa on related charges.

In 2003, Tony Yengeni, a former ANC lawmaker, was found guilty of defrauding parliament by failing to disclose a discount on a luxury car from one of the companies bidding for the arms contract. In 2005, Zuma’s then-financial adviser, Schabir Shaik, was convicted of trying to solicit a bribe for the politician.

South Africa’s defense spending never exceeded 1.7 percent of gross domestic product, below the international norm for developing nations, according to Manuel, who will face cross-examination tomorrow.

“We were diligent in exercising” control over state finances, Manuel said. The arms deal wasn’t concluded “by starving the other social functions of their necessary expenditure,” he said.

To contact the reporters on this story: Amogelang Mbatha in Johannesburg at ambatha@bloomberg.net; Mike Cohen in Cape Town at mcohen21@bloomberg.net

To contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net Karl Maier, Gordon Bell

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