Special Hearings — Business Hearings — 1997-11-11

CHAIRPERSON: Thank you very much.  Russel Ally.

UNKNOWN: Thank you Archbishop, as yourself would have said a bit of a disarming exercise.  After the struggle to get Armscor here, just a couple of questions, which I know as you have stressed, the new people in management and also completely changed board.  But Mr Hayward, you yourself, you've been a businessman for a long time and also you were involved in Asacom, in an official capacity, so I hope the questions will not be too unfair.  To try and get some understanding of the nature of the past and in particular in the way which the economy interacted with government, the politics.  There is the position which has been put forward in many submissions that between the years 1970 and 1990, certainly from the '80's onwards, that the, a major force driving the South African economy was the role of the armament industry which led to, which has given rise to this description, many people use of a 'military industrial complex' developing.  Do you want to make any comments on that?  Is that a fair point?

MR HAYWARD: Well I think, I'm not talking now as Armscor, I'm talking here I think in general business, I would have a bit of a question mark against that.  I say this only for one reason.  If I look at business as a whole and we take the likes of Sasolburg, the development of Sasolburg, Mossgas, I see very prominent captains of industry sitting over here with major developments.  I would say the arms industry, certainly at the time was obviously important, it provided jobs, as you heard a 150 000.  But you know, a 150 000 jobs is small when you look at the industry as a whole.  So I don't think, I think it was a industry that was heavily focussed on obviously for many reasons.  But I do not believe when I said when you think of a 150 000 jobs that it made as much noise or bang as perhaps the product they sold.  But it was an important industry, I would believe.  I wasn't part of it, but the fact is I'm just talking now as a broad industry.

UNKNOWN: I'm not speaking about job creation as much as profit, that were generated as a result of the growth and development of the armament industry in this country, because, you know that often profits are not necessarily measured in terms of numbers of people employed.

MR HAYWARD: Let's talk about that.  I think one of the things we need to remember, and as I've just showed you, if I look at where Armscor was, it was one of the bigger players.  At one stage probably got to almost 40% probably of industry of the defence sector.  Now Armscor remember was a non profit structure.  So it wasn't making profits.  It's true it might have been ploughing it back into research, but it wasn't making profits.  I've also done some research to find out, you know, how did you say, the chaps evaluated themselves also against international pricing, to make sure that the Armscor subsidiaries themselves were developing products here at a reasonable price.  And if you look at the groups that are around today in the defence industry, then they've been around a long time, I think most of them you'll find are, well there are some small chaps, but there are some big players.  There's a few big players.  They're public companies in the main, so one can see what profits they have or haven't made.  I honestly doubt that I wasn't fair and that I haven't looked at their records that there wasn't excessive profit taking.  My chaps assure me not, because they tell me when the tenders were in, we had to be internationally competitive.  Because they still had a , never mind what the budget was, we've had to buy, and that's still our job, at the most cost effective price.  So even in those days, I understand we measured and went round the world, to ensure that we were getting the best value for money.

UNKNOWN: The reason I actually asked that is to try to understand what some of the business' which already made submissions, but said that business' obviously  operate in a particular environment and there are restrictions on what business can do and what business cannot do, but it would seem that the development of the arms industry purely created a climate in which private business in particular could grow and benefit as you yourself pointed out, that most of the suppliers to Armscor was through the private sector.  Now was this, and this is really just asking for you opinion, was this because of the profits, business is business is business or was this, again an opinion, because there was real sense on the part of business that there was a duty and almost a responsibility to develop the armament industry because of certain questions of national security which were at stake?

MR HAYWARD: I think if you have a look you know, those players who are in the defence industry , it's almost a fairy limited group who decided to get in.  I don't think everyone felt comfortable.  And neither today, being in the defence environment.  I know some very major groups who intentionally did not get involved.  Or did get involved with that type of product.  So I think you had specific groups, as you said earlier, business men obviously go into business to make money; now the point you're trying to infer or find out really, and I can't tell you whether they made more in the defence industry than anywhere else.  As I said to you, the information I have, which is limited, tells me they didn't but I cannot say to you they didn't.  They're public companies, so one can argue you can go and look at their books and research them and find out if they were excessive.  If they were, the (unclear) of the world; I mean I know people, if you look at the Anglovaals, they're the helders of the (unclear).  I mean people of great integrity with national balance sheets, so I just sense, they would have wanted to have made a fair profit, that's for sure.  And some of those organisations right now are taking quite a the reverse side of things, they're battling almost to survive.  So I can't really answer your question to be honest, because I wasn't part of the defence sector at all.

DULLAH OMAR: It's not entirely eliminating, but I think the defence industrial sector anywhere in the world as you probably have realised was quite different from other economic sectors.  I think the one big difference is that when government places a contract, you have security and knowledge that it's going to be paid for and unless that government really gets very badly bankrupt.  I think that apart from your profit and national security motivation that you're outlining might have been a third motivation that this was probably a most secure sector to go into than any of the others.

UNKNOWN: : And the charges that because of South Africa's international isolation and the difficulties that you actually get when you secure arms, especially after the mandatory arms embargo, that there was actually a premium of getting involved in this industry because it was so difficult, so that those who actually did get in got paid over and above because of the effort to ensure that the military might was maintained, is there any truth to that?