Special Hearings — Business Hearings — 1997-11-11

MR HAYWARD: I couldn't say there's any truth, but one would surmise as I said earlier in my presentation, that some people must have made that little bit of extra out of it.  I think the reputable groups would have made their fair profit, because people looked long term.  There must have also been quite a lot of chancers around, I'm very sure, in and out for a few bucks; you know, high risk high reward.  You can argue again of course, that in some instances, some of the groups, their people, they might argue themselves by gaining to trying to make this money, were putting themselves quite at risk, I mean this ISC case is a classic point.  Some of the chaps had threatened prison sentences of a couple of hundred years.  And a lot of those fellows who I met I might tell you didn't make much money, they were employees of firms.  But I'm sure people must have made money.  But I don't know them, I can't tell you who they are because I wasn't around selling to them.

UNKNOWN: In your submission, one point 6 of the original submission that you sent to us, there's this, you state the following and maybe it could be useful if you could elaborate, especially on the second part of it.  You say that
"we don't deny that in executing its' mandate, Armscor would have contributed to the military capability of the country.  For most members of the South African Defence family, the enemy was not the people of South Africa, it was the threat posed by an external aggressor.  Usually a communist state such as Cuba or the then Soviet Union".
Now, I may be wrong but that's not my understanding of the perception, and even more the reality, the majority of people, of black people in South Africa, is that for them the South African defence family is very much targeting the majority of people inside this country.  Now, how is it that you make a statement like that?

DULLAH OMAR: I think that was definitely based on the consensus that was developed in Armscor, amongst the management itself.  I think that what you've found was that especially when it came to Armscor personnel who regarded themselves as part of the defence family, the possibility of research and development they were doing was being used against their own country and did not enter the equation.  I think you'd probably get that unanimous answer from, to the person.  I haven't been on the other side of the barrel as such, I also find that incredibly difficult to believe but we have recorded that to indicate that this was the way they approached their work.  And that was the perception that they had of the role that they played, in the conflict.

CHAIRPERSON: Thank you very much, any other, yes.

DR BORAINE: Chairperson, only one question this time, not two.

CHAIRPERSON: Thank you for small mercies.

DR BORAINE: I wonder if you could tell us, you mentioned that you're not for profit company, do you get any, are you subsidised, by the state and if so to what extent?

MR HAYWARD: We're given an allocation out of the defence budget.  And obviously we work it back also to  show them as a percentage of their budget what we cost them.  Because in effect we have to run Armscor as you might say a commercial operation and we say to them it cost you between five and six percent or whatever it is and we evaluate ourselves against agencies around the world, such as in France and Britain and we found we probably one of the most cost effective as we can find it.  It's very difficult to measure (unclear).  But our customer has to at least have a base.  If we're not performing, Mr Deputy Chairperson, then obviously they're not going to employ us.  So you can argue, they'll go somewhere else and pay, so we've got to be very careful, in fact they wanting more and more to be blunt with you for less and less which is normal.  Especially with their budgets being under pressure they put ours under pressure.  So we've got to earn our keep,we've got to justify it, very much so.

DR BORAINE: A follow up question just arising from what you said.  In other words you said, the tax payer is making a contribution and because of the controversial past, to put it mildly of Armscor, and also forgive me if I sound naive, but there is a view that arms manufacturing, I know the argument about being strong in order to keep peace, speak softly but carry a big stick; but there is a feeling among a number of people who felt that the time would come when an organisation like Armscor would no longer have to exist, or those would be even far far smaller than it obviously is, (unclear).  Is this ever discussed, ever thought about in your own mind, your own staff, your own chairboard?

MR HAYWARD: Very much so.  In fact when I came to Armscor, the first thing I asked myself,  do we need an Armscor?  That was the first question.  What has happened in the few years I've been there, the message has just come through now, yes, we need an Armscor.  Because we need a body that's independent, the board I might mention of Armscor also the procurement board.  So you look at good corporate governance if you like.  We've got outside businessmen coming in to give advice, is this a good buy or not.  It's become even more important now that we're doing affirmative procurement, with all due respects to see who's who in the zoo, who are coming in with office.  And you protect the minister if you like, and everyone else, because it comes up through the ladder of recommendations through the board at the top.  And what you find, Mr Deputy Chairperson; you know we don't buy products off the shelf, it's a very very experienced type of person who moves in for example you'll go in and get the product specked out that the defence force needs.  Then they'll design that, then they'll go out and tender, then they'll evaluate the tenders and then you'll have ongoing upgrading going on for maybe 25 to 40 years.  So it's a highly specialised programme and you find these programme managers as I told you we were invited to go and help the US programme.  They're highly skilled people, we find that frankly you need almost a parastatel that enables you to have a type of man who's an entrepreneur / businessman, not just a civil servant.  His under the pressure therefore also of watching his money, he negotiates his deals.  So you'll find that our defence force is going to need products.  The question is one of two options, they doing it by themselves or we do.  Now what you find, if it's a case of by themselves, very often the man whose a pilot today is made a program manager tomorrow on a new product.  It may last two, three, four, five years then he wants to go back to flying.  He doesn't want to be desk bound.  Our specialists will stay in that aviation field for 25, 30 years.  So you have this ongoing, as I said to you, great expertise needs to be built up.  And that's why with our black engineers, it's taken a lot of effort to get them to the levels where we need them.  So the message is simply this, we've just done an evaluation, do we want an Armscor, the message is we need it.  It's the most cost effective way for procurement.