COALITION FOR DEFENCE ALTERNATIVES

Rearmament

South Africa remains grossly overarmed relative to neighbouring countries. Throughout the Parliamentary Defence Review of 1996-98, NGOs argued that the socio-economic consequences of poverty pose a much greater threat to South Africa's democracy than do foreign armies. South Africa cannot afford to squander its limited financial resources on military equipment at the expense of social investment.

Military leaders have argued that in an uncertain world it is essential to maintain military preparedness. They cite the dictum: "If you want peace, prepare for war." Consequently, they recommend a technologically-advanced defence force with an expandable "core force" of corvettes, submarines, fighter aircraft and tanks.

In November 1998, the government announced plans to reequip the SA Air Force and SA Navy with a package of high-tech weaponry expected to cost close to R30 billion. The purchases would be financed in part by reducing the number of defence personnel from 130 000 to 70 000. Parliament and the Cabinet endorsed the proposals--the latter adding a provisio that the acquisitions would be subject to their financial affordability.

Proponents justify the plan on two main grounds: that the equipment is essential to national defence, and that the deal will generate enormous economic benefits in the form of new foreign investment and trade.

Strategic necessity: Given the almost total lack of any credible threat to South Africa's borders, most arguments for strategic necessity have amounted to little more than appeals to national pride--or machismo. For example, submarines have been touted as a means of making a small navy important. A Department of Defence spokesperson told the Parliamentary Joint Standing Committee on Defence that in the event of a naval invasion by the United States, submarines would at least give South Africa the ability to "give the Americans a bloody nose!"

The SA Navy also sought to justify purchases of corvettes and submarines by citing their ancillary uses in protecting South Africa's valuable marine resources. On another occasion, a Navy spokesperson declared that "submarines are the ultimate stealth weapon to protect fish!" NGOs pointed out that specialised vessels better suited to this task would be available at a fraction of the cost of warships, but these protests were brushed aside.

Economic benefits: Superficially, the economic arguments in favour of the proposed arms deal are more compelling, especially in light of the enormity of South Africa's unemployment crisis. It has become standard practice in the international armaments industry for customers to require compensatory business to offset the cost incurred in buying weapons systems. In 1997, the Department of Trade and Industry adopted an "Industrial Participation Programme" for all state projects with a foreign exchange value in excess of US$10 million. The goal is to "leverage economic benefits and support the development of South African industry by effectively utilising the instrument of government procurement."

The rearmament package announced in November 1998 includes trade and investment offsets valued at more than R110 billion. These are expected to create 64 165 jobs:

Source: Business Day, November 19, 1998

The first principle of South Africa's Industrial Participation Programme is that offsets must not increase the price of the purchase. In practice, however, any costs incurred by arms companies as a result of offset deals are simply factored into the price of the equipment. Furthermore, vendors are often eager to recoup research and development costs associated with weapons systems. The SAAB Gripen programme, for example, has been a major political and financial embarrassment in Sweden because of enormous cost overruns and performance difficulties. This help to explain why, according to Swedish sources, South Africa is being charged SEK 535 million per plane compared with quotes to Brazil of SEK 180 million, to the Philippines of SEK 280 million, and to Chile of SEK 285 million.

While the compensatory costs of offsets are exceedingly high, the penalties for non- achievement of the offsets and job creation are minimal. In terms of the Department of Trade and Industry guidelines, it is responsibility of the supplier companies to ensure fulfilment of the offsets. Thus, there is no guarantee that the additional expenditure will secure the promised jobs and investment.

Indeed, arms vendors frequently make unsubstantiated predictions about the benefits of offsets, especially in terms of job creation, confident that few people will remember their claims or be able to challenge them if they fail to be realised. In 1995, South Africans were told that the proposed purchase of four Spanish corvettes (at a cost of R1,7 billion) would prompt Spanish investment worth R4,8 billion which would create 23 000 jobs. Neither Armscor nor the SA Navy could explain clearly how these figures were calculated. Meanwhile, an analysis by the SA Deep Sea Trawling Industry Association concluded that, instead of creating jobs, the deal would have destroyed South Africa's existing fishing industry, putting about 85 000 people out of work.

The ostensible benefits of the German tenders hinge on the development of a deep water harbour at Coega near Port Elizabeth and the construction of a US$1 billion stainless steel plant and metallurgical centre. Proponents of the plan dismiss objections that a glut of stainless steel on international markets and the potential for severe ecological damage render Coega non-viable both financially and environmentally. Moreover, the preponderance of jobs created would be in hi-tech fields which would do virtually nothing to relieve massive unemployment in the Eastern Cape amongst unskilled labour.

Meanwhile, Swedish companies seem to be abandoning the pretense that their portion of the package will produce investments of R48,313 billion and 23 195 new jobs. They have told the Swedish press that South African bureaucrats do not understand their own model and have grossly inflated their expectations of Swedish obligations.

The most dubious aspect of such offset provisions, however, is that they do not make economic sense. Unless constrained to do so, the private sector simply does not pass up attractive trade or investment opportunities so that these may be used as incentives to drum up business for arms merchants. If the proposed trade and investment contracts are profitable and viable, they would be negotiated independently of the purchase of weapons. Conversely, if they are not economically viable, there is little hope that they will materialise at all or, if they do, that they will succeed.

The co-mingling of military and development decisions is especially worrying in light of the secrecy that typically enshrouds arms deals. If lack of transparency is, on rare occasions, a regrettable necessity in matters of national security, it is invariably a disaster for equitable and sustainable development. It creates numerous opportunities for the corruption endemic in the arms industry to spill over into civilian initiatives. Deals such as the £20 billion Al Yamamah weapons-for-oil deal, negotiated between Britain (i.e., British Aerospace) and Saudi Arabia have become internationally notorious for corruption. [It is also worth noting that the Al Yamamah contract was supposed to create 75 000 jobs in Saudi Arabia. Recent analysis indicates that only 1 600 jobs were created, of which only 300 low/medium technology jobs were filled by Saudi citizens, the rest being held by imported expatriates.]

There is little reason to believe that South Africa's experience would be any different from that of other nations who have attempted, unsuccessfully, to marry rearmament and development. A recent international study of the impact of offset agreements concluded that "the only real function that offsets perform for recipient countries is to provide political legitimisation for the large outlays required for military equipment, by allowing governments to point to apparent, but ultimately non-existent, economic benefits that can be derived from offsets." (Dr Neil Cooper, University of Plymouth, England).

South African NGOs and Church leaders have called repeatedly for the abandonment of the proposed arms deal. The Archbishop of the Church of Sweden has threatened to sell that Church's investments in any Swedish companies which participate in the SAAB offset programmes. The German Lutheran Church is considering applying similar pressure against German companies. We support these actions. We urge the government to withdraw from the deal and consider alternative ways of using these funds to stimulate the creation of jobs for less skilled workers and to preserve South Africa's natural resources.