The purchase by Tanzania in 2002 of a $40 million Radar system from BAE Systems, the UK’s biggest arms supplier, which caused so much controversy at the time has come back again to haunt the governments of both countries.
The London Guardian chose Monday January 16, the day on which President Kikwete began an official visit to London, to splash on its front page a dramatic new development in the case. It described how two ‘business moguls’ had admitted that they were secretly paid $12million (30% of the contract value) as part of the deal. The tycoons, Sailesh Vithlani and business partner, Tanil Somaiya, were said to have made the admission to British detectives who had flown into the country to further investigate the graft allegations and find potential witnesses. Vithlani, who acted as a middleman in the deal, and has a long-standing relationship with military and government figures, has admitted that the sum was covertly moved to a Swiss account by BAE Systems, which is under investigation by the Serious Fraud Office (SFO) in Britain. The SFO, which was recently forced to abandon its investigation into commissions paid on a massive arms contract with Saudi Arabia, is now focusing its attention on Tanzania.
Tanzania borrowed from Barclays Bank to finance the purchase, which many critics said was unnecessary and overpriced. When asked, Vithlani told the Guardian he had made no disbursements from the $12 million to public officials in Tanzania nor to any third parties outside Tanzania.
At the time of the sale the British Government had been divided on what it should do. Tony Blair supported the deal but he was strongly opposed by his then Minister of Overseas Development Clare Short and the Chancellor, Gordon Brown.
This news story soon had repercussions in the international media and amongst politicians and others in both Tanzania and Britain.
BAE was alleged to have made two parallel arrangements with the alleged middlemen. In the first, a conventional agency agreement was signed under which 1% commission was to be paid if the deal went through. But under a second, more unusual agreement, BAE owned offshore company ‘Red Diamond’ was said to have deposited another $12m, representing 30% of the contract price, in Switzerland. This money was said to be under the under the personal control of Vithlani. In the world of international arms deals, a commission of 1% to local agents is generally regarded as legitimate but commissions of over 5% are regarded as questionable.
BAE Systems, asked if they had made a payment into Vilani’s account refused to answer, saying: “We will not be commenting on any point of substance. This cannot of course be taken as any kind of admission.”
THE HOUSE OF COMMONS DEBATE
In a heated 3-hour debate in the House of Commons Clare Short, now an independent MP, joined the Conservative opposition in accusing Tony Blair of pushing through this ‘scandalous’ and ‘squalid’ deal. Short has consistently argued that Tanzania could have paid much less for the same equipment. Lynne Featherstone, for the Liberal Democrats, said that Britain had to be ‘squeaky clean’ if it wanted to retain any influence, reputation or credibility in world affairs. “Somewhere between the government, BAE and Barclays – and perhaps all three – our reputation is in tatters,” she said.
Shadow International Development Secretary Andrew Mitchell said BAE had sold ‘ageing technology’ and that the system was not adequate and too expensive. Mitchell said the deal had all the warning signs of impropriety – “a vastly inflated price, an unsuitable product and unorthodox financing”.
Clare Short revealed detailed conversations she had had with former President Mkapa after she had taken the decision to cut back UK aid to Tanzania by £10 million ($19.2 million) as a result of her concerns over the deal. “He told me that the radar contract had been signed before he came to office, a deposit had been paid and there was a penalty clause if Tanzania did not go ahead” she said. At this point, Liberal Democrat MP Susan Kramer asked, “Is the Hon Lady saying that, after the presidential election, the Tanzania government was interested in finding a way out of the project.” Ms Short replied: “President Mkapa was a technocrat and a fine president, but he was not politically powerful and he had inherited the contract. If the UK had done the right thing by refusing an export licence he would have been a happy man.” However, “the Ministry of Defence had given approval for the project, which was already under construction in the Isle of Wight, on the basis that it would not be contested because it was uncontroversial.” Ms Short said: “President Mkapa and I reached an agreement that if he promised that there would be no second half to the project, we would go ahead with increasing our aid again. I saw him after he had ceased to be president and he told me that he had kept the promise.”
Conservative shadow minister Andrew Mitchell wanted to know why the Government approved an export licence against the recommendations of the World Bank and the International Civil Aviation Authority. “If the government argues that a judgement call was taken after lengthy consideration, why did it act without reference to the opinions of those best placed to comment? Did the Government know of the $12 million payment to a Swiss bank account when the export licences were granted.” When the (UK) Government gave evidence to the Committee reference was made to the fact that Tanzania was, self-evidently a sovereign state. The point was made and largely accepted that it therefore had the right to decide what air traffic control system it wanted to buy. Conservative MP Peter Lilley said: “We in this country talk a lot about governance. We lecture the governments of developing countries, telling them that they must investigate, be transparent and hold Ministers to account. But the sad truth is that on this occasion the suspicions fell on a British company. It was British ministers who turned a blind eye; it was the British government who rushed a decision through before the World Bank could even publish its report.”
In defence of the deal, Secretary of State for International Development Hilary Benn said the government had considered whether the export would seriously undermine the economy or seriously harm the sustainable development of the recipient country. “At the time the government judged it would not and, looking back from this vantage point, it would be hard to argue that it did” he said. He added that he could not comment on bribery allegations because they were under investigation. He said: “One decision taken on one case does not mean we are going soft on corruption. Look at the broad range of the things we are doing.”… “That is not to say that there were no concerns about the system and its suitability – there clearly were.” The Conservative motion holding the government to account was lost by only 76 votes, a small figure given the overwhelming majority Labour has in Parliament.
Some experts believe that there were other considerations which caused the Tanzanian government to buy the equipment but these could not be revealed because they involved Tanzania’s security.
PROTESTS IN DAR
On January 21 opposition leaders in the National Assembly in Dar es Salaam demanded that government leaders who were involved in the deal should resign immediately, to facilitate proper investigations. The demand was made at the climax of a 2 hour procession organized by five opposition parties to express misgivings about alleged corruption in government circles.
PRESIDENT KIKWETE’S COMMENTS
President Kikwete said that Tanzania would seek a refund from the UK if a corruption probe into the sale reveals it was overcharged. The President said officials found guilty of taking bribes during the deal would be punished. He added that Tanzania had the right to buy the air traffic control system and Britain should be ashamed if British businessmen had taken advantage of the transaction to earn illegal income. “It does not make sense for a rich government like that of Britain to milk a poor country like Tanzania” he said. President Kikwete said that the BAE agent who sold the air defence system lives in Tanzania but has British citizenship. “The British investigators came to us and asked for our cooperation in investigating the role of the BAE agent in Tanzania, which we provided”, he said. He added that the British detectives suspect that the BAE management was sharing the spoils with the agent who transacted the deal. However, he said his government was looking into the possibility that some Tanzanian accomplices were involved in the deal.
More recently, Tanzanian Minister of State (Good Governance) Philip Marmo said he was surprised about the graft claims since the procurement followed all procedures including parliamentary approval. The same was said by Andrew Chenge, the present Minister for Infrastructure Development who was then the Attorney General. – Majira.
BAE said it was co-operating fully with the investigations but strongly denied operating a secret slush fund to sweeten deals.