Johannesburg, April 22, 2005,Sam Sole and Stefaans Brümmer (Mail&Guardian)

Beleaguered arms company Denel is facing a new round of pressures following press reports in India that the ministry of defence has scrapped a multibillion-rand deal to buy South African G-6 howitzers.

Denel told the Mail & Guardian the company had received no communication from the Indian government, but the reports cloud a positive announcement from Denel that it has been awarded a R210-million contract to supply high-technology pilot helmet tracking systems for the European fighter market.

The doubt cast over the Indian deal will add to the headaches of incoming Denel CEO Sean Liebenberg, who has been brought in by Minister of Public Enterprises Alec Erwin to turn around the ailing parastatal.

This week neither Liebenberg nor Erwin would comment on the Scorpions probe, revealed by the M&G last week, into possible kickbacks on a deal to supply G-6 artillery systems to Saudi Arabia in the 1990s.

India’s previous government reached agreement in 2003/04 with Denel on the supply of 180 self-propelled 155mm guns, but press reports this week said the government would re-issue the tender, as the Denel product was regarded as too expensive.

At least one paper, The Indian Express, said that a joint venture deal for 100 tracked vehicles for which Denel is supplying the guns, would also be reviewed.

The Express also quoted Defence Minister Pranab Mukherjee as saying he had instructed his officials to put a freeze on all dealings with Denel, while the government investigated allegations that Denel had paid an arms agent commission to secure a R20-million deal to sell 200 special rifles to the Indian army.

South Africa’s Saturday Star, which broke the rifle story, quoted a Denel source as alleging the agent had supplied secret records of an Indian price negotiation committee, which could have assisted Denel to set an attractive price.

Denel has denied any wrongdoing, but the allegations have caused an uproar in the Indian Parliament and led to calls for renewed scrutiny of deals negotiated under former Indian defence minister George Fernandes.

The Indian Telegraph reported this week that former prime minister Atal Bihari Vajpayee had been warned in confidential letters about the plan to purchase self-propelled guns from Denel at an “exorbitant” price.

The paper reported that between August 2003 and January 2004, Priya Das Munshi, then an opposition MP who sat on the parliamentary defence committee, had written three times to the prime minister expressing concern about the Denel deal.

According to the Telegraph the letters alleged that Fernandes’s ministry was:

• Avoiding competitive global tenders and creating a single-vendor situation to award the contract for self-propelled guns to Denel;
• Trying to virtually bail out a sick company which would collapse if India did not place a huge order;
• Negotiating to pay a price of $5-million per gun to Denel, when the requirement could be met from other suppliers at nearly half the price; and l Glossing over Denel’s continued supply to Pakistan.