South Africa

OPEN SECRETS: UNACCOUNTABLE

Fana Hlongwane – Agent of BAE Systems

This is the second in a three-part Open Secrets series detailing the lucrative relationship between BAE Systems and its covert international network of middlemen. As we saw in Unaccountable 00012, BAE, like many European arms corporations looking to profit from South Africa’s 1999 Arms Deal, paid well-connected middlemen and agents vast sums of money to guarantee access to politicians and key decision-makers. This focuses on another of these middlemen – Fana Hlongwane.

BAE Systems was awarded the contract to supply the South African Air Force with 24 of its Hawk trainer aircraft, as well as a second contract – along with its joint venture partner, Swedish Defence company, SAAB – to supply 26 of their Gripen fighter jets. These highly lucrative contracts were together worth R15.77-billion (valued at about R45-billion today) – more than half the total cost of the arms deal at the time.

But, as we saw in the previous instalment in Daily Maverick, the selection of BAE as South Africa’s largest arms deal contractor made very little financial or logistical sense. BAE was neither the cheapest nor the best option in terms of their machinery, with the head of the Air Force himself opposed to the deal early on. Last week, we discussed the evidence that another of BAE’s middlemen, John Bredenkamp – who died last week – was paid handsomely to activate his political connections.

Denying any malfeasance, the South African government ultimately justified their decision to select BAE based on the company’s “offset” proposals. The “offset” obligations were economic benefits, like new jobs and industries, that government and the arms companies promised the public would flow from the deal. Few, if any, ever materialised.

Once BAE had secured the contracts, they needed to ensure these offset promises were delivered. This is where Fana Hlongwane’s role became important.

Who is Fana Hlongwane?

A former ranking commander of Umkhonto we Sizwe and a former director of South African arms manufacturer Denel, it comes as no surprise that Fana Hlongwane has carved himself a space in the South African defence industry. Having made his millions from numerous business ventures, directorships and lucrative consultancy agreements, the controversial businessman has come to be associated with the flashy playboy lifestyle. Known by the nickname “Styles”, his penchant for Italian fashion, luxury vehicles and lavish parties, is well documented. As is his role in arms deal era corruption.

At the time of the arms deal, Hlongwane was an adviser to then Defence Minister Joe Modise, who was also implicated in allegations of corruption related to BAE’s arms deal contracts. Before his death in 2001, Modise was accused of altering procurement processes during the arms deal specifically to ensure BAE’s selection. He was also accused of failing to declare clear conflicts of interest, as companies in which he held shares stood to profit by approximately R20-million from contracts related to the fulfilment of BAE’s offset obligations.

Hlongwane and BAE managed to keep their relationship relatively well hidden until allegations emerged in November 2008 when the Scorpions raided the properties of Hlongwane, BAE Systems South Africa and other agents. In order to secure the search warrants necessary for the raids to take place, the Scorpions relied heavily on an affidavit from the United Kingdom’s Serious Fraud Office (SFO). The SFO affidavit outlined how BAE had allegedly run a system of agents in South Africa in an effort to secure contracts in the arms deal. This system operated with the explicit intention to facilitate payment of massive “commissions” by BAE to various agents: commissions that, according to SFO records, reached a total of £115-million.

Fana Hlongwane’s funds

In their investigation of BAE’s relationship with South Africa, the SFO discovered a number of overt and covert agreements signed between BAE and Fana Hlongwane for the work he had completed relating to the 1999 arms deal. As set out below, Hlongwane is alleged to have used his proximity to key decision-makers in the arms acquisition process to influence the outcome in favour of BAE, and ensure that processes following the signing of the contracts ran smoothly.

The SFO, during the course of their investigation, had received documents from BAE showing that Hlongwane, through his company Hlongwane Consulting, had entered into a general consultancy agreement with BAE in September of 2003. This agreement was backdated to 1 January 2002. Hlongwane was brought in to further BAE’s interests with regards to its offset obligations after they had won the contracts. As the South African government had been warned, the fanciful promises of industrial and economic development that BAE had promised as “offsets” were proving difficult, if not impossible to achieve. It was purportedly Hlongwane’s role to ensure that these obligations were settled as soon as possible.

This agreement placed Hlongwane on a retainer of R15.5-million per year. But the evidence suggests that Hlongwane received much more than this from BAE. Several large additional payments were made to him from BAE-owned companies for the duration of their agreement. One such payment occurred in 2005 – approximately R50-million was paid as a “settlement” figure to Hlongwane in relation to the work done on BAE’s South African Gripen project.

Between September 2003 and January 2007, Hlongwane Consulting received payments totalling more than R110-million (that’s nearly R250-million in 2020), a staggering sum which BAE has failed to sufficiently justify. These extraordinary payments to a consultant suggest that BAE saw a significant payoff from what Hlongwane could provide.

The payments did not stop there. Hlongwane went on to receive a further R51-million through a consultancy agreement with a South African registered company called SANIP. SANIP was owned by BAE’s partner on the Gripen deal, SAAB, and was set up in order to monitor the offset obligations related to the arms deal contracts the two companies had been awarded. SAAB would go on to distance itself from these payments, claiming that BAE had taken over running SANIP on its behalf and that they were unaware of the contract with Hlongwane – this is discussed further below.

While these payments received by Hlongwane may be suspicious, they would only have been illegal if they were made in order to exploit Hlongwane’s position as Modise’s adviser, or if these payments were made to Hlongwane to be further distributed to other politically connected individuals. This was the exact conclusion that the SFO had come to.

Despite attempts to distance itself from BAE, Hlongwane, and SANIP, it later emerged that SAAB had in fact entered into its own consultancy agreement directly with Hlongwane Consulting between October 2003 and October 2004. The agreement paid Hlongwane Consulting €18,000 per month for advice on political, economic and security policy.

In 2010, new evidence emerged supporting the allegation that onward payments were made relating to the arms deal. It showed that chief of the SANDF at the time of the deal, Siphiwe Nyanda, had received a R4.36-million loan from Hlongwane in 2005 to finance the purchasing of a new house. The loan had been written off in 2009 with evidence that there was little to no attempt at repayment, and the loan payment flowed directly from one of Hlongwane’s business accounts. Although both parties deny that this loan constituted a bribe, it clearly constituted a serious conflict of interest at the very least.

In 2011, a Swedish documentary released new evidence after an investigation into BAE’s Swedish partner SAAB. It found that SANIP, the SAAB-owned company in South Africa, had entered into a consultancy agreement with Hlongwane in order to assist with the fulfilment of offset obligations. However, they were unable to prove that any meaningful work had actually emerged from this agreement. Despite payment of vast sums of money (the initial R51-million consultancy fee and additional bonuses), neither Hlongwane nor SAAB was able to produce anything more than a two-page BEE report as evidence of their work relationship.

The irresistible inference was that this consultancy agreement was merely a cover to ensure that regular payments could be made to Hlongwane for reasons neither party involved could explain. Responding to the new damning evidence, SAAB publicly distanced itself from BAE, claiming that the UK company had run SANIP on its behalf since 2004 and used the SAAB subsidiary without its knowledge to pay Hlongwane R24-million.

Despite attempts to distance itself from BAE, Hlongwane, and SANIP, it later emerged that SAAB had in fact entered into its own consultancy agreement directly with Hlongwane Consulting between October 2003 and October 2004. The agreement paid Hlongwane Consulting €18,000 per month for advice on political, economic and security policy.

Hlongwane at the Seriti Commission

Fana Hlongwane was one of only two people accused of receiving corrupt money from the arms deal to actually appear before the Seriti Commission. However, as was too often the case during the commission, the examination of Hlongwane’s evidence was insufficient to uncover any meaningful information related to his agreements with BAE and SAAB, or his implication in various local and international investigations.

In fact, Hlongwane’s testimony before the commission was entirely untested. He was not asked a single question in cross-examination by any interested parties, nor by any of the commissioners. This was despite the fact that much of his testimony either directly contradicted substantive evidence gathered by local and international authorities, or entirely ignored evidence in which he was implicitly named.

The failure of the commission to test evidence in any meaningful way is one of the many examples of a clear unwillingness by the commission to uncover the truth and ensure accountability. It should thus come as no surprise that in 2019 the North Gauteng High Court set aside the findings of the commission, ruling in favour of the application by civil society groups, the Right2Know Campaign and Corruption Watch. 

The court affirmed what civil society and the public had concluded – that the Seriti Commission had fundamentally failed to do its job. The court found “a clear failure [by the commission and its judges] to test evidence of key witnesses [and] a refusal to take account of documentary evidence which contained the most serious allegations”.

What should have been an opportunity for the South African public to learn about what had really transpired during and after the signing of the arms deal, was actually no more than a blatant whitewash. With that having been confirmed by the North Gauteng High Court, South Africa deserves a real opportunity to see justice served and those who illegally profited to be held accountable. There is still time for Hlongwane and others implicated to face the questions that the Seriti Commission failed to ask.

Where is Fana Hlongwane now?

In the absence of any accountability for his role in the arms deal, and as with so many of the arms deal middlemen, Hlongwane has continued to leverage his political connections and network to his advantage.

His association with the notorious Gupta network is one such connection. It is well reported that Hlongwane had introduced British PR firm Bell Pottinger to the Gupta enterprise, a relationship which would go on to build a propaganda war machine that fuelled racial tensions in South Africa. Hlongwane had built his relationship with the public relations company during his battle against corruption allegations related to his consultancy agreements with BAE.

Hlongwane continues to live a life of luxury. He is rumoured to own a fleet of expensive vehicles and a string of upmarket houses across South Africa, one of which is located in the affluent Johannesburg suburb of Hyde Park, Johannesburg,  and dubbed the “Playboy Mansion”. The Joburg jet-set have largely looked the other way when it comes to uncomfortable truths, choosing instead to embrace a man implicated in serious crimes as one of their own.

Failure to hold Hlongwane and others like him to account has allowed him to continue to expand his bank balance and his network of influence. The overall lack of accountability for the arms deal has been to the detriment of South Africans. 

BAE similarly has benefited from this culture of impunity – for if Fana Hlongwane were to ever have his day in court, there is ample reason to suggest that Britain’s biggest arms dealer would be seated alongside him in the dock. Next, we will turn to BAE’s role as a kingpin in the arms deal. DM

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Previous articles in the Unaccountable series are:

Dame Margaret Hodge MP – a very British apartheid profiteer

Liberty – Profit over Pensioners

Dube Tshidi & The FSCA: Captured Regulator?

Rheinmetall Denel Munition: Murder and mayhem in Yemen

National Conventional Arms Control Committee – handmaiden to human rights abuse?

Nedbank and the Bank of Baroda — Banking on State Capture

HSBC – The World’s Oldest Cartel

Estina’s Banks

McKinsey — Profit over Principle

Jacob Zuma – Comrade in Arms

Thales — how to buy a country

John Bredenkamp – Agent of BAE Systems

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