Defence Intelligence's bungled top-secret R1bn+ Russian spy satellite project was never cancelled

26 October 2014

"Project Flute", the R1 billion plus top-secret Russian spy satellite development project, was thought to have been cancelled following a bungled procurement process by Defence Intelligence.  

However, this week Dr Sam Gulube, the Secretary of Defence, revealed that:  

A contract, which has been cancelled and then reinstated, was a contract  to develop a "military satellite";  and

The contract to develop a "military satellite" was "now on track". 

This officially confirmed, for the first time, that the contract to develop a military satellite is ongoing.

This was a major breakthrough in a five-year-long investigation into Defence Intelligence's top-secret R1.2 billion Russian spy satellite development project, called "Project Flute".

"Project Flute"

On 19 May 2006 a contract, with a value of approximately R1.2 billion, was signed with a Russian company called NPO Mashinostroyenia to develop a Kondor-E Synthetic Aperture Radar satellite for Defence Intelligence.

The top-secret project was called "Project Flute" and later "Consolidated Project Flute".

We do not have all the facts about "Project Flute". However, we do know the following: 

Project Name: "Project Flute" and later "Consolidated Project Flute";

Project Description: To develop a Synthetic ApertureRadar satellite, called the Kondor-E, capable of seeing at night and through cloud cover, for Defence Intelligence;

Project Cost: +/- R1.2 billion;

Contracting Company: NPO Mashinostroyenia;

Contract Number: No. 710/303/060001; and

Contract Date: 19 May 2006

The main driver behind "Project Flute" is believed to have been General "Mojo" Motau, who at the time of signing the contract was the head of Defence Intelligence.

"Follow the Money"

"Project Flute" was thought by many to have been cancelled following a bungled procurement process by Defence Intelligence.

However, at a Portfolio Committee on Defence and Military Veterans meeting on 22 October 2014 at Parliament, Dr Sam Gulube, the Secretary for Defence, confirmed that: 

A reference in the Special Defence Account Annual Financial Statements for the Year ended 2014 to a contract that had been cancelled and then reinstated, referred to a contract for a "military satellite"; and

The contract for the "military satellite" was "now on track".

The contract, which Dr Sam Gulube confirmed referred to a contract for a military satellite, was cited in the Special Defence Account Annual Financial Statements for the Year ended 2014 for fruitless and wasteful expenditure, totaling R212 749 000.

It is not possible to determine, given the breakdown of the fruitless and wasteful expenditure, whether the R212 749 000 was incurred as a result of the contract for the military satellite, alone.

However, from an analysis of the Special Defence Account's annual financial statements, it is possible to determine that the contract for the military satellite incurred R212 714 000 worth of fruitless and wasteful expenditure between the 2010/11 and 2013/14 financial years. (See Table 1)

Table 1: Special Defence Account - Fruitless and Wasteful Expenditure, 2010/11 to 2013/14

*Source: Special Defence Account Annual Financial Statements, 2010/11 to 2013/14

In the meeting, Dr Sam Gulube claimed that the fruitless and wasteful expenditure was incurred as a result of exchange-rate fluctuations. 

This may be true for the R2 314 000 worth of fruitless and wasteful expenditure incurred in the 2013/14 financial year. 

However, it is highly likely, given the large amount of fruitless and wasteful expenditure, which ranges between R110 414 000 and R2 314 000 per year, that the contract for the military satellite was reinstated at a higher contract price.

This means that the total contract price for Defence Intelligence's Russian Kondor-E spy satellite could be as much as R2.4 billion.

Ground Station

"Project Flute" was thought to have been cancelled because of major flaws in the contract, including the fact that Defence Intelligence would have no control over the spy satellite from South Africa.

However, a copy of a statement of work, in my possession, between NPO Mashinostroyenia and a company called KB Svet Komputers, suggests that a ground station may be, or may have been, established in South Africa.

The statement of work is entitled "Statement of Work for Local Computer Network administration and consultation for ground 710KC segments administration on the territory of the General Client and on the territory of NPO Mashistroyenia company". 

KB Svet Komputers, were required, in terms of the statement of work, to set up a Virtual Private Network on the territory of the "General Client" and NPO Mashinostroyenia, in order to transmit data to or from a satellite.

Unfortunately, NPO Mashinostroyenia's "General Client" is not named in the statement of work. However, it does refer to the reason for the work arising from a:  

"contract from 19.05.2006 (No. 710/303/060001) between NPO Mashinostroyenia and the General Client".

The contract number and the date on which the contract was signed mentioned in the statement of work are exactly the same as the contract number and the date on which the contract was signed for "Project Flute".

Unfortunately, the statement of work, between NPO Mashinostroyenia and KB Svet Komputers, for the Virtual Private Network, remains unsigned and does not name the "General Client" directly.  

It's, therefore, only possible to reach the tentative conclusion that a ground station may be, or may have been, established in South Africa. 

Launch Date

The contract with NPO Mashinostroyenia to develop Defence Intelligence's Kondor-E spy satellite was signed eight years ago on 26 May 2006. 

However, all the evidence suggests that the satellite has not been launched.

An Interfax news story, published on 29 August 2014, reported that the Kondor-E would be launched, using a Strela launch vehicle, last week on 23 October 2014, from the Baikonur cosmodrome in Kazakhstan.

However, the story also speculated that the launch was likely to be delayed until next year, following a disagreement concerning "drop areas" between Russia and Kazakhstan.

At the same time there are rumours that the Kondor-E may be launched as early as 18 December 2014.

Right To Know

The Minister of Defence and Military Veterans, Nosiviwe Mapisa-Nqakula, has so far refused to be drawn on this matter.

What the minster has done is issue veiled threats to those who have asked hard questions about "Project Flute".

I will, therefore, be grilling the minister on Defence Intelligence's bungled top-secret R1.2 billion Russian spy satellite project during the Question Time in Parliament on 05 November 2014.

In the end, the public, who may have sunk up to R1.4 billion into Defence Intelligence's bungled Russian Kondor-E spy satellite project, have a right to know.

Statement issued by David Maynier MP, DA Shadow Minister of Defence and Military Veterans, October 26 2014

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