Letter to the Sunday Times challenges the newspaper on the attack it has made on a large investor | 'Secret Report' accusing MAN Ferrostaal is full of mistakes
MAN Ferrostaal warned the Sunday Times that their false allegations of bribery are damaging to current negotiations for the construction of oil and gas platforms in the company's offset projects in Saldanha Bay and Cape Town. This might endanger the creation of thousands of jobs.
In a letter to the editor-in-chief of the Sunday Times, MAN Ferrostaal board member Dr. Klaus Lesker says: "Willingly or not, the Sunday Times is putting jobs at risk. Saldanha operator Grinaker is currently negotiating contracts for the construction of oil and gas platforms in Saldanha Bay with international clients. International companies react very sensitively to bribery allegations and I am concerned that your false allegations might have a negative impact on these negotiations. One particular project under negotiation would secure a workload of four year's full capacity at the facility in Saldanha Bay. Your false allegations in the Sunday Times articles from August 3 and August 10, not only put the creation of jobs at risk, but also jeopardizes the return of a promising industry to SA."
The letter goes on: "MAN Ferrostaal has made a substantial contribution to the SA economy. Together with partners we have arranged, and we are in the process of arranging investments totalling several billions of Rand, creating and retaining several thousands of jobs."
MAN Ferrostaal is in possession of the 'secret report' the Sunday Times used as a basis for its false allegations about the company. The finding is that this ‘secret report' is full of mistakes, inaccuracies and omissions. The factual errors in it are so obvious they don't even stand up to public scrutiny.
Some examples: The 'secret report' repeatedly confuses the consortium for the submarine programme with the consortium for the frigate programme. Passages such as the following show this: "One opposition leader accused the government of buying frigates from Ferrostaal at an additional cost of ZAR75 million for each frigate." The company wants to state clearly: MAN Ferrostaal has no involvement whatsoever in the frigate programme. The company's involvement was restricted to the submarine programme only. Another example: The 'secret report' talks about "South Africa's Department of Trade and Industry (DTI) which administers the arms deal and offset projects ...". It is a publicly known fact that the DTI does not purchase submarines.
As the 'secret report' says, "most information is based on source reports and leaked information in the media." Quoting unnamed sources and newspaper articles is not substantiated information on which a newspaper can base severe accusations. (Further examples of inaccuracies, factual errors and omissions are included in the attachment to this press release).
In his letter to the editor-in-chief of the Sunday Times, Klaus Lesker concludes: "Due to the high number of mistakes, factual errors and inaccuracies, the 'secret report' by no means justifies the basis for the false allegations against our company. The Sunday Times used wrong information contained in the report without checking whether this information is correct or not. As a result, the Sunday Times severely attacked MAN Ferrostaal's good image and reputation. Based on these findings MAN Ferrostaal requests a full rectification. According to good business practise, please be informed that MAN Ferrostaal will exercise all its options including but not limited to legal action."
Attachment: Mistakes, inaccuracies and omissions contained in the ‘secret report' underlying the Sunday Times' allegations (selection):
1. On the bribery allegations
The 'secret report':
"Another link to Ferrostaal is the fact that the German Consortium of which it is a part, was given the order for the military vessel by African Defence Systems (ADS) which was headed by Shabir Shaik."
The facts
There has never been any contact whatsoever, neither personal nor businesswise, between MAN Ferrostaal and Shabir Shaik or between MAN Ferrostaal and ADS. This sentence shows that the report confuses the frigate programme and the submarine programme. MAN Ferrostaal has had no involvement in the frigate programme whatsoever.
The 'secret report':
"A former South African official, who had access to such information told us in confidence that Ferrostaal paid ZAR 30 million (about £2 million) to current President Thabo Mbeki to gain the arms contract in the first place. When questioned by investigators in South Africa, Mbeki claimed that ZAR2 million was given to his former Deputy President Jacob Zuma and the rest went to the ANC. However it is unlikely that this information will be leaked in the near future because Mbeki maintains a tight reign on the National Prosecuting Authority where this matter would be dealt with. Further investigations into this issue is being pursued by [sic] various sources."
The facts
The allegations are wrong and absolutely unfounded. MAN Ferrostaal never made any payments to President Thabo Mbeki, to Jacob Zuma or to any other member of the ANC or to any public official. The last sentence in the report "Further investigations into this issue is being pursued by [sic] various sources" had been left out by the Sunday Times entirely. There had been numerous investigations into the submarine programme. Their outcome was: there is no evidence whatsoever of any wrongdoing by MAN Ferrostaal.
The 'secret report':
"The Sunday Times has also established that the report which makes the Mbeki-Zuma allegation is in the possession of the director-general of the European Commission's External Relations in Brussels and the Munich state attorney in Germany." (Sunday Times, August 3, 2008)
The facts
The European Commission called MAN Ferrostaal's communications department and asked: "Do you have that report? Because we don't have it." MAN asked the state attorney in Munich who stated that they didn't have the report.
2. On Offset
The 'secret report':
"One possible solution of slow or failed delivery of offset obligations by the contracting German companies, including Ferrostaal, would be to impose the contractual penalties."
The facts:
This passage implies that MAN Ferrostaal had failed to deliver their offset obligations. This is not the case. MAN Ferrostaal and their partners have managed investments totalling several billions Rand in SA. The company has retained and created many thousands of jobs through its projects. To date, the company has discharged more than 80% of their offset obligations.
The 'secret report'
"The Joint Report [of the South African Public Prosecutor, the Auditor General and the Public Prosecutor's Office] did not comment on the feasibility of the industrial participation undertaking by the contractual companies but sources believe that the undertakings were ‘onerous to the extent of being totally impractical'."
The facts:
MAN Ferrostaal has two sets of offset programmes. One for ARMSCOR, the national procurement office, called DIP (Direct Industrial Participation) and one for the Department of Trade and Industry, called NIP (National Industrial Participation). ARMSCOR confirmed in writing to MAN Ferrostaal that the company not only fulfilled its obligations, but in fact exceeded them. In terms of the DTI programme, MAN Ferrostaal had proposed numerous projects to the DTI of which most have been fulfilled, some are still under execution.
The 'secret report':
"Ferrostaal ... was among the group of arms suppliers which had not met the deadlines for its local investment and purchase obligations as part its agreement with the South African Department of Trade and Industry."
The facts:
MAN Ferrostaal has met all their milestones. As a matter of fact, two milestones have been redefined due to due to reasons beyond MAN Ferrostaal's control.
The 'secret report':
"The country's biggest tea estate, the Magwa tea plantation, was in a bad condition and declared bankrupt but the resuscitation of the estate was one of the projects Ferrostaal attempted. ... large financial needs make the deal seem an unfavourable choice likely to fail. The question is, why did Ferrostaal choose to invest in this type of project?"
The facts:
All projects have been identified and implemented in close cooperation between MAN Ferrostaal and the DTI. The Magwa tea plantation had to dismiss 3000 workers. Unemployment is a big issue in South Africa. As a consequence of MAN Ferrostaal's investment, 1055 permanents and between 1800 and 2500 seasonal workers are employed on the tea plantation, each of them feeding a family
3. The attempt to damage MAN Ferrostaal's image and reputation
The 'secret report':
Projects which are an undisputable success, appear as questionable in the report. Many of MAN Ferrostaal's offset projects have not been mentioned, like i.e. the Limpopo tea plantation.
The facts:
The fact that the ‘secret report' questions successful projects shows that the objective is to attack the company's reputation. An example of omitted projects: In Limpopo, two tea plantations had to dismiss 3000 workers at the end of 2004, due to financial difficulties. MAN Ferrostaal stepped in with financial and managerial support. In the wake of this investment in 2007 2154 workers were put back to work, taking home more than R25 million annually. In a letter dated March 2008, the Limpopo Provincial Government praised MAN Ferrostaal for their "efforts they took in assisting the Limpopo Department of Agriculture to revitalize the tea plantations in our province. It is with deep sense of satisfaction that we can afford to enable rural businesses to compete with some multinationals in this industry."
The 'secret report':
There is no mention of the positive effects of MAN Ferrostaal's offset projects in the 'secret report'.
The facts:
The fact that MAN Ferrostaal is very successful with its offset projects led to the Strategic Partnership Agreement the DTI has proposed to MAN Ferrostaal and which the company has accepted with great satisfaction.
The 'secret report':
The report spends two pages on "Reputational issues and consequences of failure to meet offset obligations".
The facts:
This creates the impression that the report has been designed to damage MAN Ferrostaal's image and reputation.
In 23 instances, the 'secret report' quotes unnamed sources: "our sources believe ...", "well placed sources say ...", "in the opinion of the source ...". In 13 instances, the paper quotes newspaper articles going back to the year 2002. This does not indicate in depth or substansive research. The Sunday Times didn't check whether the information contained in the 'secret report' was right or not. The mere fact that the report confuses the submarine consortium and the frigate consortium should have led the newspaper to double check and question all details contained in it.
Statement issued by MAN Ferrostaal August 24 2008
