The gods of war and the devils of politics

POLY TECHNOLOGIES – PolyTech for short – handles the international affairs of the larger Poly Group Corporation, one of China's largest arms manufacturers. The military established the group in 1984 and today it is the largest exporter of Chinese arms ranging from missiles to naval vessels.

PolyTech is also on every possible US sanctions list. From missiles for Iran, Syria and North Korea, to essential military components that allow Russia to maintain its attacks on Ukraine, nothing stops this company from peddling weapons.

A few years ago, the South African Navy stood firm when Denel's top management tried to push PolyTech forward to build coastal patrol vessels. At the time, the construction (by Chinese craftsmen) would have breathed new life into the Simon's Town naval dockyard, and the Chinese offer would have helped to establish Denel's maritime manufacturing arm, since Armscor had so far failed as the dockyard's operations manager.

PolyTech's competitors, especially Damen Shipyards in Cape Town, resisted and apparently threatened legal action. And the navy said not only did the Chinese vessels fall short of its specifications, they also cost 20% more than the winning bidder – Dutch-owned Damen – had tendered.

Even though Damen won the contract, three deep-sea patrol vessels in the tender were cancelled, leaving only three coastal patrol craft. And military expert Helmoed-Römer Heitman says these vessels were not what the navy needed because the South African coastline is not suitable for operations using shallow-water ships.

It was an expensive lesson, but apparently not enough to persuade defence minister Thandi Modise or Armscor to think twice about giving PolyTech another foot in the door.

During a recent question-and-answer session with Modise in parliament, DA defence spokesperson Kobus Marais confronted the minister about the agreement she signed with PolyTech at the International Defence Exhibition & Conference (Idex) in Abu Dhabi in February.

Marais argued that the missile components believed to be part of the deal are already being produced by local arms manufacturers, including Denel Dynamics. He told Modise this kind of cooperation would damage the local arms industry rather than breathe new life into it. Modise replied that during Idex, she and Armscor cleared up all their differences and disputes with representatives of the local arms industry.

India has also asked South Africa to help establish an arms plant there, and Modise said she and Armscor planned to help struggling local manufacturers to make money in partnerships elsewhere rather than go under.

She did not say a word about sanctions against PolyTech, or about the fact that the agreement with the Chinese company is another nail in the coffin of South Africa's relations with Western trading partners. Or that it might at some point push the tolerance of the Americans – already seeing red after the recent joint naval exercise with the Russians and the Chinese in Richards Bay – over the edge.

The Namibian fiasco

The Namibian Defence Force (NDF) had its own arms scandal thanks to PolyTech's involvement in the procurement of most of its newest equipment, including fighter and fighter training aircraft, helicopters and a coastal patrol vessel.

Over the years, The Namibian uncovered the story of how generals and other officers were bribed to oil the gears of the Chinese machine. PolyTech signed a contract with the NDF in 2011 for the supply of weapons worth N$156m. In the court case that followed, it was claimed that N$3.6m was paid into the Zambian bank account of former army chief Lieut-Gen Martin Shalli – who denied it.

However, the US Treasury intervened because the transaction was made in dollars via the Bank of New York (BNY) while US sanctions were in force against PolyTech. Windhoek was forced to stop the payment after BNY reported the transaction to the US government, and the N$156m was paid back to the Namibian treasury in 2016.

But this was not the end of the country's cooperation with the Chinese, and defence minister Peter Vilho resigned in 2021 due to continued pressure over alleged corruption with Chinese contracts. Media reports focused on his offshore bank account in Hong Kong, which he failed to declare. The claim was that the Chinese suppliers maintained this account's balance.

Namibia's Institute for Public Policy Research and its CEO, Graham Hopwood, have maintained over the years that a proper investigation must be done into all transactions involving PolyTech and other Chinese contractors.

Hopwood wants a code of conduct to force ministers to declare their interests and assets, and says this is particularly important in the defence arena because military contracts – even details of the defence budget – are largely kept secret due to “strategic security considerations".

With Vilho and his predecessor being allowed to resign and retire, there was never any clarity on what was at the heart of the allegations. Namibian taxpayers also have no idea how their taxes are spent in the defence department.

SA flirts with US sanctions

A local arms manufacturer which mostly trades internationally says it had one contract with the Chinese. “They're basically just looking for intellectual property and services. We will never sell hardware to them. In turn, they would rather dump things here like in the rest of Africa," says a source at the company.

“For the whole Armscor story, I don't have much hope. They will only take care of Denel in any case, rather than the rest of the industry. We are certainly not going to adjust our business strategy because of the earth-shattering news that Armscor is going to renew."

Heitman also has little hope that the PolyTech deal will benefit the local industry, saying the government and the department of defence should focus on developing and expanding local skills.

Whenever China has had contracts in Africa, the work has been done by Chinese workers rather than locals. While South Africa's unemployment remains sky high, this is likely to fuel unhappiness in the labour force.

The Chinese are also notorious for counterfeiting components, which brings to mind the 2002 break-in at Denel Aviation. The burglars, with inside help, stole 25 computers containing information about the Rooivalk attack helicopter. The culprits were never found but there were strong suspicions that the break-in was ordered by the Chinese, who desperately wanted the Rooivalk blueprints. The following year saw the first flight of the Chinese Changhe Z-10 – a helicopter with remarkable similarities to the Rooivalk.

Brooks Spector, a retired American diplomat living in South Africa and associate editor of Daily Maverick, says the US State Department keeps a close eye on sanctions violations. Its office charged with foreign asset control particularly looks at violators of sanctions against Russia and Chinese companies.

Where there is the slightest suspicion or evidence that any country is using a component of US origin in equipment supplied to a sanctioned country, the US will retaliate with similar sanctions against the perpetrator.

Where it concerns a transaction between a sanctioned country and, for example, a South African company in which sanctioned companies or persons have shares, each transaction will be considered on its merits. However, few companies will take the slightest chance for fear of negative consequences.

“South Africa tempts fate by playing footsie with Russia and China," says Spector. “Retribution is a single step away."

♦ VWB ♦

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