December 19, 2014, 2:39pm
Military builds untouchable empire
THE Namibian Defence Force is building a shadowy business empire that does not account to the public or parliament, and is seen in some quarters as a potential threat to the country's democracy.
The secretive conglomerate is August 26 Holdings, formed by the defence ministry in 1998. It initially warehoused rights in a controversial diamond mine in the Democratic Republic of Congo, but has since spread its wings by launching eight industrial subsidiaries: August 26 Logistics, Windhoeker Maschinenfabrik, August 26 Industries, Sat-Com, August 26 UBM, August 26 Textile and Garment, NamForce and Agri-Tour.
Many of these companies are run by serving or retired senior NDF officers. Some of the subsidiaries were set up to service the defence forces, but the group has increasingly spread its tentacles into the general public sector and State-influenced industries such as construction, diamonds and agriculture.
Despite landing government contracts worth billions of dollars, August 26 has never produced an annual report publicly, is not audited by the Auditor-General and has never appeared before a parliamentary committee to account for its activities.
Defence Minister Nahas Angula declined to comment on the company's operations and referred questions to the company's board. In the past Angula has argued that the military's business dealings cannot be made public due to national security.
August 26 has a well-connected board of directors and is chaired by Secretary to Cabinet, Frans Kapofi, a technocrat with military background. Its chief executive is James Auala, a retired brigadier-general and businessperson whose private interests include business in the diamonds sector.
Kapofi told AmaBhungane that some August 26 businesses are in financial trouble: “Some of the companies are in intensive care. We are looking at how to get them out of trouble. They will definitely need financial backing from the State.”
He particularly mentioned Windhoeker Maschinenfabrik, an engineering firm, as a loss-making enterprise. Kapofi conceded that August 26's subsidiaries do not produce up-to-date financial reports, but said plans are there to publish them.
“I realised that I have not seen annual reports. There wasn't much to report on because some of the subsidiaries were not fully functional but they are getting there.”
Kapofi, who has chaired August 26 for close to a year, is high on the ruling Swapo parliamentary list and will be an MP next March following Swapo's landslide election victory.
The acting chief executive officer of August 26, Josiah Kasheeta, also refused to give information about the company, citing security reasons. “Since we deal with the defence and security of the country, we do not want to expose ourselves.”
He said some of the companies are State-funded, adding that annual reports are compiled each year and forwarded to the defence minister and Cabinet.
Last month the Tender Bulletin, a weekly newsletter that monitors State contracts, criticised August 26's secretive practices as an open door for corruption and warned that it could pave the way for military control of the State.
“A more sinister agenda is one that typifies the transition to totalitarian political rule, where the party in power buys its political allegiance from the armed forces to ensure its survival,” the Bulletin warned.
“[It] will place [Namibia] on a further slippery slope to the militarisation of the State apparatuses and eventual rule through the barrel of the gun.”
The Namibia Chamber of Commerce and Industry said the government creation of companies becomes a problem when they are awarded State contracts that do not concern the military.
NCCI chief executive officer Tarah Shaanika said: “It is strategically wrong for the government to win tenders for daily goods and services that can be supplied by other companies. This stifles the private sector and suffocates entrepreneurship. Why should the military get a catering tender when so many other companies can supply food? You cannot use our tax money to compete against us. How can that be right?” he asked.
Shaanika said the main purpose of August 26 was to provide jobs for retired generals.
August 26's subsidiary operations include:
• August 26 Ultimate Business Machine (UBM), launched in September.
The company's entry into the construction sector sparked concerns that it would gobble up most government building and civil engineering contracts. Initially set up to modernise army barracks, it recently scooped a N$450 million tender for the construction of the new military hospital - without submitting a tender.
UBM's managing director is Colonel John Namoloh, an NDF officer who is related to former defence minister and current housing minister Charles Namoloh. The South African Sunday Times quoted John Namoloh as saying the plan is to compete with other companies. It cited concerns that the Namibian army is trying to follow in the footsteps of the Egyptian military, which gained power and wealth through a network of businesses.
• August 26 Logistics, which focuses on security, allegedly to supplement Treasury spending on defence, was engulfed by a major scandal in early 2013.
The weekly newspaper Confidente published allegations that top generals had manipulated the tender system to hand contracts worth over N$1,5 billion for the supply of food to military bases to “briefcase companies” owned by relatives and friends.
The contracts had previously been awarded to private companies after a tender process. Their value rose over a 10-year period from an initial N$3-billion to N$5-billion amid allegations of kickbacks and hidden shareholdings.
A month after the damning report, the defence ministry withdrew the tender.
Certain generals allegedly had received kickbacks to lobby for a new system that would allow the ministry to hand the contracts to selected individuals.
In July Defence Minister Nahas Angula announced that the contract had gone to August 26, which then signed a sub-contract with its 51% subsidiary, August 26 Logistics.
The other shares in August 26 Logistics are held by former mayor of Windhoek, Matheus Shikongo, with 24%, and a South African businessman, Sarel Oberholzer, with 25%.
The national tender board said the defence ministry “did not apply for an exemption [from tender processes] and no exemption was granted”. In 2001 the defence ministry handpicked August 26 Logistics to procure bombs from a Cyprus-registered company, Harvey Logistics.
After N$3-million went missing, Harvey Logistics was dissolved. The Namibian government launched an investigation, but no official has yet been held to account.
August 26 Logistics also had rights in a DRC diamond mine granted to the Namibian government in 1999 by former Congo president Laurent Kabila as a reward for military support. For years secrecy shrouded the identity of Namibia's international partner in the 25-square kilometre open-cast mine at Maji Munene, 45km from Tshikapa. It remained unclear whether mining actually took place; the value of production, if any; and who benefited from it.
However, the Mail & Guardian can reveal that Maurice Tempelsman, a Belgian-American diamond magnate and friend of Namibia's founding president Sam Nujoma, was Namibia's partner in the deal. Tempelsman's lawyer in Southern Africa, Christian Merkling, insisted that the mining never went ahead as planned.
• August 26 Holdings has three subsidiaries in the manufacturing sector, the troubled Windhoeker MaschinenFabrik, which makes trucks, trailers and tankers; August 26 Industries, which started in 2007 and manufactures footwear and boots for soldiers; and August 26 Textile and Garment and Textiles. The latter focuses on making combat fatigues, trousers and protective clothing. The former deputy permanent secretary of defence, retired colonel Mwetufa Mupopiwa, is the general manager of the textile company.
• August 26 owns 75% of Sat-Com, a telecommunications firm involved in the installation and manufacture of equipment such as two-way radios, satellites and radio transmitters.
• NamForce, a new insurance company, will become fully operational next year and will take over the army's insurance policies, including disability and funeral cover. Rainer Ritter, ex-chief executive of the Namibia Financial Institutions Supervisory Authority is Namforce's managing director.
• August 26 has an interest in agriculture through its subsidiary Agro-Tour Development Initiative, which farms livestock on 57 000 hectares at Grootfontein.
By Shinovene Immanuel and Ndanki Kahiurika The Namibian