Inside Ivor Ichikowitz’s Paramount empire
Is arms trader Ivor Ichikowitz a ‘man of Africa’, as he says, or is he gutting some of his assets in SA while building an offshore empire?
Ivor Ichikowitz rejects the label "arms dealer". The founder of Paramount, Africa’s largest private arms group, presents himself as an industrialist and philanthropist with a passion for the continent — an image buffed by a slick public relations machine.
But questions have previously been raised about the extent to which Ichikowitz may have benefited from his role as a "favourite courtier of African presidents Jacob Zuma, Ali Bongo and Denis Sassou Nguesso", as French publication Intelligence Online put it in 2016. And, more recently, critics have homed in on his image as a highly successful entrepreneur.
To many in SA’s armaments industry — Ichikowitz’s former employees and business partners among them — he’s not what he seems to be.
They allege that Paramount’s success as an industrial powerhouse is fragile, and hold Ichikowitz responsible for the plight of companies that were the pride of SA’s military industry.
At the heart of these allegations is company subsidiary Paramount Combat Systems (PCS), now under liquidation, which produced a range of armoured vehicles.
A secondary case is the toxic bust-up between Ichikowitz and Aerosud father-son team Paul Potgieter senior and junior, responsible for developing the Ahrlac, a reconnaissance and counterinsurgency aircraft. The joint venture went into business rescue last year amid mutual threats and recriminations between the parties.
AmaBhungane has obtained internal documents and financial records, and spoken to more than a dozen former employees and business partners of Ichikowitz, most of them involved in PCS.
A consistent theme is the apparent unsustainable business practices pursued under Ichikowitz. He’s said to have always been in pursuit of the next deal — even when Paramount companies could scarcely hope to deliver on existing ones.
They claim a pattern of securing major defence contracts with attractive downpayments, which were then routed through opaque offshore companies. It’s thought that large amounts were diverted towards an aggressive acquisition drive, leaving operating companies starved of cash.
As working capital started drying up, they say PCS management was forced to beg Ichikowitz for funds, and use money from newer deals to cover shortfalls in ones they were already behind on.
In early 2018, PCS was put into business rescue. But with prospects of saving the company appearing dim, one of its biggest customers, Singapore Technologies Kinetics (STK), initiated liquidation proceedings.
The collapse of PCS cost nearly 300 local jobs.
The liquidation is now the subject of legal action by another, unrelated creditor, General Kinetics. The Canadian company alleges that Paramount wrested control of valuable assets and intellectual property at fire-sale prices when the liquidator sold these back to another Paramount company.
Paramount stoutly denies any wrongdoing. In response to written questions, it says it has been the target of "industrial espionage and attempted sabotage".
"It will also appear that you have been provided with various pieces of false information by disgruntled former employees who are engaged in competitive bids against us in many of the self-same countries you have raised issue on, and we would urge caution before placing undue reliance thereon," the company says.
In court, Paramount has hit back at General Kinetics’ application as "entirely misconceived".
Paramount says the intellectual property left in PCS was "residual" and of "very limited use to other potential purchasers". It "offered an amount that [it] could justify as being reasonable in the circumstances, and the liquidators accepted the offer".
Paramount blames missteps by PCS’s previous local management for the subsidiary’s woes, along with the failure of two important suppliers and a default by the Kingdom of Jordan on a contract to buy 50 armoured vehicles.
In this two-part series amaBhungane delves into the business dealings of PCS to determine whether there is any truth to the allegation that dubious offshore arrangements were at the heart of its collapse. This instalment traces the history of Paramount and the deals in question, while next week’s story will look at how large downpayments on contracts were apparently diverted into offshore accounts.
Paramount is important because it is a potential window into the way Ichikowitz does business, mixing commodity trading, arms deals and political ingratiation in the manner pioneered by his close associate, French businessman Jean-Yves Ollivier, the most famous "Monsieur Afrique" of his generation.
An empire built on apartheid’s collapse
By Ichikowitz’s account, he began his career during SA’s political transition in the early 1990s, "working to support Nelson Mandela’s programme of democratisation, national reconciliation, economic and industrial normalisation".
According to a 2012 profile in the Jewish Chronicle, "he realised there was potential to make large amounts of money from what he calls the peace-keeping industry".
With the end of apartheid, defence spending in SA was deprioritised, as the highly militarised country began winding down its arms industry. That left large quantities of surplus stock that could be bought cheaply. It’s how Ichikowitz began amassing wealth: procuring hardware such as sought-after mine-resistant armoured vehicles, refurbishing them and on-selling to other countries.
It also nearly landed him in trouble, when two of his early companies were accused in a defence department investigation of violating arms controls and sending their staff into army bases to strip vehicles of parts.
Paramount tells amaBhungane that Ichikowitz had no involvement in the day-to-day running of those businesses, and that a subsequent "investigation was reportedly commissioned by Armscor which cleared the Armscor personnel implicated, hence no steps [have] been taken as to the unsubstantiated allegations".
(Armscor has told amaBhungane it is unable to trace that report.)
In 2006, Ichikowitz established what would become Paramount Land Systems (and later PCS) to design and manufacture armoured vehicles. It operated from Midrand, where it had a production workshop.
By December 2011, the growth of Ichikowitz’s business empire reached a turning point. Paramount bagged a major deal with STK, worth nearly €90m, to supply Singapore’s defence ministry with armoured vehicles.
The deal was ambitious in both scale and technological complexity. Paramount would supply the Singaporeans with 101 highly sophisticated vehicles based on the Marauder, a rugged four-wheeled armoured personnel carrier.
The plan was for some of the production to be gradually migrated to Singapore. To that end, Paramount would also supply 186 hulls, which would be shipped to Singapore and made into complete vehicles.
Twelve variants of the vehicle would have to be developed, tested and delivered as prototypes, before being produced at scale.
The deal, codenamed Project Marlin, would later turn out to be the armoured vehicle division’s undoing. But in the beginning, it meant Paramount received a large upfront payment from its customer.
In the years after the STK deal was sealed, Ichikowitz embarked on an acquisition spree.
One of the companies Paramount swept up was Industrial & Automotive Design (IAD). Its acquisition in 2013 heralded another turning point, because the company, renamed PIAD, greatly enhanced the technological capability of the group.
PIAD specialised in the development of mine-resistant armoured vehicles — a forté of SA military engineering. As such, it was key to the development and re-engineering of Paramount’s flagship armoured vehicles, like the Mbombe range of eight-, six-and four-wheeled vehicles.
In the same year, Ichikowitz bought aerospace company Advanced Technologies & Engineering out of business rescue, adding to his stable a firm that, as an article at the time put it, would give Paramount "unprecedented access to some of the most advanced weaponry in the world".
Another important acquisition in 2013 was a majority stake in Cape Town-based shipbuilder Nautic Africa, which later went into voluntary business rescue.
That business survived (though creditors suffered), but the rescue practitioner raised the concern that, at the time Nautic was struggling, significant assets were distributed to its shareholders, including Paramount.
In 2014 Paramount acquired the military business of aeronautical design and manufacturing company Aerosud and, at around this time, invested in a low-cost airline, FlyAfrica. The latter proved short-lived, ceasing operations in 2015.
Paramount also got involved in Ahrlac through a joint venture with Aerosud. It went into business rescue in 2019.
In 2015 Paramount Land Systems moved production to a large new facility at Isando, Joburg, augmenting the company’s industrial muscle enormously. Paramount could now produce armoured vehicles at scale, with the vehicles for Project Marlin, as well as for other contracts, to be rolled off the Isando production line.
Ichikowitz had turned his company from one that traded primarily in hardware and was little more than a "military vehicle start-up" into what was, on paper at least, an industrial all-rounder with the capability to produce military hardware for land, air and sea, and with lucrative deals around the world.
But the company’s beefed-up industrial might in SA wouldn’t last.
Former Paramount sources, including four former senior employees in the group, speculate that advance payments from the STK contract were used for unrelated purposes.
It’s a charge Paramount firmly denies, suggesting it doesn’t make sense. "It is a matter of public record that [Paramount’s] shareholders injected approximately R500m into the company, including substantial amounts by way of loan funding."
The company also says that, by the time PCS was put in provisional liquidation in early 2018, "in line with the design and manufacturing milestones of the [STK] contract, 77% of the total contract value was delivered … Your superficial analysis of what took place is denied and is patently false."
That figure of 77% completion is hard to square with the picture painted by others — including STK, when it applied to have PCS liquidated.
But at the time PCS was formed in mid-2016 — when PIAD absorbed Paramount Land Systems — the cracks in the armour division of the company were already showing.
Paramount had clinched contracts to supply vehicles to governments across the world, including in Mali, Azerbaijan, Jordan and Kazakhstan, where Paramount set up a joint venture to manufacture armour.
But the land division was falling behind on deliveries.
According to former senior employees, including a former financial executive, PCS inherited a financial mess from Paramount Land Systems. Several former employees say there was chaos on the production floor as a result of constant cash flow problems.
The Singaporeans, out of their pragmatism, paid a very large downpaymentAndrew Charter
Internal correspondence bears this out. Submitted as part of labour dispute hearings, the documents obtained by amaBhungane show PCS management’s growing alarm at falling behind target on Project Marlin, and frustration at the lack of available cash and the dire situation.
In one e-mail from late 2016, then PCS CEO Ben Jansen, who co-founded IAD, writes to Paramount senior executive and longtime Ichikowitz associate John Craig, copying in Ichikowitz and Morris Kotzen, another executive who was instrumental in Project Marlin.
"It is not surprising that we are struggling," writes Jansen. "It is very difficult to build vehicles on beg and borrow. I get hundreds of phone calls a day from irate suppliers and the staff can’t take it any more. It’s on a knife edge so we will see."
Paramount denies ever withholding cash from PCS, saying: "We are not sure we understand the suggestion that funds were withheld, which is illogical, and you provide no suggested motivation for any such action, or any facts on which your allegation is based."
Paramount also points to "various other external reasons for the liquidation of [PCS], which were outside of PCS’s control, such as defaults in payment by debtors".
Paramount blames PCS’s former executive team for "mismanagement", noting that it has launched an investigation into former employees, but refusing to provide further details.
However, minutes of meetings, internal correspondence and records, and sources amaBhungane has spoken to, suggest a different story.
Opaque offshore deal
The funding problem appears to be linked to the complex and opaque structure of the STK deal.
Early on in amaBhungane’s investigation, several sources claimed the Singaporeans had paid a large chunk of the roughly €90m upfront.
Advance payments are not uncommon in large defence contracts and, according to former senior employee Andrew Charter, the downpayment made commercial sense for the Singaporeans.
"The Singaporeans, out of their pragmatism, paid a very large downpayment because they wanted Paramount to buy large volumes of components upfront, so they wouldn’t be exposed to multiyear price inflation, and because we could get better deals through economies of scale."
As was the norm for Paramount deals, the STK contract was structured offshore. Paramount Logistics Corp (PLC), a Paramount company registered in the offshore haven of Cyprus, actually held the contract with STK.
PLC, in turn, subcontracted its SA associate to deliver the armoured vehicles, effectively at cost, with most of the anticipated profit accruing to PLC in the low-tax jurisdiction.
Paramount rejects "allegations of ‘complex and opaque’ financial structuring or any breach of any legal, regulatory, statutory or taxation requirement regarding Paramount Logistics Corp (or indeed any other entity)".
The company points to the "more than 200,000 companies incorporated in Cyprus which cannot surely all be engaged in underhand matters".
"To the contrary, the Cypriot system complies with EU standards and is not a tax haven as you allege."
In recent years Cyprus has taken steps to improve anti-money-laundering measures and introduced regulations to bring it in line with other EU countries. It’s also hiked its corporate tax rate from 4.5% to a still low 12.5%, though companies can still effectively be taxed less.
However, the island’s regulations remain weakly enforced and it is still attractively opaque to those who want to keep money and transactions hidden — as the wash of hot Russian money through its banking system has demonstrated.
Moreover, documents filed in the Cyprus company registry show that PLC was owned by another Cyprus company, Fivemiletown Holdings.
Fivemiletown, according to 2016 filings, was 70% owned by Navarino Trust 2006, registered with a secretarial company in Cyprus, and 30% by Nermosia, a British Virgin Islands company. More recent filings, from 2018, show Nermosia to be the 100% shareholder of Fivemiletown.
Ichikowitz himself, according to company filings in the UK, was described as an Australian resident in 2015 and as a Cypriot resident and national in 2016.
Paramount’s lawyers say: "There is absolutely no evidence that our clients are not tax compliant."
Separately, Paramount director of group communications Nico de Klerk says: "Mr Ichikowitz runs a global business that has generated many billions of rands of exports for SA over several decades. He emigrated from SA many years ago and we do not propose to comment further on his personal affairs, save to confirm that I understand he is fully tax compliant in all relevant jurisdictions.
"Mr Ichikowitz’s passion for SA, its people and the African continent is not dependent upon where he spends his time."
*In the FM next week: how PLC Cyprus apparently creamed off a large portion of STK’s downpayment as profit offshore, leaving PCS short of working capital and putting its management team at odds with Ichikowitz and his close associates
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