SA owed 'billions' for guns bounty

[Mikethehack]

BUSINESS NEWS
SA owed 'billions' for guns bounty

Fri, 15 Sep 2006

South Africa is owed billions of rands in industrial participation agreements signed with international arms suppliers, and government should explain why this investment has not happened, Democratic Alliance leader Tony Leon said on Friday.

The agreements, termed "offsets", were mooted as a primary motive for the arms deal at the outset of government's plans to spend tens of billions of rands on military ships, aircraft and other hardware, he said in his weekly newsletter on his party's SA Today website.

"When the government signed the initial R30-billion deal with five major European companies, it claimed South Africa would receive a staggering R104-billion in complementary investment, and some 65 000 jobs would be created."

Bread-for-guns bounty

According to this, for every one rand spent on armaments, three to four rand would in effect be gained in offset benefits, Leon said.

"Yet last week, (Defence Minister Mosiuoa Lekota) admitted that only a fraction of this bread-for-guns bounty had been realised.

"Answering questions in Parliament, he conceded that a mere 13 000 jobs had in fact been created, for the R29-billion South Africa has already paid for the weaponry — a staggering shortfall of 52 000 jobs."

Leon said if the non-compliance of the successful bidders in South Africa's arms deals with their offset agreements was added up, "we get to a truly alarming figure of R5-billion".

Yawning gap

This had been quantified at the time of the first milestone deadlines in 2003/04, when three of the contractors had already defaulted on their offsets commitments: Ferrostaal, with a shortfall of R4-billion, BAE/SAAB (R840-million) and Thales (R262-million).

"This yawning gap between promise and fulfilment should have been a source of national outrage; instead, the compliance dates came and went with hardly a murmur from government.

"It is now time that we took up the cry and demand action — and credible explanations," Leon said.

The terms of the offsets agreements allowed the state to charge penalties of between five and 10.0 percent of the total value of a specific contract.

Fines imposed?

However, government "has apparently refused to implement the breach-of-contract fines which they are entitled to impose".

As a matter of urgency, it should explain this.

"Have such fines been imposed? Have they been held over; if so, on what grounds? Have the companies who have defaulted on their offset commitments been called to account?" he asked.

"The government cannot be so careless with taxpayers' money; if the state has a strategy to force the company to comply, it is duty bound to take South Africa into its confidence," Leon said.

Sapa