Publication: Sapa Issued: Parliament Date: 2005-04-01 Reporter: Sapa Reporter:

Contractors Failed to Meet Offset Obligations - DA











Contractors tasked with supplying arms to South Africa in a R30 billion acquisition by the government have failed to meet their offset obligations by R5-billion, the Democratic Alliance said at Parliament on Thursday.

"At the first milestone deadline, over R5-billion of offset commitments have not been met. This represents 22 percent of all commitments required by the first milestone," said DA spokesman Enyinna Nkem Abonta.

At the signing of the 1999 arms deal, the government claimed these offsets would create 65 000 jobs and bring R110-billion worth of investment, he said.

"Government should insist that the contractors should pay their shortfall penalties which would amount to almost R500 million," Abonta said.

According to the DA, three contractors -- the German Submarine Consortium Ferrostaal, BAE/SAAB and Thales -- had fallen short by R4-billion, R845 million and R263 million respectively.

The DA has regularly argued against the offset clause being used in negotiations which alludes to added investments into a country by a contractor. It believed that the "value" negotiated very rarely brings in actual benefits to the country.

It was widely reported at the time that the offset value was three times the value of the actual purchase.

Abonta said that logic dictated that if South Africa benefited three-fold to the actual cost of the arms, then it would make sense for the government to spend a huge portion of it budget on purchasing weapons regularly to boost the economy.

"There is no empirical belief that offset value brings any benefit into the country," he said stating that all it did was increase the purchase price as contractors built in the penalty fees for reneging on deals.

He also attacked the Department of Trade and Industry, which he said, had no way of monitoring the alleged offset value.

"What we have is a dearth of information... because the DTI is not forthcoming," he said accusing the department of cheating figures to provide answers.

He also accused the department for not conducting a "socio-economic analysis" which, Abonta claimed should be a major study when conducting a deal on the scale of the arms acquisition. This, he said would determine what impact the purchase would have on the population.

"There are many milestones to go but if we don't speak up now then the deal will collapse into shoddy work," he said. The DTI were unavailable for comment.

With ackowledgement to Sapa.