But controversy lingers over actual benefits

ThyssenKrupp Marine Systems, one of the firms involved in the multi-billion-rand arms deal, says South African companies benefited to the tune of R850 million from offsets connected to the construction of four frigates.

Ulrich Scheel, an offset manager with TKMS, yesterday told a news conference that the fitting of four new South African Navy frigate platforms had been completed with a high volume of local content and labour.

He said the fitting of the frigate platforms was in line with the Defence Industrial Participation (DIP) initiative, which stipulated the contracting of local companies.

Among others, these companies supplied and installed the frigates' electrical, diesel, high-tech exhaust, refrigeration and ventilation plant units. Companies that benefited include Cape Town-based firms DCD Dorbyl, Hyflo South Africa and MTU South Africa.

"The DIP system has been a tremendous success, ensuring not only the integration of South African components on to the frigate platforms built in Germany, but also securing skills and technologies for South Africa relevant to ship-building, engineering more broadly and other aspects of the economy," he said.

Scheel added that since completing the frigate contracts some of the companies had been commissioned to supply specially welded exhaust gas systems for Malaysian, Korean and Italian national navies. The additional business was worth R48.8 million.

"These will stand the local companies in good stead as they integrate further into international supply chains," Scheel said.

The four frigates are the SAS Matola, SAS Isandlwana, SAS Spioenkop and SAS Mendi. The frigates are among world's first warships equipped with water jet propulsion systems and boast the first use of laser welding technology on vessels of this kind.

The arms deal has come under heavy criticism from sceptics, who argue that the R30 billion tag was too expensive a price to pay for a developing country grappling with socio-economic challenges.

These critics include anti-war campaigner Terry Crawford-Brown who wrote a book, Eye on the Money, on the arms deal controversy.

He has accused the arms trade industry of deep-seated, endemic corruption.

Last week Independent Democrats leader Patricia de Lille alleged in Parliament that the ANC, Nelson Mandela Children's Fund and the Community Development Foundation had received irregular sums of R500 000 from TKMS in 1999.

TKMS has denied paying any bribes in order to benefit from the arms procurement process.

Crawford-Brown, however, rubbished the offset claims by TKMS. He said the arms firm needed to provide the public with more details on the offset benefits.

"Since we spent R10 billion on four frigates that we didn't need, R850 million is a very poor return on that investment. International experience is that offsets are way inflated," Crawford-Brown said.

Former ANC MP and fierce arms deal critic Andrew Feinstein said he found it strange that TKMS had not given an indication on the number of jobs created through the offset.

"This does not change my view that offsets are economic nonsense. If there are sustainable economic investments to be made … they do not require the state to spend billions on weapons," he said.

The arms deal has been defended by the Department of Trade and Industry, which announced last month that the industrial offset programme had resulted in R9 billion worth of investments into the local economy and had created 50 000 jobs.

TKMS has defended the offset programme on the basis of income for SA companies, jobs, and skills and technology transfers.

With acknowledgements to Thabo Mabaso and Cape Argus.