Not all arms deal offsets delivered expected results

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Last week’s revelations that expectations had not been met in at least 40 of 121 arms deal offset projects has been supported by former trade and industry minister Alec Erwin in testimony to the Seriti Commission.

According to SABC News, as reported by News24, Erwin said some of the trade agreements of the 1999 arms deal did not produce the expected results. He added negotiations were “complex and intricate”.

Opposition Democratic Alliance (DA) party shadow defence and military veterans minister David Maynier, who obtained the Department of Trade and Industry internal audit report on the offset aspects of the multi-billion Rand arms deal, has asked for the Parliamentary Portfolio Committee on Trade and Industry to schedule a hearing on the report.

The Freedom Front Plus, in the form of the party’s trade and industry spokesman Anton Alberts, is intent on going even further.
“The arms deal offset contracts were a gimmick and held none of the promised economic advantages for South Africa and its people,” he said, adding the offsets were “nothing other than fraud”.

In addition to seeking a high level investigation into the offsets, the party will be seeking legal advice on institution of a possible class action on behalf of every South African citizen.
“In this case (the arms deal offsets) it boils down to fraud against the citizens of South Africa and is direct sabotage of the country’s economy,” he said giving the example of a promised 56 531 job opportunities to the 3 815 that materialised, according to the audit report.

Alberts said the audit indicated “virtually none” of the job opportunities and investments “promised” as part of the Strategic Defence Procurement Packages (SDPP) by government had materialised. He would be asking for an audit of all offset projects to “expose the whole can of worms”.

Government, he said, had apparently allowed the companies involved in the offsets to write off billions of Rand they owed the country.
“It is shocking that taxpayers can be misled and exploited by their own government.”

Offsets were required investments in industry in South Africa and were a condition of winning contracts under the SDPP. Companies had Defence Industrial Participation Programme (DIPP) and National Industrial Participation Programme (NIPP) obligations. NIPP activities were documented and monitored by the Department of Trade and Industry (DTI) while Armscor approved and documented all DIPP projects. In order to encourage investment in certain sectors, multipliers were added to some investments.

For example, for the NIPP offsets, BAE Systems and Saab invested $8 870 968 in Denel, partly acquiring Denel Aerostructures. After an investment multiplier of 67,4 was applied, the two companies were credited with $1 704 936 013 worth of investment.