South Africa's controversial arms deal - which was originally billed at R30,3-billion - is now expected to cost the country well over R40-billion, parliament's watchdog public accounts committee heard on Wednesday.

The department of defence's head of procurement, Chippy Shaik, said if inflation and exchange rate costs were included, the deal would now cost about R43,8-billion over 12 years.

This figure, however, could rise even further once bank loan costs were factored in.

Shaik said it was very difficult to give a final figure as the minister of finance had yet to negotiate financing costs with international banks.

'We'll have to ask whether cabinet was aware of this' Laloo Chiba, an ANC committee member, said it was unacceptable that the defence department could not provide the final estimates, and demanded a detailed projection of all costs be provided to the committee.

The projections should be submitted to the committee by Monday, he said.

Dr Gavin Woods, the committee's chairperson, told Sapa that the figures would be tested against those submitted to the cabinet for approval last year.

"We would have to ask whether cabinet was aware of this (this increase in costs)," he said.

Questions could be raised as to how well cabinet "put its mind around" the deal should the figures be the same.

'No individual can influence the processs' The project had originally been expected to cost R30,3-billion, with industrial participation offsets of R104-billion.

Officials associated with the arms deal - including Shaik, the government's former chief negotiator, Jayendra Naidoo, and top Armscor personnel - were grilled for seven hours about details of the package.

This follows a special report to parliament last month by Shauket Fakie, the auditor-general, which found that generally accepted procurement practices were not followed.

Fakie recommended a special forensic audit into the deal's subcontracts, some of which have been the subject of corruption claims.

Among those sitting in the public gallery were Judge Willem Heath, who earlier this week formally applied for a presidential proclamation allowing his investigative unit to probe the deal.

The investigating directorate into serious economic offences and Selby Baqwa, the public prosecutor, have also launched investigations into the deal.

Andrew Feinstein, an ANC committee member, said this was the most complex issue that had come before the committee.

"The deal has been characterised by an enormous amount of rumour and conjecture."

The committee needed all information on the deal "so it can once and for all deal with any irregularities".

There were still areas that remained "murky" and required clarity. 

These included the lack of a formal conflict of interest declaration, the relationships between contractors and sub-contractors, and the actual benefits accruing to the country.

Shaik told the committee he had declared his conflict of interests in relation to the procurement of four corvettes - as part of the arms package - for the South African navy.

His brother, Shabir, is the director of African Defence Systems, which also employs Chippy Shaik's wife, Zarina, and was involved in the corvette deal.

Shaik said he had declared the conflict of interest and recused himself from the awarding of that contract.

"It was presented to the ministers and also recorded that a conflict of interest does exist," he said.

Feinstein requested documentary proof of this, and asked for an unequivocal statement that conflicts of interest could not in any way impact on the ultimate decision taken about the awarding of the contracts.

"I can unequivocally state that the process does not allow for any individual to influence the process of this magnitude," Shaik said.

Committee members repeatedly sought clarity about the guarantees in relation to the deal's national industrial participation (NIP) commitments.

Naidoo said that over and above the ten percent requirement, there were other safeguards to ensure performance.

The South African government, for example, had entered into a declaration of intent with its British counterpart to ensure the performance commitments would be fulfilled.

The committee expressed concern that the financial guarantees amounted to only R3-billion - ten percent of the R30-billion contract - when the NIP totalled more than R100-billion.

Woods requested the defence department submit written proof of all commitments undertaken.

The committee would release a report on its findings on October 30, and would at that stage decide whether to pursue a forensic investigation into the matter, he said. - Sapa

With acknowledgement to Sapa and Independent Online.