THE cabinet moved yesterday to calm fears that government's R30bn arms deal will escalate to R43,8bn because of the weakness of the rand. Government spokesman Joel Netshitenzhe said the defence package included "comprehensive" agreements with financial institutions to hedge it against escalating prices as a result of inflation and exchange rate movements.

Although he did not have the exact figures, he said these were taken into account. "Further discussions on the modalities, and in some cases, implementation of the industrial package, as agreed, are under way," Netshitenzhe said after a cabinet meeting in Pretoria.

He said there were no budget risks arising from the industrial defence procurement package. Finance Minister Trevor Manuel would present the medium-term budget policy framework to Parliament on Monday. "These facts should not be conflated with internal discussions on the budget of the defence department, nor the details of the subcontracting."

Cabinet's statement came after reports that a number of investigative agencies would conduct a forensic probe into the arms deal to see whether there were any irregularities, particularly regarding transactions between prime contractors and subcontractors.

Allegations of irregularities have been submitted to the public accounts committee by a number of sources. It emerged also that the purchase price for the arms had escalated from R30bn to R43,8bn, while offset benefits, presented at R104bn, were far from secure. Only R3bn had been secured so far. Netshitenzhe said the cabinet agreed that relevant ministers would avail themselves to the committee to clarify "these broader strategic issues".

He said: "Government will cooperate with any investigations that may be set up on this matter. The cabinet is satisfied that the whole process was undertaken with integrity. "If people want to examine this, they should look at the whole package."

On the foot-and-mouth disease outbreak in KwaZulu-Natal, Agriculture and Land Affairs Minister Thoko Didiza said continuing tests had identified an infection in the KwaZulu-Natal area of Georgendale. Thirty-four herds of cattle were found to be positive, but these were not new infections. Government would be "on top of the situation not long from now", she said. 

The cabinet approved also that SA should join the Nordic Southern African Development Community Fund and Agency. This would enable SA companies, especially small and medium enterprises, to benefit from financing of joint ventures. Netshitenzhe said the cabinet reiterated the correctness of the principle that salaries of public office bearers should be handled by an independent commission, now chaired by Judge Richard Goldstone. 

"While sensational reports have focused on the upper end of the scale, the reality is that the average increments amount to 7,5% and these include the introduction of notches taking into account length of service as well as housing allowances," he said. The cabinet encouraged the public to debate these issues and make submissions to the independent commission.

With acknowledgement to Xolani Xundu and the Business Day.