A 50% increase in spending has cast doubts over how the arms deal was done, writes Estelle Randall. 

The watchdog role of parliament's standing committee on public accounts is expected to come under scrutiny as it prepares to report on alleged irregularities in government's costly arms deal. The report could have vast ramifications for the government at the highest levels in the face of yet untested information received by the committee. 

At a hearing this month on auditor-general Shauket Fakie's special report on the deal, it emerged that the government would have to spend at least 50% more than the announced R30-billion on new warships and aircraft.

Shocked MPs heard that instead the bill, over 12 years, would be about R43,82-billion, excluding finance charges which are expected to be substantial. Doubt emerged at the hearing about whether South Africa would reap the full benefit of the estimated R110-billion industrial offset activity (and 65 000 new jobs) which was said would accompany the arms acquisitions. The R110-billion has already been revised to R104-billion. 

Public accounts standing committee chairman Gavin Woods said: "We're taking things forward but we could find ourselves with a further investigation which will come up with conclusive answers to the questions which have been hanging around for the past year."

The committee has dealt with other major issues of financial irregularity like Sarafina 2, but this is the most complex issue that has come before it and it was not a very comfortable position to be in, Mr Woods said. The committee is sifting through a pile of top-secret cabinet and other documents as it seeks answers on two basic issues. The first, said Mr Woods, related to whether the cabinet knew the deal would cost more than the R30-billion the public was told it would cost. If the cabinet did not know, the question arose whether ministers were misled deliberately. Were the figures given to the cabinet not fully representative of the whole picture or did the cabinet make a  mistake?

Mr Woods was hesitant to say anything which could be interpreted as prejudging the outcome of his committee's probe. "We must remain beyond reproach in this process. It's a very big issue and we'll have to be very sure of our facts. "We're hopeful that our investigation won't reflect badly on the cabinet but we do feel a degree of anxiety. If our investigation does reflect badly on the cabinet we'll say so and there would have to be a political assessment of what to do. "There have been bad experiences with arms deals in other countries and when the truth came out the consequences were quite devastating."

The second key issue on which the committee would express a view related to procedures followed in concluding primary and sub-contracts of the deal. It would examine whether these were adequate and whether there were any irregularities. "The auditor-general seems to suggest they were insufficient in some cases and there were specific issues which arose in his report, like the change in the formula for the lead-in fighter training aircraft. "The formula was changed midstream and that disadvantaged one of the bidders. The result was that we paid about 70% more and received 17% greater value," said Mr Woods. "We're testing answers to these issues and have called for more information about the evaluation procedures used." His committee would also try to establish how secure the promised industrial offset activity was.

"Two of the officials who conducted the offset aspect of the deal assured me we would get the R104-billion or close to that figure. They've told me the government contracts mean there's unlikely to be any reneging on what was negotiated and that the deals were as tight as they could have been. "But we want to look at these government-to-government contracts to see whether the assurances they talk of are in them. We also want to look at the offset agreements themselves - to see the business-value basis for these."

Since the deal involved several government departments his committee would also examine an appropriate monitoring system to check that South Africa got what it was promised. The committee plans to finalise its report on October 30 and to present it to parliament in that week.

In his special report on the arms deal, Mr Fakie identified irregularities relating to some of the contracts and asked for a forensic audit into these. The Heath special investigating unit and the Public Protector have also been asked to investigate irregularities in especially the transactions between prime contractors and  subcontractors.

With acknowledgement to Estelle Randall and the Sunday Argus.