Parliament (Sapa) - Trade and Industry Minister Alec Erwin has rejected criticism of the counter-trade agreements linked to the controversial multi-billion rand arms deal, and squashed any suggestion that the contracts will not be met. Addressing parliament's trade and industry portfolio committee on Tuesday, he said the job-creation forecasts associated with the deal were "fairly realistic".

The government had done exhaustive studies on the impact of the deal, and examined similar undertakings in other countries. The projection of 65 000 jobs created from National Industrial Participation (NIP) investments arising out of the defence procurement package was "relatively optimistic", but realistic.

Erwin said about 9 500 direct jobs should be created from the industrial participation programmes by 2008, with a further 4 000 arising from the construction of certain manufacturing plants, and 1 500 from production work in those plants.

This totalled 15 000 jobs, and the figure had been multiplied by four to calculate the knock-on indirect jobs expected to be created. "If the projects emerge, we feel the figure of 65 000 is attainable."

However, he stressed this was merely a projection, and not cast in stone. The committee had invited concerned groups to make public submissions on the accuracy of the employment creation projections. The hearings are being held one day before parliament's watchdog public accounts committee (Scopa) meets to discuss its original resolution recommending a probe into aspects of the arms deal.

Both the auditor-general, Shauket Fakie, and Scopa have raised concerns about the counter-trade aspect of the deal. Scopa, in its interim report to Parliament last year, described the 65 000 job projection as "optimistic", and urged the national assembly's trade and industry committee to investigate the matter further.

The bulk of the submissions on Tuesday, however, centred on the viability of the arms deal and whether using NIP agreements was misguided. A visibly annoyed Erwin said government would not reverse any aspect of the deal, and was obliged to meet all its contractual obligations.

The government, as the democratically-elected representative of the people of South Africa, had decided to undertake the deal on the basis of the findings of the defence review. He challenged the South African Chamber of Business (Sacob) to give details of allegations of irregularities associated with the counter-trade deals, and to submit its apparent objection to NIP in writing.

Sacob council member Geoffrey Ashmead said offsets were an inefficient, complicated and risky measure, and only used by countries which were under "extreme economic duress". Counter-trade deals tended to conceal prices, and offered scope for corruption. He recommended a procedure be devised to supervise the offset deals.

Ashmead said the hearings were necessary because of "certain allegations of irregularities" associated with the offset deals. Erwin responded: "If that is another allegation being made . . . maybe you should make it very carefully."

While the sub-contracts associated with the deal have been the subject of corruption allegations, the counter-trade deals have until now not been implicated. Erwin said it had been government policy since 1997 to negotiate offsets for any international deal exceeding $10-million.

In its submission, the Congress of South African Trade Unions (Cosatu) argued that the deal would benefit only the defence industry, and provide few employment opportunities.

Terry Crawford-Browne of Economists Allied for Arms Reduction (Ecaar) urged the government to cancel all contracts associated with the arms deal. "Offsets are a scam promoted by the armaments industry, with connivance of politicians, to fleece the taxpayers of both supplier and recipient countries," he said.

Erwin said cabinet was satisfied with the performance guarantees of ten percent of the cost of the purchases. It had been willing to accept guarantees of only five percent. He said 15 percent of the offsets had already been realised.

The counter-trade agreements were expected to bring in more than R100-billion in knock-on investments. Non-defence industrial investment should total about R24-billion, with the remaining spin-offs coming from increased exports, local sales and Defence Industrial Participation (DIP) agreements, he said.

The committee is expected to study the job and investment offsets, and compile a report for submission to the National Assembly. 

With acknowledgement to Sapa and WOZA.