Pretoria - South African companies developing electronic sub-systems for mainly corvettes at their own cost were guaranteed contracts if and when the vessels were purchased, a panel probing the arms deal heard on Monday.

Richard Young, whose company lost the contract, testified in Pretoria that the state was not able to fully support research by the local defence industry in the late 1990s.

Young said this was made clear in 1998 by Frits Nortje, at the time corvette programme manager at Armscor.

Nortje said local companies would have to use their own money for such research.

"What was said ... was that the state could not guarantee that the contractors who took such risks would eventually receive the contract because they could not guarantee that the corvette programme would eventually materialise," Young said.

"However, it was said that if and when the corvettes acquisitions was finally approved, then these contractors who had taken risks in developing their elements would be guaranteed their part of the contract."

Young threatened with legal action

Young, who is managing director of Communications Computer Intelligence Integration (CCII) Systems, was supposed to start testifying two weeks ago, but the hearing was postponed to sort out possible contraventions of secrecy provisions in his testimony.

Public Protector Selby Baqwa, chairperson of the presiding panel, ruled that Young required permission from Defence Minister Mosiuoa Lekota to testify to ensure that his evidence would not compromise state security.

Young claims his company was named the preferred supplier of these systems. The tender was later awarded to French company Detexis. It is the sister company of African Defence Systems (ADS), of which arms acquisition head Chippy Shaik's brother, Schabir, is a shareholder and director.

CCII is a defence information technology company based in Cape Town.

Earlier on Monday, Young's legal counsel Adam Pitman told the panel that his client had been threatened with legal action by ADS.

It informed Young he was at legal risk if he aired confidential or classified information from the contract document. The first threat was made on August 6, and was reiterated by ADS on Monday morning, Pitman said.

He said he had been trying for three weeks without success to obtain the contract documents from ADS. ADS' team thereupon handed Pitman the documents, and he was granted a short adjournment to study them.

Witness able to testify without hindrance?

Martin Kriegler, for ADS, said Young would not get immunity from legal action should his evidence contain statements defaming or compromising the company.

Last Monday Lekota ruled that Young only testify if he refrained from referring to confidential and classified documents.

Young has insisted on being allowed to testify without constraints.

He received another letter from Lekota on Monday morning, enabling him to testify without hindrance.

Pitman, however, persisted that this did not amount to totally unqualified consent.

Michael Kuper, for the Department of Defence, described the minister's authorisation as "perfectly adequate".

With acknowledgement to Sapa and News24.