The controversial arms procurement deal could land South African taxpayers with massive foreign debt of R286-billion by 2010, according to projections by Economists Allied for Arms Reduction (Ecaar). 

The projection, based on rand-dollar valuations made by a leading financial institution and allowing for six-percent-a-year financing costs, was given to the recent national conference of Jubilee 2000 in East London. 

Ecaar is an internationally respected association of economists which has the noted US economist and diplomat John Kenneth Galbraith and nine Nobel laureates among its patrons. 

Jubilee 2000 is an association of prominent South African church leaders and academics, headed by Anglican Archbishop Njonkulu Ndungane. 

'Warships and warplanes do not produce income' 

It has taken a strong stand against the arms procurement programme, believing it to be an unnecessary extravagance at a time when South Africa faces massive poverty, unemployment and health crises. 

The Jubilee 2000 conference unanimously passed a resolution calling on the government to repudiate the guarantees given to British, German and Swiss banks and credit agencies and to cancel the arms acquisition programme. 

Terry Crawford-Browne, Ecaar's South African representative, said the cancellation of the arms deal was all the more urgent in view of the full-scale investigation into allegations of corruption being conducted by the country's top investigative agencies. 

The heads of the three agencies - National Director of Public Prosecutions Bulelani Ngcuka, Auditor-General Shauket Fakie and Public Protector Selby Baqwa - disclosed this week that 30 investigators from the agencies were probing conflicts of interest, alleged bribes and processes followed in negotiating the deals. 

The Jubilee 2000 conference was given a summary of the arms deal in a paper delivered by Crawford-Browne. 

No floor to the rand's value against the dollar 

"We are not permitted to know the details of the financial packages, but we do know they run 10 to 15 years," he said in the paper. 

"Warships and warplanes do not produce income. It is already predictable that because of these purchases South Africa will face a massive financial crisis which will make the 1985 debt standstill look like a picnic," he added. 

There was no floor to the rand's value against the dollar. Given its history over the past seven years, INet Bridge had projected that the rand-dollar exchange rate in five years, in 2006, would be R16.94 to one. 

In 10 years, in 2011, it was projected at R37,07. 

INet Bridge is a highly regarded financial database used by, among others, the The Board of Executors. 

Allowing for six-percent-a-year preferential financing costs, the foreign debt on the arms purchases would be about R286,89-billion. 

Crawford-Browne said that when signing the South African government guarantees to European institutions for the loans, Finance Minister Trevor Manuel had commented: "It is absurd to have to consider foreign exchange risks in cash accounting when local borrowing does not consider such risks." 

Crawford-Browne also explained how discrepancies arose in the reported cost of the arms deal. 

Press reports habitually put it at R43,8-billion, while Manuel referred to R30,3-billion. 

"Manuel declared in September and November 1999, when the contracts were signed, that they were costed at $4,77-billion. At that stage, Manuel said the net present value was R30,3-billion. 

"He said the government could not consider forward value. He said that Admiral Visser (then head of the South African navy) was no more entitled to estimate the final cost at R43,8-billion than he (Manuel) was qualified to steer the admiral's ships." 

Crawford-Browne said he was responsible for giving PAC MP Patricia de Lille information about the arms deal which was brought to him by ANC intelligence agents. 

This enabled De Lille to blow the whistle on alleged corruption and conflict of interest and eventually led to the government's face-off with Judge Willem Heath, resulting in the omission of his unit from the investigation. 

With acknowledgment to Jean Le May and Cape Argus.