Cape Town (Reuters) - The estimated costs of South Africa's controversial R30 billion arms procurement deal have jumped in under a year by close to 50 percent, parliamentarians were told on Wednesday. At the same time the trumpeted benefits from so-called industrial offset deals are unlikely to provide much in terms of real benefits to the economy, the Standing Committee on Public Accounts heard.

"The latest estimate we have puts the cost at R43.828 billion", Admiral Kek Verster told the committee that oversees government spending. He added that this figure took into account inflation and expected exchange rate movements but not finance costs. The deal signed last December, involving arms firms in Germany, Italy, Sweden, Britain, France and South Africa, is supposed to generate investments worth R104 billion which the government said should generate 65 000 much-needed jobs.

But Jayendra Naidoo, who led the South African negotiating team, said the offset deals should be seen more as a risk management exercise than growth promoting. "The end result will be that there will be minimal negative impact (from the arms deals) and marginal positive impact (from the offset deals)," he told the committee.

Irregularities Found in the Deal 

The arms and offset deals have been dogged by allegations of bribery, corruption and improper behaviour. Auditor-general Shauket Fakie said in a special report last month on the deal he had found a series of irregularities in some parts of it and was recommending a forensic audit. "I recommend that a forensic audit of or a special investigation into these areas be initiated," he said of the deal involving corvettes, submarines, helicopters, trainer jets and fighters. "Furthermore I am concerned that the guarantees for national industrial participation may not be sufficient."

Judge Willem Heath, whose special investigation unit is tasked with uncovering fraud and graft nationwide, said earlier this week that he wanted to turn his investigators loose on the deal. He told Reuters on Wednesday that he hoped his unit would be given the go ahead to mount an in-depth probe into the deal along with the auditor-general, the Office of Serious Economic Offences and the public prosecutor.

Chippy Shaikh, head of acquisition at the department of defence, defended the analytical and negotiating process to the committee, but admitted that no one involved had ever been formally required to declare any conflict of interest. "I find extraordinary the informal way that conflicts of interest were dealt with in a matter involving R30 billion," ANC member of the committee Andrew Feinstein said. Shaikh said he had declared a conflict of interest and withdrawn from talks over choice of supplier for the corvette combat suites when his brother joined the eventually successful South African bidder, African Defence Systems. But he added that basic government procurement guidelines had been breached and that many members of the analysis and negotiating teams had been in direct contact with the bidding firms right up to the point at which contracts were signed.

With acknowledgement to Jeremy Lovell and Woza.