The European consortium building four corvettes as part of South Africa's arms procurement programme says it has already fulfilled more than half of its defence offset obligations.

But it has also warned that the ongoing controversy over the deal is scaring off potential investors.

In a statement marking the ceremonial laying the keel for the first of the ships in Hamburg, Germany, this week attended by Defence Minister Mosiuoa Lekota, the consortium said its defence industrial participation obligation amounted to roughly $450-million.

Of this, it had after "only one year" already fulfilled an amount of $265-million, either by signing contracts and receiving the corresponding deliveries and services, or by having defined parties with whom contracts were ready for signature.

The group, the European South African Corvette Consortium (Esacc), said it was also obliged as part of the deal to fulfil national industry participation (NIP) offsets totalling $690-million, and to effect sales and exports of $2-billion.

It said that more than 33 South African companies had benefitted from existing contracts, which ranged from the supply of shipbuilding components and steelwork to the design and manufacture of high-technology systems.

"We are very proud to have achieved the fulfilment of more than 50% of our obligations after only one year," said Christoph Hoenings, a director of ThyssenKrupp, the company owning the shipyard where Thursday's ceremony took place.

"In our immediate efforts we had to concentrate on long-lead items and on material which is required in an early stage of the construction of the corvettes.

"For the remaining portion, we are confident of maintaining the schedule agreed upon with the South African authorities."

The consortium said that of the NIP offsets obligations, investment  credits had been granted to Esacc, or had been applied for, totalling $138-million - "leading to sales and exports of $630-million".

The investments and sales and services ranged from heavy industries to high-tech systems.

Hoenings said the larger investment projects, such as the erection of a steel mill or the processing of titanium, were "still ahead of us". Feasibility studies would be submitted in the second half of this year.

Hoenings urged South Africa to finalise its probe into allegations of corruption in the arms procurement process.  He said that ThyssenKrupp was one of the world's leading industrial companies and prized its reputation for integrity and honesty.

"We are (going) to create massive investment in South Africa - for the good of all of its citizens.

"Unfortunately, we meet more and more potential investors, both South African and European, who worry that their reputation could be harmed if they are associated with the re-equipping of the SANDF.

"We trust that with the public hearings these stories will come to an end soon, as these allegations prejudice us and South Africa," he said.  

With acknowledgment to Sapa, Ben Maclennan and Business Day.