One of the officials who negotiated what arms South Africa would buy received a discounted Mercedes-Benz from one of the successful sub-contractors - months before the decision was made, it emerged on Monday.

Vanan Pillay, the Department of Trade and Industry official who was a member of the international offers negotiating team led by Jayendra Naidoo more than two years ago, told the department of the purchase of the car only last month.

He is now under scrutiny for the purchase through the European Aeronautic Defence and Space Company (EADS), which stands to benefit from sub-contracts awarded in the R43-billion arms procurement programme.

In November 1998 the cabinet announced the preferred bidders and left it up to Naidoo's negotiating team to haggle with bidders - only if favourable contracts could be reached would the purchases go ahead.

The team consisted of several officials from the departments of trade and industry, and defence.  

On September 15 1999, the cabinet announced negotiations had been finalised and certain equipment would be procured.

This effectively committed the government to spending R29,9-billion for six arms programmes - the navy's corvettes, Hawk fighter trainers, Gripen fighter jets, light utility helicopters, maritime helicopters and submarines.

Just two months earlier, on July 7 1999, Pillay had received a Mercedes-Benz 250 TD through EADS. He paid R141 000 for the brand-new car.

EADS had paid its related company DaimlerChrysler SA R174 000 for the car and sold it to Pillay at a loss of R33 000.

This gave Pillay a discount of 29%, or R57 000 off the retail price of R198 000.

The Department of Trade and Industry is now finalising its internal investigation, centering on whether Pillay broke the department's code of conduct by not fully declaring the circumstances around the purchase of his car.

Trade and Industry ministerial spokesperson Edwin Smith told The Star that investigations by director-general Alistair Ruiters regarding Pillay's conduct were likely to be completed soon.

"We expect that the director-general will make a formal statement about the findings of the investigation later this week," Smith said. Pillay notified the department of his purchase only on June 26 this year.

Department spokesperson Manana Makhanya said: "The director-general received a report on Monday establishing the basic facts of the matter.

"So he (Pillay) has not been found guilty of anything and until the director-general has applied his mind to the report, and consulted with the minister, none of us will be able to say anything," the spokesperson said.

The total cost to taxpayers of the arms procurement programme has ballooned along with currency fluctuations.

Allegations of corruption around the arms deal are the subject of a multi-agency probe.  

With acknowledgement to Marvin Meintjies and The Star.