CAPE TOWN Trade and Industry Minister Alec Erwin is to deal with the credibility of the R104bn industrial offsets attached to the controversial R43bn arms deal at a two-day hearing of Parliament's trade and industry committee which starts today.

It will attempt to establish to what extent reliance can be placed on the offset undertakings and their promise of 65000 jobs. Apart from academics, submissions will also be made by the SA Chamber of Business and Congress of SA Trade Unions.

In his special report on the arms procurement programme, Auditor-General Shauket Fakie found the performance guarantees for the offsets inadequate.

Also, at a public accounts committee meeting last year to consider Fakie's report, the committee learnt performance guarantees had been secured for only R3bn of the national industrial participation commitments or 10% of the contract price.

Along with Fakie, committee members were concerned if this sufficed to ensure total delivery of the R104bn commitments.

The chief government negotiator for the acquisitions, Jayendra Naidoo, told the committee the countertrade spin-offs were intended only to provide some additional benefit for what was a necessary equipment purchase.

They were intended as a "risk management exercise" and it was questionable if they would give the economy a huge boost.

At a press briefing last month Erwin, with Finance Minister Trevor Manuel, Defence Minister Mosiuoa Lekota and Public Enterprises Minister Jeff Radebe, stressed national industrial participation projects could never be a justification for an arms purchase and were not decisive in the final procurement decision.

Meanwhile, the public accounts committee meets tomorrow to decide what was intended by its original resolution recommending an arms deal probe.

The decision could affect the future committee chairmanship of Gavin Woods of the Inkatha Freedom Party, who urged President Thabo Mbeki to include the Heath unit in the probe.

Deputy President Jacob Zuma has criticised Woods for acting without committee backing.

Geoff Doidge, African National Congress (ANC) public accounts spokesman, said the removal of Woods was "certainly not on our agenda" but "one can never say never in politics".

ANC chief whip Tony Yengeni said the committee would decide Wood's fate.

Meanwhile, Bonile Ngqiyaza reports that a former African Defence Systems (ADS) employee has dismissed an Armscor probe into allegations of serious fraud in awarding of contracts as "onesided and inadequate".

Fritz Louw, the former employee, has vowed to lay a complaint with the police against Armscor after it said it had found no wrongdoing in its dealings with ADS.

Louw insisted yesterday employees of the companies conspired to defraud taxpayers of more than R3m in a deal linked to the R43bn arms deal. He said the Armscor probe took place without him or other witnesses who had presented sworn affidavits being called to testify.

Yet Armscor said yesterday the witnesses were not called in, as it had copies of the affidavits.  

With acknowledgement to Linda Ensor and Business Day.