Johannesburg (Reuters) - Regulators gathered on Monday to lay the ground rules for a joint investigation into the government's scandal-blighted, multi-billion rand arms deal with European defence contractors.

The unprecedented multi-agency probe aims to get to the bottom of allegations of corruption involving government officials, which could turn out to be the most serious cases since the ANC came to power in 1994. Five key investigating and prosecuting units met in Pretoria to thrash out  terms for their joint probe. Parliament's public accounts committee met with the Heath anti-corruption unit, the auditor-general, the public protector, the national director of public prosecutions and the investigating directorate: serious economic offences. 

"The objective is to see whether we can establish a structure within which the five units can work together," Gavin Woods, head of the public accounts committee, told the SA Press Association (Sapa). 

Initial areas of investigation will be on sub-contractors in South Africa, flawed procedures, possible exercise of undue influence on the contract process and the failure of government to reveal the true cost of the deal at  the time. 

The R43.8 billion deal for German corvettes and Anglo-Swedish jet fighters has been mired in controversy after a parliamentary inquiry questioned tendering procedures and why government underestimated the cost of the hardware which will be used to modernise SA's armed forces.

Fresh controversy was sparked by a weekend newspaper report that President Thabo Mbeki's right-hand man, Minister of the Presidency Essop Pahad, had attempted at an ANC meeting to derail the planned investigation to protect Mbeki. 

Pahad denied the report in The Sunday Independent but left unchallenged the paper's statement, based on unnamed ANC sources, that Deputy President Jacob Zuma had rebuffed Pahad's move. Zuma had told Pahad that Mbeki's brother, Moeletsi, had been mentioned in allegations concerning the arms package and not the President, who would want his family name to be cleared, The Sunday Independent said. 

"From the point of the government, certainly from the point of view of President Mbeki, we will never ever stand in the way of any probe or any investigation into corruption and fraud," Pahad told SABC Radio on Monday. 

Corruption Taints Defence Deal

Allegations of bribery and corruption have tainted the defence package signed for R29.9 billion in December with firms from Germany, Italy, Sweden, Britain and France. 

A preliminary study by the auditor-general called for a forensic audit after  finding serious flaws in procedures, while parliament's public accounts committee criticised cabinet for failing to disclose the true cost of the deal. Widely trumpeted offset deals used by the government to defend the purchases in terms of 65 000 new jobs and technology transfer are unlikely to materialise, the committee ruled.

Investigators are also expected to address a report alleging that a R10 million "bung" was paid to a former cabinet minister for facilitating the purchase of German corvettes. The Mail & Guardian also reported on Friday that another R11 million had  been paid to a group of South African politicians and officials from a European manufacturer as a "success" fee. The paper has also reported that firms with close links to the head of the military's weapons procurement committee were awarded most of local contracts. 

No one in the defence department's committee had to formally declare a conflict of interest.

With acknowledgement to Reuters and Woza.