SOUTH Africa's cash-strapped Department of Defence (DOD) was not ready to deal with a multi-project defence package in the late 1990's, a senior military official testified on Tuesday.

Rear-Admiral Keg Verster, the first witness to testify at a probe into alleged corruption surrounding the country's $5,5-billion arms procurement deal, said the defence department at the time did not have a policy to deal with more than one arms contract.

Three statutory bodies are investigating allegations of widespread corruption involving South Africa's plans to buy aircraft, patrol boats and submarines from five European defence manufacturers.

"We were feeling our way into a new environment," Verster told the panel, lead by Public Protector Selby Baqwa -- whose job is to protect the public from wrongdoing by government departments.

Verster, the director of weapons systems at armed forces' headquarters in Pretoria, said the DOD was facing a range of uncertainties in the mid-90s, partly because of major budget cuts.

"We were finding ourselves in a position of debt with budget problems. We had contracts underway but no money to pay for them," he told the public hearing, held at Baqwa's offices.

He said the DOD's debt was also renegotiated and serviced over four years. During this period, the department had to start planning for a comprehensive defence procurement package, Verster said.

"It was difficult to plan the funding of a strategic package within our budget," he added.

"From our point of view it was not clear what the government wished to have," he said.

Among the allegations being probed is one that the chief whip of the ruling African National Congress (ANC), Tony Yengeni, received a bribe, in the form of a luxury four-wheel drive, from a company with links to the deal.

The hearings were due to begin two weeks ago but were postponed at the request of the defence department, which said it needed more time to prepare.

The investigation into the arms deal is being carried out by Baqwa, the office of the auditor general and the director of public prosecutions.

The probe began in January at the insistence of parliament after auditor general Shauket Fakie released a report saying proper procedures had been sidestepped in the tender process for the deal.

South Africa's move to re-equip its armed forces has triggered complaints that the country does not need and cannot afford the weapons or that the money would be better spent on welfare.

With acknowledgement to AFP, Reuters and the Daily Mail & Guardian.