CAPE TOWN Foreign arms suppliers had already fulfilled 15% (R15,6bn) of their R104bn national industrial participation obligations attached to SA's R43bn arms deal, Trade and Industry Minister Alec Erwin said yesterday.

The R15,6bn is made up of both foreign direct investment concentrated in the production of a whole range of goods from aluminium tubes, stainless steel pipes, gold chains and household appliances as well as the value of exports. It has been generated in the 16 months since the cabinet approved the arms deal in September 1999.

Challenging critics of the arms package who have questioned the likelihood of the offset contracts being fulfilled, Erwin expressed confidence that the remainder would materialise over the four-to-10 year period which the contract allowed. Progress would be monitored and reports submitted to Parliament every six months.

Erwin was briefing Parliament's trade and industry committee during a public hearing on the estimated offsets and their job creating potential. Government projected 65000 jobs would be created, 12000 of them direct.

His comments followed evidence before the committee last year by the chief government negotiator for the acquisitions, Jayendra Naidoo, that the countertrade spinoffs were intended only to provide some additional benefit for what was a necessary purchase of equipment.

They were meant as a "risk management exercise", and it was questionable whether they would provide a boost to the economy, Naidoo said.

Erwin said yesterday that of the R104bn committed, R24bn would come from nondefence investments and the remainder from exports, local sales to the arms suppliers and defence industrial participation contracts.

"I am confident we are already succeeding in considerable measure in getting investments," Erwin said. There was also a "fairly realistic chance" that the 65000 jobs would materialise.

Erwin stressed that government had an overarching policy on national industrial participation regarding all procurements where the imported content exceeded $10m. Its aim was to leverage foreign investment to build up SA's industrial capacity.

Offset projects attached to the arms deal were evaluated and ranked not only on the basis of their value but also in terms of how they contributed to SA's overall industrial strategy. 

With acknowledgement to Linda Ensor and Business Day.