Trade and Industry Minister Alec Erwin rejected the notion on Tuesday that the government had deliberately misled the public on the cost of the country's strategic defence package.

Outlining all factors that could push up the price tag would only have sown confusion, Erwin told a panel investigating the multi-billion rand arms deal in Pretoria.  

He said the government followed the correct approach by adopting standard budget reporting procedures.

Adopting standard budget reporting procedures

"As soon as you start dabbling in different types of figures, you will only confuse yourself."

Erwin was testifying in the public hearings which form part of a probe into the arms deal by three government agencies - the Public Protector, the National Directorate of Public Prosecutions, and the Auditor-General's office.

They are investigating between 40 and 50 allegations of wrongdoing in the arms deal at the request of Parliamentis watchdog public accounts committee.

The deal provides for South Africa to acquire four corvettes, three submarines, 30 light utility helicopters, 24 Hawk lead-in fighter trainers and 28 Gripen advanced light fighter aircraft over the next few years.

Cost estimates for the arms package rose from R30,3-billion in 1998 to R43-billion last year because of exchange rate fluctuations, sparking criticism that the government misled the public.

A wide range of factors had to be considered

Erwin said on Tuesday it would not have been feasible to give a full picture of every single risk factor with regard to possible cost increases. "In risk analysis you literally work with hundreds of figures. You would have needed more than 300 pages to describe all the risks."

It made more sense to report the value of the project in terms of rands when the decision was made to purchase the defence equipment.

Projections could not be seen as the real cost of the project. That figure would only be known once the project was completed.

Erwin said it would not have been sensible to give a "worst-case-scenario" estimate of the eventual cost of the arms package. "But I think one can say that R43-billion is a middle to upper ranking estimate."

Assessing the financial risks of the deal had been a very complex exercise, Erwin testified.

A wide range of factors had to be considered, such as the impact the acquisition would have on financial markets, interest rates, and South Africa's balance of payments.

"This matter was discussed for many hours, late into the night. It has been an immensely complex thing," Erwin said.

"We came to he conclusion that this was a risk worth taking in the light of the defence department's need for equipment."

Erwin rejected allegations of undue influence in the final selection of suppliers. He reiterated that defence acquisition chief Chippy Shaik had made no secret that his brother Shabir was a director of African Defence Systems, a South African company that benefited from the package. It was agreed that Shaik would recuse himself where the company was involved. Erwin said: "It was impossible for any individual to corrode the selection procedures."

The hearings continue.

With acknowledgment to Sapa, Hannes de Wet and Independent Online.