CAPE TOWN SA's arms deal cost R141,5m more than planned in the first year of payments, but about R250m had been saved on the original R30,3bn price tag, according to a reply by Finance Minister Trevor Manuel to a parliamentary question.

Manuel, in a written reply to a question from Democratic Party MP Raenette Taljaard, said in the period from April 1 last year to March 31 this year, arms deal payments increased by R141,5m.

Of this, R95m was a result of price escalation; rand exchange rate "adjustments" accounted for R45,6m. The original payment for the period was R2,719bn, with the final actual payment R2,860bn.

Taljaard had asked Manuel whether there had been any escalations in the cost of the defence package under the escalation clauses in the contracts.

She also asked what mechanisms were in place to "ameliorate the negative impact of the escalation clauses" on the overall cost structure of the package.

Manuel replied the escalation clauses in the contracts provided for price adjustments in line with "industry-wide cost inflation either locally or in the relevant supply country". These were standard provisions in long-term supply contracts, Manuel stated.

Manuel stated the original R30,3bn price tag had been reduced to R30,05bn as a result of negotiations for the "final commitments" a saving of R250m.

He stated the defence package's cost had increased from R30,050bn to R37,5bn as a result of price escalation. This figure apparently excluded an estimate of how rand exchange rate fluctuations would add to the price. 

With acknowledgment to Wyndham Hartley and Business Day.