Officials duck and dive around moribund jobs-for-arms schemes SA's arms-buying programme looks like being shot from the sky. Flak is buffeting it from all sides: parliament's standing committee on public accounts, the Heath Investigative Unit, the Public Protector, the Office for Serious Economic Offences and the Auditor-General (see page 42). 

Some of the contracts may be cancelled if a forensic investigation, now under consideration by the parliamentary committee, finds serious irregularities in the way they were awarded. When Cabinet approved the initial plan to upgrade the SA National Defence Force's arms capability, it was going to cost the taxpayer just under R29bn over 12 years. In return, SA would benefit by more than R110bn in foreign investment, increased exports and local sales from several "offset deals".

More importantly, government promised that these would create 65 000 new jobs. SA could not afford not to do this, critics were told. 

Today, it's practically impossible to find anyone in government willing to repeat those promises. In fact, it's difficult to find anyone who's willing to talk about it at all. Though several high-priced defence contracts have been awarded, details of the industrial offset deals are sketchy, at best. 

The one official who should know, the Department of Trade & Industry's director for industrial participation programmes, Vannan Pillay, failed to turn up at a scheduled meeting with the FM and has ignored repeated telephone and faxed inquiries.

The "latest estimate" by the Defence Department is that the armaments systems will cost R43,828bn. This includes projected inflation and "expected exchange rate movements", but not finance costs, which will be substantial. 

Not including these costs in the original figure was, as one insider puts it, "enormously stupid". Or deceitful. Not  only are we paying more, we're getting less. Jayendra Naidoo, SA's former chief negotiator in the arms deals, has admitted that the offsets should be seen as a "risk management exercise" rather than growth promotion.

The overall effect of the process will be economically neutral, he says. Similarly, the figure of R110bn has been revised to R104bn. And even that seems no more than a thumb-suck. ANC MP and public accounts committee member Andrew Feinstein has led most of the questioning during the committee's hearing on alleged irregularities in the allocation of tenders. "To be saying the effects are going to be economically neutral, specifically in relation to the balance of payments, is not saying much. That certainly isn't how it was originally presented to parliament."

The head of acquisition at Defence, Shamin "Chippy" Shaikh, told the committee he was not concerned about the enforceability of the counter-investments promised by the various contractors, even though guarantees to  the amount of only R3bn had been obtained. He says the contractors are bound by the contracts they have signed, yet representatives of some of the consortia say they are renegotiating their contracts. No-one knows why.

Part of the problem is that a number of government departments are involved, yet none of them is in charge of the process. Feinstein says this is cause for real concern. "It isn't clear whether all these benefits are being coherently monitored and managed and we're not sure which benefits to expect at all." 

Parliament is expected to order a complete forensic investigation into the process by next month. If it is shown that there have been serious irregularities, some of the contracts may be cancelled. More details could come to light this week, when the committee's hearings continue. But even if no irregularities are found, the impression will remain that the benefits to SA have been grossly exaggerated.

With acknowledgement to Willem Kempen and the Financial Mail.