CAPE TOWN German industrial giant Thyssen has become embroiled in allegations that it offered sweeteners to black empowerment companies to facilitate its successful bid for multibillionrand arms contracts in SA.

The Thyssen group is a member of the consortium which won the R6bn frigate contract, and another which landed the R5,2bn submarine contract.

James Sutherland, a member of the Bafokeng tribe's legal team, claimed yesterday that several empowerment companies were to have received risk-free loans from Thyssen to acquire some of its shares in listed ferrochrome producer SA Chrome & Alloys.

The Thyssen group acquired the SA Chrome shares when the company raised R700m for a new ferrochrome smelter. The Bafokeng have a 22% stake in SA Chrome, acquired for R100m, and will buy R20m of Thyssen's shares.

Sutherland claimed the loans were to have been underwritten by the trade and industry department, which subsequently changed its mind because of the "furore" over the arms deal.

In an unauthorised letter to SA Chrome MD Terry McConnachie, Sutherland said the empowerment parties were upset "that they would no longer receive risk-free loans from Thyssen to acquire shares in SA Chrome & Alloys because they played a role in ensuring that Thyssen acquired the arms deal".

Sutherland's allegations were denied by all involved, and he also faced criticism and possible censure from the Bafokeng administration.

Empowerment consortium Capstone, which is involved in negotiating the acquisition of some of the R60m in shares in SA Chrome being made available to empowerment groups by Thyssen, strongly denied the claims.

Zaid Isaacs of Capstone, which is understood to have members with links to senior government officials, described the allegations as "utter rubbish". He said the group was negotiating loans independently with financial institutions, with no involvement by the department.

A department spokesman also denied claims that it was to have underwritten the loans. The department was not a bank. Government was keen to encourage empowerment and would offer countertrade credits for this, he said.

Bafokeng legal department head Steve Phiri said the Royal Bafokeng Administration was "very embarrassed and disappointed" by Sutherland's incorrect letter. He denied any mention had been made of the empowerment groups having assisted Thyssen with its bid.

McConnachie said the deal would go ahead. He said the department had rejected Thyssen's proposal that nonpayment of the loans it granted to the empowerment groups would qualify as part fulfilment of its national industrial participation obligations.

Sutherland said he planned to submit documents supporting his allegations to the team investigating the arms deal.

With acknowledgment to Linda Ensor and Business Day.