The unprecedented investigation announced this week into South Africa's controversial R43,8-million arms deal has the potential to deeply embarrass the government.

The preliminary report of parliament's public accounts committee on the deal amounts to scathing criticism of at least two ministers - Joe Modise, the former defence minister and Alec Erwin, the trade and industry minister - who drove the deal. 

The committee also takes a swipe at the cabinet as a whole, saying it failed to be frank about the fuller cost of the weapons purchase, which has already escalated from R30-billion to R43-billion.

But it is the wider nature of the probe that threatens to expose alleged government collusion in the manipulation of major government and parastatal contracts to the benefit of a clique of ANC insiders. 

The committee is taking these allegations seriously. Allegations have been put to the committee that portray a complex web of interlinked deals, of which the European arms purchases are but one element. Other deals include the third cellular licence bid, the prospective sale of G6 artillery to Saudi Arabia and other arms exports, the taxi recapitalisation programme, the proposed smart-card identity system and various oil deals. 

The pattern of connections is repeated throughout the deals covered in the committee's report.

For example, Lambert Moloi, a former general and close aide of Modise, is part of the arms deal and the cell bid, through Futuristic Business Solutions.

Conlog, of which Modise was chairperson, secured a contract to produce electricity metering systems. 

Questions might also be asked as to how Modise funded the purchase of his stake in Conlog. 

Another key figure in the arms deals is alleged to have been a front for the business interests of several cabinet ministers.

Chippy Shaik, who directed the tender process on behalf of Modise, has become a touchstone for concerns about possible conflicts of interest.

While Shaik told the committee he recused himself from consideration of the corvette deal - in which his brother Schabir was involved - the committee, in an apparent reference to Shaik, questioned "whether there was not too great a concentration of influence - from documentation through to decision-making".

The committee is taking these allegations seriously. 

In careful language the report said the committee had received a large amount of evidence "of varying plausibility", which "reflected to a significant degree common ground".

Dr Gavin Woods, an Inkatha Freedom Party MP and the committee chairperson, has said this "big picture" needed to be explored. 

Wally van Heerden, the deputy auditor-general, said he believed the probe should have full access to the records of contractors as well as to the bank accounts and shareholding of key figures involved in the deal.

The committee said that because of "the possibilities of undue influence" having been applied in the selection of prime contractors, further investigation was necessary.

In particular questions will be raised about the decision to award the fighter-trainer contract to the British Hawk, manufactured by BAE Systems.

Impeccable sources say that at least two very senior officials involved in negotiating the deal were unhappy about the way in which the selection criteria were changed to favour the Hawk, which was double the price of its competitor.

With acknowledgement to Sam Sole and the Sunday Independent.