Johannesburg - The financing of the controversial arms deal has resulted in some bizarre agreements, including the establishment of a condom plant by a German steel conglomerate.

The deal is the largest since the end of apartheid and the counter-trade provisions require all those providing the arms to buy South African goods or invest in South Africa to a total amount of US$15 billion by 2011.

German steelmaker Ferrostaal, through one of its investment subsidiaries, owns a 15% stake in a company making condoms with Cologne-based Kondomi, and now Kondomi plans to produce around 100 million condoms a year for the African market.

Unfinished condoms are to be imported from Germany to the plant at East London, where another famous German company has its South African plant - DaimlerChrysler. Here the finished goods will be made up and packed.

Ferrostaal is a member of the consortium that is building three submarines for the South African navy at a total cost of US$857 million.

Mondi and 200 jobs

Sweden's Saab and Britain's BAE Systems, who are providing Gripen fighters and Hawk trainer aircraft respectively, have also come up with unusual schemes to comply with the terms of the deal.

A consortium is investing R600 million in the timber concern Global Forest Products (GFP), founded at the beginning of the year, and the two aircraft manufacturers are providing R55 million in capital.

GFP, which owns forests and plantations as well as three saw mills, is expecting export contracts over the next 10 years totalling around R5 billion.

The concern is a joint venture, with the Washington-based Global Environment Funds owning 51% and the South African paper manufacturer Mondi the rest.

GFP will prevent a saw mill in Mpumalanga from closing and thus save around 200 jobs.

Needing good news

Proudly presenting the scheme in front of the cameras at a presentation in Mpumalanga on 20 November, Defence Minister Moisuoa Lekota announced other investments in a range of projects.

The government is in need of positive news, as the scandal over the project refuses to die down. Defence acquisitions chief Chippy Shaik had been suspended from his post earlier this month.

The recently published report into the deals alleges conflicts of interest was met with criticism and close scrutiny.

'Report censored'

United Democratic Movement leader Bantu Holomisa on Friday called for Shauket Fakie's resignation in the wake of media reports that the executive was given power to influence the arms deal investigation.

Following revelations last week that Cabinet had influenced the drafting of the preliminary and final arms reports, the UDM was "shocked to learn of new allegations that the investigation itself was indeed managed by Cabinet", Holomisa said in a statement.

Last week, the Mail & Guardian reported that the executive invoked sections of the Special Defence Account Act to give government the chance to vet both the auditor-general's September 2000 preliminary report and the joint investigative team's report tabled in Parliament earlier this month.

The Act gave the executive the power to censor the report for reasons of "national interest".

Fakie has denied that "substantial" amendments resulted.

Steering committee kosher?

Friday's Mail & Guardian reported, however, that the executive arm of government from the start placed itself in a position to influence the course of the investigation itself.

This included the establishment of an "audit steering committee", which included, among others, the recently suspended Shaik.

The existence of this "steering committee" raises serious questions about the extent to which Fakie's September 2000 report and this month's final report were "steered", the Mail & Guardian article said.

Holomisa said the fact that people suspected of wrongdoing, such as Chippy Shaik and trade and industry department arms deal negotiator Vanan Pillay, reportedly served on the committee, brought the whole investigation into disrepute.

Instead the terms of reference appeared to have been determined by cabinet through this "steering committee", Holomisa said.

"The auditor-general must resign if media reports regarding this 'steering committee' are confirmed," Holomisa said.

A spokesperson for Fakie said on Friday he was on official business in Europe and could not be immediately reached for comment. He was expected back in the country on Monday.

With acknowledgement to Sapa and News24.