Johannesburg - The controversial arms deal has begun to bear fruits for the country through the offset programme entered into by the government with all participants.

In terms of the defence purchases agreement, the seller is obliged to invest up to 50 percent of all commercial or industrial activity of the total contract value. The seller has seven years to discharge its obligation from the effective date of the agreement.

One of the participants in the national industrial participation programme facilitated by the department of trade and industry is BAE Systems-Saab from Europe.

Through its obligations linked to South Africa's purchase of Hawk and Gripen military aircraft, the group is providing $8.7 billion of new economic benefits to the country through investment facilitation and exports.

As part of its industrial participation obligation to South Africa, BAE Systems-Saab has embarked on a tourism marketing initiative to lure Scandinavian holidaymakers to Port Elizabeth and the Eastern Cape province at large.

Bernard Collier, a director of BAE Systems-Saab for national industrial participation, said the tourism initiative was chosen for its ability to create sustainable jobs for the locals.

"Tourism is labour intensive. It has a unique ability to create a range of jobs in construction, transport, hotels and restaurants, to name just a few. This shows how important the sector is in driving economic empowerment where it is needed most in South Africa," he said.

Eastern Cape is one of the poorest provinces in the country, with an unemployment rate above 54 percent.

The tourism initiative had already borne fruit, said tourism officials in Port Elizabeth.

Solomon Khunou, the newly appointed chief executive of Tourism Port Elizabeth, said the tourism drive had already resulted in over 5 000 plane tickets and about 90 000 bed nights reserved for the new season by tourists from Denmark, Sweden and Norway.

Analysts said the travel and tourism industry directly contributed about R31 billion of South Africa's gross domestic product, and 7.1 percent indirectly.

BAE Systems-Saab said it had spent about R5 million on marketing Port Elizabeth in the Scandinavian countries and a further R15 million to upgrade the MacArthur Baths complex on the city's beachfront.

Lionel October, the acting deputy-director of enterprises and industry division at the department of trade and industry, said the ministry welcomed the initiative. A similar project was earmarked for St Lucia in northern KwaZulu-Natal.

With acknowledgements to Sapa and Business Day.