New questions have emerged about possible corruption in South Africa's controversial arms procurement deal with reports in the British media that more than R2-billion in commission was paid to confidential agents here by British arms manufacturer BAE Systems.

But both the British government and BAE Systems have denied the allegations, insisting that "due diligence procedures were followed" or that "such payments are corrupt".

Britain's Guardian newspaper reported on Monday that BAE Systems - the United Kingdoms's biggest arms manufacturer - had "paid millions of pounds in secret commissions to obtain a huge UK taxpayer-backed contract to sell Hawk jets to South Africa".

According to the report, the British government had confirmed the payment, a move likely to "fuel the ongoing row about corruption allegations faced by BAE all over the world".

The arms firm had refused to disclose the identity of its confidential agent in South Africa, and Britain's department of trade and industry admitted it did not know who was to receive the money, despite providing loan guarantees for £1,5-billion.

"The commission could be more than £160-million, if it is in line with similar payments in the past," the report said.

Last month the Guardian reported allegations that Joe Modise, then defence minister, had received more than R2-million and that cash had also gone to the African National Congress's 1999 election fund.

ANC spokesperson Smuts Ngonyama on Monday night vehemently denied the allegations. "That is all rubbish, that's nonsense," Ngonyama said.

"We never received money for the election from anyone who was linked to the arms deal."

He charged that the allegations were being manufactured by "agents who are trying to campaign for Democratic Alliance".

"That is a malicious rumour and they're not going to weaken the ANC in the current election campaign."

According to the Guardian, South African government documents showed that the late Modise had intervened to prevent a rival Italian firm, Aermacchi, from winning the multi-billion rand contract. BAE Systems won the bid to supply South Africa with the Hawk lead-in fighter-trainer.

The DA said on Monday night it was "deeply dismayed" at the latest allegations and demanded that a probe be launched "as a matter of utmost importance".

"The latest allegations add further fuel to the perception of a scandal that surrounds the arms deal," said DA MP Raenette Taljaard.

She demanded that the government reveal the identity of the agent that benefited from the commission payment and that the government "must also come clean on whether it received any bribes or commissions linked to the arms deal".

"The president bears a special responsibility to come clean on these issues, as he was the former chair of the cabinet sub-committee that dealt with this procurement," Taljaard said in a statement.

Responding to the allegations, BAE Systems said it was normal for the company to employ consultants and advisers to assist it when operating in foreign countries and that the South African authorities were "continuously informed of the advisers employed by BAE Systems, as required by South African regulations".

Such advisers were used especially in new markets like post-apartheid South Africa, where the company was unfamiliar with the procurement and regulatory environment and processes.

"The use of such advisers is strictly controlled, both under South African and UK regulations.

"Like all defence contractors, BAE Systems is bound by these regulations. BAE Systems always complies with all relevant regulations," BAE Systems South Africa said in a statement.

"BAE Systems rejects any suggestion that any such payments are corrupt either in intent or in fact."

The Guardian quoted Britain's Trade Secretary, Patricia Hewitt, as saying in answer to a parliamentary question that Britain's department of trade and industry's export credit guarantees department required "certain details of agents' commission".

Due diligence procedures had been followed and no irregularities were detected, Hewitt is reported to have said.

With acknowledgements to Jeremy Michaels and the Cape Times.