Projects flowing from the country's multi-billion rand arms deal have directly created nearly 6 700 jobs, it emerged at an Institute for Security Studies (ISS) seminar in Pretoria on Tuesday.

"There is an enormous amount of good news behind the strategic defence package offsets," said David Botha*, an ISS consultant who has worked in the local defence industry for several years.

He also praised the much maligned arms deal as "the most transparent deal ever done in the world".

There had been an enormous amount of scrutiny, Botha said.

"It is the most open deal ever done."

The audience included several prominent people in the defence industry, as well as Auditor-General Shauket Fakie.

In newspaper reports earlier this year, Fakie was accused of omitting vital facts from the final report resulting from an investigation into the arms deal, and also of changing facts in the report.

Fakie subsequently said he was of the opinion that he had not limited the report in any way.

In terms of the arms deal, companies that won tenders to supply equipment are required to re-invest certain percentages of the contract value in South Africa's economy - termed industrial participation programmes.

The arms procurement agency Armscor has a policy whereby Defence Industrial Participation (DIP) obligations apply to purchases of between US2-million and US10-million.

The government's National Industrial Participation (NIP) programme applies to purchases with an imported value exceeding US10-million.

When the deal - then worth US3.9-billion or R24.9-billion - was signed in December 1999, provision was made for DIP of US2.4-billion (60 percent of the contract value) and NIP of US14-billion (350 percent).

It meant that economic activity of more than four times the value of the contract would be generated, Botha said.

"This was the largest industrial participation commitment ever made."

At the end of March this year, the suppliers were ahead of schedule with their DIP commitments.

"Orders have been placed with 38 local companies, and the estimated work content of the contracts placed is 3.6-million man-hours, or an estimated 1 677 jobs."

Botha pointed out that most of the commitments were for direct DIP, such as subcontracting, with most of the indirect DIP still to be identified and contracted.

The interaction between the contractors and the South African industry had various indirect benefits, he said.

These included increased exposure of the local players to people at decision-making level in the international arena.

"That served to dispel the perception of South Africa as a third-world country lacking in sophisticated technology and political stability."

There had been cases of partnerships between local and foreign companies.

"Several companies dramatically increased export business, some or most of which does not form part of the DIP credits."

By March, 45 projects had been approved under the NIP programme - of which the total value exceeded 40 percent of the commitment.

An example was the establishment of a condom factory in the Eastern Cape by the German Submarine Consortium. This had created 520 new jobs, Botha said.

Due to the involvement of Swedish company Saab, about 1 000 Scandinavian tourists were brought to the Eastern Cape every month, he said. [Is this one of the "low-hanging fruits" of national industrial participation? What a joke.]

According to the Department of Trade and Industry, NIP projects have created some 5,000 direct job opportunities.

Regarding industrial participation and the arms deal as a whole, Botha said "The contractors are demonstrating real commitment by the size of the operations they have put in place... and the results to date are very encouraging..."

"There is every indication that we are getting good value for money spent."

However, he warned that the early successes might be due to the tendency to go for the "low-hanging fruit" and that it would become progressively more difficult to find acceptable projects.

As the fulfilment period neared its end, it would also become more difficult to bring activities to fruition, Botha said.

"The next few years will be critical."

* [Dawid Botha was previously a senior manager at Armscor and later an executive director of Altech Defence Systems (ADS).] 

With acknowledgements to Sapa and the Business Day.