Despite hefty criticism, SA's controversial arms deal is paying off, according to a new report that says the country has already recovered double the amount it spent in buying arms through industrial offset programmes.

SA already has $6,6bn in commitments from offset programmes, a substantial gain on the $3,9bn spent on the arms procurement package, and projects flowing from the deal are expected to create about 7 000 jobs, says a report by Institute for Security Studies defence expert David Botha*.

Botha, however, warned government that it would have to become more vigilant in future as the most easily achievable projects were started first.

He said it would become progressively more difficult for the contractors to find acceptable projects, and constant reviews had to be undertaken to ensure "SA benefits from the full extent of these commitments".

There was also concern about the turnover of staff at the Industrial Participation Secretariat, created by the trade and industry department to ensure the process was properly managed. "There needs to be continuity to ensure that this process is properly managed," said Botha.

He was also critical of government's efforts to make the arms deal accessible to the public.

Still, he said, the strategic defence package deal was, in his experience, "the most transparent of its kind in the world".

Some misunderstandings about the deal had to do with the difficulties in showing that the business created was "new business" and not an extension of activities already taking place. Also, projects tended to be spread over seven years, with credits only being earned years down the line when the economic activity occurred. Business plans for projects were sometimes put together in haste because the tender process was short and later revised with state assistance as they no longer had economic merit, creating a negative impression.

Auditor-General Shauket Fakie attended the presentation of the report with businessmen and senior defence officials.

Botha's report dealt with Armscor's Defence Industry Participation (DIP) programme, which applies an obligation of up to 100% of the value of contracts between $2m and $10m, and the government's National Industrial Participation (NIP) programme, which applies to purchases with an imported value topping $10m.

According to the report, the DIP programme resulted in orders being placed with 38 local companies by this March, creating 677 jobs. The NIP programme has seen the approval of 45 projects to the value of $6bn.

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

With acknowledgements to Chantelle Benjamin and the Business Day.