Cape Town - The offset programme of the multibillion-rand arms procurement package had markedly improved the economic landscape of South Africa over the past six years, according to trade and industry minister Alec Erwin.

Writing in the 2002 review of the national industrial participation programme (NIPP), Erwin said the obligations on foreign arms suppliers had helped to fundamentally and strategically reshape the economy.

The NIPP emphasised industrial expansion on the "basis of mutual benefit, driven by sound business principles so vital to ensure that projects are sustainable over the longer term.

"Investments ... have enabled foreign investors to add value to their local supply chains and guarantee the quality and consistency of local supply, while still making a profit. For the state the benefits are considerable," he said.

The government's industrial participation secretariat was monitoring obligations with participation credits worth about R140 billion covering more than 60 projects.

The programme is obligatory and can be discharged in various ways, including investment, export promotion, research or collaborative business activity.

Not all the industrial offset projects have been a booming success though. The Ecoplug, which is manufactured in Cape Town, has failed to take root because of its reported high price.

The Ecoplug consists of a capsule filled with a herbicide, which kills the root system when inserted into tree stumps. It is one of the projects approved by BAE/Saab, which won the contract to supply Hawk trainer and Gripen fighter aircraft.

Ecoplug South Africa's former marketing manager, Dereck Suckling, said one of the top customers - the government's Working for Water campaign - was not buying enough of the plugs because they were too expensive.

He said the plugs cost about R1.75 each, while the real cost of manufacturing was 40c to 50c.

Speaking from Eskilstuna, Sweden, Ecoplug founder and president Hans Merving said the firm employed 15 staff.

He said the South African affiliate firm was exporting to Sweden, Norway and Finland, with tests and registration procedures under way in 20 other countries, including the US.

According to the review, the NIPP was "explicitly" directed at achieving key national economic objectives such as sustainable economic growth, the development of small, medium and micro enterprises, value-added exports, job creation and economic advantages for the historically disadvantaged.

Lionel October, the deputy director-general for enterprise industry development, said projects were screened beforehand for commercial viability. "They must produce business plans that are tested by sector experts for their viability. We don't want ... white elephants."

The department of trade and industry had a monitoring process, which checked on projects every six months.

October said that, hypothetically, if one project failed, it did not reduce the obligations of companies to South Africa, as "companies just needed to find other projects to invest in" to make up the necessary industrial participation credits.

The department will brief parliament's portfolio committee on trade and industry today on the latest developments concerning the NIPP.

With acknowledgements to Sapa and the Business Report.