Government should penalise the German submarine consortium for failing to meet its responsibilities to secure investment and sales under arms deal contracts, the Democratic Alliance (DA) said yesterday.

The consortium, led by German company MAN Ferrostaal, was contractually bound to facilitate investment and sales worth à720m by July last year — but is about à520m behind this target, it emerged in Parliament last week.

The consortium, like other suppliers in government's controversial arms deal, had agreed to facilitate so-called offset commitments in nondefence industries in return for securing a multibillion-rand contract to supply SA with submarines.

MAN Ferrostaal missed the July industrial participation milestone by long way, providing less than a third of the participation agreed to, said DA trade and industry spokesman Enyinna Nkem-Abonta.

"I call on the minister to impose a fine, which will serve to show Ferrostaal … SA is serious about enforcing offset agreements," he said.

Such a penalty could be as much as R825m, given that MAN Ferrostaal's submarine contract was recently valued at R8,25bn and that performance guarantees for non-defence offset commitments were, on average, about 10% of the contract price, he said.

Nkem-Abonta also raised concern at MAN Ferrostaal's ability to meet its total offset obligations under SA's controversial arms deal. It has fulfilled only 7% of its R2,8bn total offset commitment in five years and had only two years to fulfil the remaining 93%, he said.

MAN Ferrostaal earlier said it had put measures in place to step up its offset efforts.

With acknowledgements to Carli Lourens and the Business Day.