Cape Town - Although German steel maker Ferrostaal's strategic arms procurement package commitments exceed à200m (R1,6bn) thus far, this figure falls far short of its plan to achieve à720m in investment and sales by its first milestone of July last year.

Trade and Industry Minister Mandisi Mpahlwa disclosed the figures to Parliament last week.

His department has not yet announced whether Ferrostaal will be penalised for this nonperformance.

In terms of the offset contract, the company could incur penalties of 10% of its total contract value. Ferrostaal is responsible for the German Submarine Consortium's industrial participation commitments over seven years, valued at about à3bn in investments and sales.

The five largest arms suppliers are obliged to facilitate $13,6bn in sales and investments.

The department's 2003-04 annual report on the national industrial participation programme, released in November last year, expressed concern that Ferrostaal was running out of time to meet the first leg of its commitments.

In reply to Democratic Alliance MP Eddie Trent, Mpahlwa said Ferrostaal had undertaken to build a steel mill in the Coega industrial development zone but this did not go ahead "because conditions at the time proved the investment to be not viable economically".

"It was agreed that the planned integrated steel mill be replaced with various downstream stainless steel beneficiation projects as well as projects in other industries."

Ferrostaal, Mpahlwa said, had made investments in a wide range of industries, including a training centre in Atlantis, a recycling plant for plastic bottles, a turbine-blade facility in Gauteng, and a joint venture to participate in engineering projects worldwide.

With acknowledgements to Linda Ensor and the Business Day.