A report by public broadcaster Swedish Radio this week — alleging that suppliers in SA's controversial arms-procurement programme had exaggerated offset investments to sell aircraft to SA — has elevated concerns that suppliers are not living up to their promises.

The suppliers named in the report, Swedish company Saab and British company BAE, said yesterday the report was inaccurate.

The Swedish radio report is not the first development to prompt questions about suppliers' intention or ability to deliver on the offset projects they promised to deliver.

It comes after it emerged at the end of last year from a government report that three of the five largest suppliers in government's controversial arms-procurement programme were behind schedule in meeting their offset obligations.

The five largest suppliers, including aircraft suppliers Saab and BAE Systems, were obliged contractually to facilitate $13,6bn in sales and investment in new economic activity in SA over several years.

The merits of offset programmes — seen widely as sweeteners to win support for arms deals — have been questioned by the World Bank and the World Trade Organisation.

The Democratic Alliance (DA) said yesterday it would pose a series of questions in Parliament to Trade and Industry Minister Mandisi Mpahlwa to establish the accuracy of the Swedish reports.

DA trade and industry spokesman Enyinna Nkem-Abonta said Swedish public radio reports indicated that 21 of the 26 investment projects, promised by BAE and Saab as part of their offset commitments under the first arms deal, had been rejected or terminated.

"These allegations cast a shadow over the investment component of their offset agreement where it was previously believed that they were fulfilling their obligations," Nkem-Abonta said yesterday. "If the allegations are true it will mean that BAE and Saab are in breach of their offset agreement.

"In November last year, in correspondence with the trade and industry minister, the DA ascertained that the sales component of their offset agreement had fallen short of the milestone target by more than R782m," he said.

Saab and BAE Systems both said the Swedish Radio report was factually incorrect.

The weapons makers quoted trade and industry deputy department director-general Lionel October as saying in November last year that for its first deadline of April 2004 BAE and Saab achieved 149% of its investment target and 93% of its sales target.

A statement issued by Saab and BAE Systems said the Swedish Radio report appeared to confuse a list submitted to government to show Saab's ability to create offset for SA's purchase of Gripen aircraft with the projects being undertaken by the supplier.

"The list was a demonstration of abilities, not a list of concrete promises," the statement said.

It also said that government had accepted the list for what it was — a list of possibilities.

Meanwhile, government is still deciding whether or not to penalise a German consortium of companies, led by MAN Ferrostaal, which was supplying submarines under the arms deal.

The German Submarine Consortium failed to meet its mid-term targets for offsets in nondefence projects last year.

The consortium said last month it made R24m available to set up an industrial training centre in Atlantis, Cape Town.

A spokesman declined to comment at the time on whether the consortium was concerned about a pending government decision on whether to penalise it over its obligations.

With acknowledgements to Carli Lourens, Linda Ensor and the Business Day.