French arms company Thales yesterday gave a $50m loan facility to help develop small businesses in SA’s poorer provinces.

The company formerly known as Thomson-CSF is giving the loan under its offset obligations for contracts it received under SA’s rand arms deal.

The loans, offered in conjunction with Calyon, a unit of Crédit Agricole, will come under lending operations administered by government’s Industrial Development Corporation (IDC).

IDC chief financial officer Gert Gouws said yesterday that with an interest rate lower than the prime rate, the funding was the cheapest source of commercial lending the corporation had received to date.

The loans are not meant to compete with those offered by commercial banks as the IDC funding will be project-specific and unrelated to the purchase of an asset or an overdraft facility.

The loan will not use any asset owned by the business as collateral, but rather use the project it is funding to act as security.

A critic of the arms deal maintained yesterday arms-offset projects were a waste of money.

Terry Crawford-Browne, head of Ecaar-SA, an organisation of economists opposed to arms purchases, said arms-offset deals were like a “pyramid scheme” that enticed governments into buying expensive weapons they did not need on the promise of inward foreign investment.

There is no clarity on the extent or value of total offset projects committed to by arms-deal suppliers to date.

Many countries have given up requiring offset projects in return for government contracts because the benefit of them to the local economy is questionable.

Sipho Zikode, chief director of the industrial participation secretariat at the trade and industry department, said, however, that apart from a “few problem projects” the companies involved in the arms deal were on their way to meeting investment targets.

He said government’s National Industrial Participation Programme, which gets the winners of all large government contracts to invest in SA, has seen more than $1bn go into offset projects.

Thales International Offsets director-general Jean-Claude Climeau said his group was in line to meet its targets.

One venture he did mention was the provision of drivers licences to the public by firms under contract to government.

Convicted fraud Schabir Shaik won a R265m contract to supply credit card-sized licences through his Prodiba consortium.

Shaik was found guilty last month of fraud and corruption over the arms deal, including his efforts to solicit a R500000 payment for former deputy president Jacob Zuma from Thomson-CSF.

Climeau would not comment on the fraud charges Zuma was now facing. “I only deal with offsets,” he said.

With acknowledgements to Larry Claasen and the Business Day.