Publication: Business Day Date: 2005-12-05 Reporter: Carli Lourens Reporter:

Arms-Deal Offset Policy to be Changed, says Mpahlwa

 

Publication 

Business Day
Date

2005-12-05

Reporter

 Carli Lourens

Web Link

www.bday.co.za

 

Changes would be made to SA’s offset policy, the trade and industry ministry said last week.

The policy, through which those who win large government contracts supplying goods with more than $10m of foreign content have to facilitate projects that grow the domestic economy, has drawn wide criticism for the way in which it has been executed.

Government has been criticised particularly for being evasive on whether, and how, suppliers in its multibillion-dollar defence programme have met their contractual offset obligations to date.

Several suppliers have failed to meet their obligations, but have not been penalised by government ­ as it promised to do when the arms deal was inked.

Trade and Industry Minister Mandisi Mpahlwa said in a written reply to a Democratic Alliance (DA) question in Parliament last week that the circumstances that had informed the initial policy had changed and the policy would be adjusted accordingly.

But it is unclear what direction the change may take.

An unnamed source in the defence industry said suppliers wanted government to change the offset policy so that infrastructure projects could qualify as offset projects.

This could open up the way for costly infrastructure projects, such as the R20bn Gautrain, to be funded indirectly from the arms deal.

The DA has, however, called for the offset programme, known as the Industrial Participation Programme, to be abandoned.

Instead, SA should have a procurement policy that emphasised least-cost tendering and greater transparency, the DA said last week.

The use of offsets in government procurement fell out of favour with the World Trade Organisation, the International Monetary Fund and the World Bank some time ago.

They are notoriously prone to corruption *1 and the measurement of compliance often proves to be tricky, said DA trade and industry spokesman Pierre Rabie on Friday.

“Government’s failure to report candidly on the state of compliance of MAN Ferrostaal is a case in point,” he said.

The DA said if an investment opportunity or project in SA was profitable, investors would find their own way to SA’s shores. “If not, firms bidding for contracts will build the cost of the project into the deal, and pass the cost on to taxpayers,” the party said.

The trade and industry department said in October that, so far, $1,5bn of the $4bn in investments required over the lifetime of the offset programme had been committed and invested. The programme ends in 2007 for four contractors and in 2011 for the BAE Systems-SAAB consortium.

However, exports and sales have not met milestones, with only $2,3bn of the required total of $14bn *2 having been achieved.

The department said that between March last year and August this year 134 defence and nondefence offset projects were approved.

With ackowledgements to Carli Lourens and Business Day.


*1  Offsets are a scam whereby foreign arms dealers and their new-found incountry buddies, some from the new dispensation, some from the old dispensation,................

*2  And Chippy told us in early 1999, very openly and frankly: "The government does not care about the equipment itself, only about the counter-trade (offsets)".