CAPE TOWN ­ German arms manufacturer ThyssenKrupp has fallen behind in its offset obligations in terms of the government’s multibillion-rand arms acquisition.

In terms of the deal, major arms suppliers committed themselves to achieving specified investment and export targets by 2011. These were expected to bring in billions of rands worth of investment and create thousands of jobs.

Officials in the trade and industry department had met the company in Germany to discuss Thyssen Krupp’s underperformance, deputy director-general Lionel October said yesterday.

Last year Trade and Industry Minister Mandisi Mpahlwa sent letters to ThyssenKrupp and MAN Ferrostaal, another supplier in the arms deal, warning them that unless they met their offset targets, penalties might have to be considered. However, penalties have not yet been issued.

October said MAN Ferrostaal, a member of the German submarine consortium, had subsequently come back on track with its investment in an oil-from-gas project in Western Cape, but Thyssen was “not out of the woods yet”.

ThyssenKrupp, which is part of the German Frigate Consortium, had achieved only an aggregate 65% of the 2005 target when the department reported on progress to Parliament in October last year. The report said the company was “being afforded the opportunity to remedy the situation”.

The frigate consortium is at the centre of allegations in Germany that bribes were paid for it to win the contract.

The trade and industry department’s new director-general, Tshediso Matona, said that overall, the offset programme was proceeding well and the department was “very satisfied” with the results so far.

By October last year, it had generated investment and sales credits *1 valued at $3,5bn and created 8000 new direct work opportunities, Matona said.

Public Enterprises Minister Alec Erwin, meanwhile, said government was awaiting formal notification of exactly what it was that was being investigated by German authorities.

He reiterated government’s willingness to co-operate with the investigation but said government remained “very confident that the major contracts not only were well-managed, but many years later have been very successful contracts indeed”.

Democratic Alliance public accounts spokesman Eddie Trent yesterday asked national director of public prosecutions Vusi Pikoli to undertake a review of the award of the corvettes contract to the German Frigate Consortium and the role played by government’s chief negotiator at the time, Chippy Shaik.

With acknowledgements to Linda Ensor and Business Day.