Publication: Cape Argus Issued: Date: 2008-10-23 Reporter: Gaye Davis

R17bn Extra on Arms Deal, says Ministry

 

Publication 

Cape Argus
Date

2008-10-23
Reporter Gaye Davis

Web Link

www.capeargus.co.za



South Africa's controversial arms deal could cost more than R47 billion - nearly R17bn more than the original amount, the Department of Defence has revealed.

In a written reply to a parliamentary question from the Freedom Front Plus, the ministry says the value of the Strategic Defence Package at the time of contracting was just over R30bn (in 1998 rand value).

During 2000 the projected sum had grown to R43.828bn, based on fluctuations in the exchange rate at that time, the ministry says in its reply.

A total of R36.114bn has been spent on the Strategic Arms Acquisition programme to date.

Programmes still to be finalised involve the Gripen and Hawk aircraft and Agusta A109 helicopters.

"The submarines and Corvette programmes are (to) all intents and purposes complete, except for some outstanding funding commitments liable on logistics," the ministry's reply says.

"The 2008 projection for the total cost to completion of the Strategic Defence Package is R47.525 billion."

Freedom Front Plus MP Peter Groenewald said the extra cost was "disconcerting".

With acknowledgements to Gaye Davis and Cape Argus.


I very much doubt that the total amount is only R47 billion.

That escalation seems to have been derived from a simple year on year increase of 4,5%.

In reality, the local component effectively doubled in price due to CPI escalation whereas the foreign component would have escalated at around 4,5% annually in real terms plus the Rate of Exchange component (R6,25 = USD1,00 in 1998 to R11,50 = USD1,00 in 2008).

My estimate is that the current 2008 value is R55,8 billion.