President Thabo Mbeki was allegedly paid R30 million by a German shipbuilding company to guarantee it would receive a submarine contract in South Africa's multi-billion rand arms deal, said the Sunday Times on Saturday.

The newspaper said in an article to be published on Sunday, that a secret report compiled in 2007 by a United Kingdom specialist risk company revealed the deal.

Mbeki allegedly gave R2-million of the money to Jacob Zuma and the rest to the African National Congress.

The consultancy was apparently commissioned to write the report by a leading Central European manufacturer to investigate the business practices of shipbuilder, MAN Ferrostaal, which had launched a hostile takeover bid against it.

MAN Ferrostaal, which led the German Submarine Consortium (GSC), won a more than R6 billion contract to sell three submarines to the SA Navy.

In return it apparently promised to build a R6 billion stainless steel mill at Coega in the Eastern Cape, providing 1 000 direct jobs and 3 000 indirect jobs.

"The project, which promised billions of rands in export and local sales, has not happened," said the newspaper.

The paper quoted from a section of the report that alleges:

"A former South African official who had access to such information informed us in confidence that Ferrostaal paid R30-million to current President Thabo Mbeki to gain the arms contract in the first place.

"When questioned by investigators in South Africa, Mbeki claimed that R2-million was given to his former deputy president Jacob Zuma and the rest went to the ANC."

The report apparently said the information was unlikely to be leaked in the near future "because Mbeki maintains a tight (rein) on the National Prosecuting Authority where this matter would be dealt with".

The report also alleges that SA intelligence services have proof that MAN Ferrostaal paid Mbeki the bribe.

The Sunday Times said a draft report into the submarine contract, drawn up by the attorney-general (sic) in May 2001, was "diluted and sanitised" before being included in the final report of the Joint Investigation Team, set up to probe the arms deal.

The draft apparently says "deviations from the approval process occurred" and that "good procurement practices were lacking" during the submarine bidding process, said the Sunday Times.

For example, Tipp-ex was apparently used on the evaluation working papers contrary to instructions.

Corrections made were not initialled by anyone.

The attorney-general apparently questions what impact this might have had on the evaluation process.

The newspaper also said Mbeki allegedly ignored an August 1999 affordability study and two independent steel reports which assessed the economic and financial impact of the arms deal.

The reports apparently warned that Ferrostaal's stainless steel offset project was "high risk and likely to fail".

The Sunday Times said Mbeki's spokesman Mukoni Ratshitanga said the allegations were "of such fantastical proportions as not to warrant any response."

ANC spokeswoman Jesse Duarte apparently told the newspaper that anyone with evidence of corruption should take it to the police.

"Anyone can write a document and claim it is authentic," she told the Sunday Times.

MAN Ferrostaal dismissed the allegations as a "fishing expedition" aimed at destroying the reputation of the company and the SA government.

The Sunday Times said its editor Mondli Makhanya would post a podcast on the Times website at midnight giving his reasons for publishing the controversial report.

On Saturday, Ratshitanga told SABC news that anyone with evidence of corruption against Mbeki should come forward.

He pre-empted the Sunday Times report coming out, saying it contained allegations that did not warrant a response.

"Anybody who has got a case to make against any South African, including the President of the Republic, must simply approach the law enforcement agency *1," Ratshitanga was quoted as saying at the time.

With acknowledgements to Sapa.