Detached: President Thabo Mbeki

From the start, President Thabo Mbeki wanted South Africa's notorious arms deal, even if it meant gambling with the economy.

He was presented with the affordability report on the evening of August 27 1999 *1 at his Pretoria residence, which gave a breakdown of the economic and financial risks involved.

The intention of the presentation was to guide Mbeki into making an appropriate final decision on the scale and nature of the purchases of weaponry.

At the meeting were the director-general in Mbeki's two-month-old presidency, the Rev Frank Chikane; his economic adviser, Moses "Moss" Ngoasheng ; the head of the arms deal's "international offers" negotiating team, Jayendra Naidoo; and development economist Stephen Gelb, who had helped write the 57-page report.

The Sunday Times is in possession of this document.

The impact of the deal on the country's GDP, growth, balance of payments and employment were outlined, as well as the risks associated with interest-rate increases and exchange-rate fluctuations. But, throughout, Mbeki remained largely disengaged *2.

He was warned that two independent international steel studies ­ which South African taxpayers forked out millions to commission ­ characterised MAN Ferrostaal's Coega promise of a stainless steel mill as high risk. He ignored this. What he did say was that it was "all very interesting" *3.

Mbeki went on to tell the meeting that then French president Jacques Chirac had asked him why Africans did not take responsibility for peacekeeping and related problems on the continent.

That was why, Mbeki said, South Africa needed the arms.

By the time Mbeki sealed the arms deal, he had spent the equivalent of:

• That year's entire housing budget; or
• More than half of the investment in municipal infrastructure; or
• Almost half the education budget.

No other government expenditure had ever matched the size of the arms deal, and it was expected that domestic interest rates would have to rise to counter the inflationary effects of the weapons purchases.

This was exacerbated by the fact that the money would all be spent outside the country.

Besides the large sums of money involved, the expenditure came with fixed contractual commitments over many years.

At the time, Mbeki committed to spending R36-billion; now, nine years later, it is believed to be a lot more. The final amount, though, has been keep secret.

Taxpayers forked out R6-billion for three submarines, R7-billion for four navy corvettes, R9-billion for helicopters *4, R2-billion for light utility helicopters and R5-billion for lead-in fighter trainers.

The government borrowed from a variety of international institutions to buy the arms ­ and South Africans will be repaying those loans until 2018.

Moreover, the deal would eventually cost far more than the original costing, and plunge it into high-profile corruption allegations, court cases and scandals.

With acknowledgements to Megan Power, Jocelyn Maker and Sunday Times.

• R2 billion for light utility helicopters (30 x Agusta LUH);
• R1 billion for maritime patrol helicopters (4 x Agusta-Westland MPH);
• R9 billion for advanced light fighter aircraft  (28 x Saab/BAE Systems Gripen JAS39 ALFA);