Taxpayers stand to fork out almost R50-billion for eight A400M military aircraft - a 600% increase on the price at which they were to have been supplied when the contract was signed in 2005.

"I expected a high number, but I didn't expect a number that big"

High Flyer: Eight Airbus A400M aircraft like this one will each cost South African taxpayers R6.25-billion
Photograph by: AIRBUS

Sipho Thomo, chief executive of the state-owned military acquisitions company Armscor, stunned members of the parliamentary portfolio committee on defence yesterday when he revealed that cost overruns had pushed up the price of the eight aircraft from R17-billion to about R47-billion.

South Africa has already forked out almost R3-billion for the specialised aircraft, but technical delays mean that they are likely to be delivered only in 2016 - four years behind schedule.

Thomo told the committee that Airbus, a European consortium that produces the A400M, told Armscor of the price increase at a meeting on Thursday last week.

This prompted a shocked committee chairman, Nyami Booi, to point out that the cost of the aircraft would be more than the department's annual budget.

"The department's budget sits at R32-billion. So it is either we close that Airbus [sic] or we close [the department]," he said.

The revised price estimate puts the cost of the aircraft at about R6.25-billion each.

The A400M is designed to transport tanks, military helicopters, soldiers and supplies.

Military experts said the aircraft would be useful for the army when on peacekeeping missions.

The huge price increase is despite the inability of Airbus to meet the delivery dates agreed with Armscor in 2005.

"After our meeting last week, they now want to increase the cost of the aircraft. A rough estimate indicated that the cost will move from R17-billion to R47-billion, somewhere there," Thomo told the committee.

He said he had asked the secretary of defence, Tsepe Motumi, to ask for an urgent meeting with Defence Minister Lindiwe Sisulu to discuss the price increase.

Only the Cabinet can decide to scrap the deal.

"I've asked the defence secretary to get a slot for us so we can brief the minister about this before we take it to the Cabinet because they must make a decision by the end of October," Thomo said.

The government announced its intention of buying the eight aircraft in December 2004 and, according to Armscor, has already paid R2.9-billion to Airbus. A further R1.1-billion is due later this month.

DA MP David Manynier, who grilled Armscor officials yesterday, said: "I expected a high number, but I didn't expect a number that big."

The DA called on Sisulu to scrap the deal immediately.

Thomo said a Cabinet decision was needed urgently.

"If the state is prepared to absorb this huge increase, what are the steps to carry on with the project? If it is not, we would terminate the project. That decision needs to be made by the end of October," he said.

Armscor general manager Sipho Mkhwanazi said Airbus had explained the cost increase.

When the A400M acquisition programme was announced by then defence minister Mosioua Lekota, in 2004, it was estimated that it would cost the country R7.5-billion.

The eight aircraft were to be delivered in 2012 but, because of "technical delays" at Airbus, they are now expected to land in South African in 2016.

It is understood that 192 orders for the aircraft have been placed by nine countries but the Airbus consortium is yet to deliver a single plane.

Military expert Helmoed Rohmer Heitmann said that, though South Africa needed the aircraft *1, the cost was too high.

"In view of our involvement in the continent and the demands on our military, we can only rely on Airbus to carry our heavy load. But what is of concern is the costs that have just shot up," he said.

Heitmann said the government should look at alternatives, including buying similar but cheaper Russian or American aircraft.

Defence spokesman Sipho Dlamini said Sisulu was concerned about the soaring costs and the delivery delays.

"The minister will wait to be briefed by [the] Armscor CEO before taking action or approaching the Cabinet.''

With acknowledgements to Nkululeko Ncana, Dominic Mahlangu and The Times.