Few of the promised heavy industrial projects stipulated as offsets under the controversial multibillion-rand arms deal have materialised; instead South Africa gains a condom factory, Scandinavian package tours, a mohair yarn project and a jewellery plant.
South Africans have been promised about R140-billion in offsets to justify the expense of the arms package. But even if official figures are to be believed, only a third is direct investment. The rest is in credits for so-called export promotion.
The Department of Trade and Industry says the BAe-Saab consortium, which won the aircraft tender, has a total National Industrial Participation (NIP) obligation of $7,2-billion. This is split into $2-billion in investments and exports of $5,2-billion.
Of this, the consortium’s 21 projects that have already been approved or are under way are valued at $2,405-billion: $423-million in investments and about $1,982-billion in exports.
Ferrostaal, which is part of the consortium providing corvettes and submarines, has a total NIP obligation of 2,85-billion euros. So far projects worth 1,718-billion euros have been approved, split between investments of 515,7-million euros and exports of 1,202-billion euros.
In 1999 offsets linked to the then R29-billion arms deal were esti-mated at R110-billion — later revised to R104-billion and now about R140-billion — and 65000 jobs were supposed to be created. A question mark hangs over the number of jobs that have been created.
Meanwhile, the cost of the arms deal — four corvettes, three submarines, 24 fighter and training aircraft and 30 light utility helicopters — has officially jumped from R30-billion to about R53-billion. Unofficial estimates are much higher.
The Department of Trade and Industry says arms deal contractors have beat the first of three NIP deadlines of 2004: about $2-billion of a $3,9-billion obligation has already been committed or invested.
A detailed breakdown of figures on approved NIP projects and those under way show how offset benefits can be inflated:
A condom factory in East London is being built to provide 100 jobs after Ferrostaal invested 15-million euros. But the project is officially valued at 72,6-million euros, including exports.
Cape Mohair, a spinning and yarn- dying project funded by Augusta, which won the helicopter contract, is up and running in Port Elizabeth after a $1,3-million investment. Its off- set benefit is valued at $13,2-million, including exports of $11,7-million.
Oro’Filk Gold in Cape Town makes gold jewellery after a $5-million investment by Augusta. Officially it is worth $84,7-million.
BAe-Saab invested about $90-million to take over a timber mill near Sabie. This Global Forest project is valued at $171-million, including exports.
Saab has spent about R10-million to upgrade a swimming pool in Port Elizabeth for Scandinavian tourists. Negotiations for a direct South African Airways flight from Copenhagen are under way ahead of the first tour, scheduled for October.
Thyssen, part of the submarine and corvette bid, has bought five years of production at the SA Chrome plant, which came on line in May after a $18,5-million expansion. The purchase commitment is expected to generate a total of $572-million in offset credits.