The cost of the government’s controversial arms package deal has drastically shrunk because of the stronger rand, an economist said on Wednesday.
The Strategic Defence Package (SDP) was set to cost taxpayers the rand equivalent of $4.5-billion when signed in 1999. That was around R30-billion at the time.
When the rand plunged to an all-time low in December 2001, the price, in rand, increased to around R60-billion. Many expected it to rise to at least R200-billion on the back of continued rand depreciation.
But the rand then steeply recovered for reasons as mysterious as its initial decline.
With an exchange rate of R7,95 on Wednesday, R4,5-billion translated into R35,5-billion.
”We are nearly back where we started,’ PLJ Financial Services economist Dawie Roodt said.
”Although it is cheaper than a year ago, I still do not think it right to spend so much money on arms. There are too many other, pressing, concerns.”
Asked for an outlook on the rand, Roodt said he expected the currency to weaken in the medium to long term.
He urged government to speed up payments under the SDP, expected to last to about 2011, to take advantage of the strong rand.
Under the SDP the SA Navy is to receive four Meko A200SAN patrol corvettes and three Type 209-1400MOD diesel-electric submarines. The SA Air Force will receive 24 Hawk 100 lead-in fighter trainers, 28 Gripen fourth-generation advanced light fighter aircraft and 30 Agusta A109M light utility transport helicopters.
The cost of a flight of four AgustaWestland SuperLynx 300 maritime helicopters, to operate off the corvettes, and provided for in this year’s defence budget, to be voted on by Parliament on Friday, is not included in the $4.5-billion total.
Finance Minister Trevor Manuel set aside around R1,25-billion in the 2003/2004 defence budget for the four helicopters.
Manuel also indicated that, taking into account the expected depreciation of the rand, the entire programme would cost an estimated R52,9-billion. – Sapa