DTI briefing reveals shocking new information on arms deal offsets

Today, Minister of Trade and Industry Rob Davies and officials from his department revealed shocking new information about arms deal offsets to the Portfolio Committee on Trade and Industry. 

There is a public perception that the arms deal offsets were a monstrous political fraud, and the facts that are now emerging seem to suggest that the public's perception was right.

The Minister was appearing before the Portfolio Committee on Trade and Industry to deal with questions raised as a result of a leaked internal audit document, produced by Debevoise & Plimpton LLP, which investigated "questionable and improper payment" made by Ferrostaal, which formed part of a consortium that supplied submarines to South Africa. 

The leaked internal audit document stated that, whereas Ferrostaal had an obligation to invest Euros 3 billion under the arms deal offset programme, they had in fact only invested Euros 63 million.

The department conceded that the leaked internal audit document was correct and that Ferrostaal had in fact only invested a total of Euros 63 million.

During the briefing the department also revealed shocking new facts about the arms deal offset programme, including:

• A total of 50 751 jobs, comprising 16 917 "direct jobs" and 33 834 "indirect jobs", had been created as a result of the arms deal offset programme, rather than the 65 000 jobs promised;
• the total actual investment by each of the arms deal companies under the offset programme was as follows:

• the German Submarine Consortium was awarded an offset credit of Euros 300 million for a movie about Nelson Mandela, entitled "The Long Walk to Freedom", that had not actually been produced. The offset credit included a Euro 120 million "investment credit", based on an actual investment of Euro 7.5 million, and a "sales credit", based on projected sales, of Euro 180 million.

How is it that BAE/Saab, which supplied the Gripen and Hawk aircraft, could get an offset credit of US$7.2billion, when they only actually invested US$203 million? 

And how is it that Ferrostaal, which supplied the submarines, could get an offset credit on Euros 2.85 billon, when they only invested US$63 million?

There are clearly some serious questions to be answered about how the arms deal offset credits were awarded, and how the so-called "multipliers" were applied, given the wide variance between the total obligation and the actual investment by each arms deal company.

This can only be done if the Department of Trade and Industry lay their cards on the table and provide a full report on the arms deal offsets.

This the Minister has agreed to do.

The Democratic Alliance (DA) therefore welcomes Minister Davies' commitment to make a full report on the arms deal offset programme available to the Portfolio Committee on Trade and Industry.

This will bring an end to a struggle, spanning more than a decade, to squeeze detailed information of the arms deal offset programme from the Department of Trade and Industry.

We look forward to receiving the report.

Statement issued by David Maynier MP, DA Shadow Minister of Defence and Military Veterans, March 16 2012

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