Mon séjour en Afrique du Sud (Cape Town)

The German Submarine Consortium (GSC) is determined to show that the industrial participation (IP) component of the controversial multi-billion rand arms deal works.

The GSC, through its IP partner Ferrostaal, have forged, what it says is South Africa's first black economic empowered (BEE) engineering services provider to the mining industry.

Ferrostaal's local subsidiary, Ferroman, now owns 30 percent of minerals process engineering and project management specialist Metallurgical Design and Management (MDM), a Randburg-based company.

The BEE component is provided by South 2 South, a facilitations company established last year.

"The partnership builds on MDM's strengths as a highly flexible boutique provider of turnkey mining projects the financial muscle, global reach, and skills depth of Ferroman's parent, Ferrostaal AG of Essen, Germany, and the Africa-focused project management solutions of South 2 South," MDM and Ferroman said in a joint statement.

The announcement of the deal, for which no financial value could be given, comes in the wake of yet more scepticism that offsets could work.

Earlier this week it was reported that two of the five defence companies contracted to manufacture ships, submarines, helicopters and fighter aircraft might have to pay millions of rand in fines for not meeting their deadlines to invest in the domestic economy and create more jobs.

When the R29 billion arms deal was signed in 2000, armament companies undertook to invest in the South African industrial sector, generating R104 billion and 65,000 jobs.

The report added that the Department of Trade and Industry (DTI), in a recent briefing to the Cabinet, confirmed that two of the companies might be fined five percent of their non-defence IP investments for falling short on the promised investments.

The DTI is considering giving the companies more time to produce the goods.

"We have to look at their efforts... it is a challenge to South Africa that we are not going to punish (the companies) if they don't meet contractual obligations or fall short of meeting five percent of their milestones. Do we really have to ignore the 95 percent of their excellent (investments)?" asked DTI chief director Sipho Zikode.

The main contractors, other than the GSC are: BAE Systems of Britain, Agusta of Italy, Thales of France and the German Frigate Consortium (GFC).

By the end of the year the GSC is expected to have delivered offsets worth US748 million, BAE US2.3 billion, GFC US56.5-million, Augusta US42.6 million and Thales US278.4-million.

Ferrostaal managing director Stephan Gehlhoff declined to comment on progress to date, saying it was for Zikode to do so, in order to "avoid false rumours."

He did repeat, however, that Ferrostaal was committed to delivering the offsets it promised in 2000.

"There can no longer be any doubt that besides helping re-equip the SANDF (SA National Defence Force), South Africa's defence procurement is also creating real economic benefits for the country," Gehlhoff added.

He added that the tie-up with MDM made up a considerable portion of its offset obligations.

MDM chief executive Robbie McCrae said the deal was their first venture into BEE. As a mining service company he said they were bound by the mining charter.

The company already had employment equity and affirmative procurement policies.

"The new partnership allows MDM to expand its horizons even further," he said, pointing out new business already obtained through Ferroman in Kazakhstan, Russia's far-eastern Kamchatka region and northern Sweden.

"At the same time we have become the first empowered supplier of minerals process engineering and project management to the South African mining and beneficiation industries."

However, South 2 South's Zaid Isaacs and Julekha Mohammed said it would take a year or two to "operationalise" the BEE deal.

McCrae confirmed this, adding it was within Mining Charter time frames.