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SA cancels ¤3-bn Airbus contract

  1. Posted on Wednesday 11 November 2009 - 10:22
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    South Africa has cancelled a deal to buy eight Airbus A400 military transport aircraft after Airbus failed to meet deadlines and costs ballooned.

    Government spokesman Themba Maseko admitted that government had cancelled the order for the aircraft.

    “The termination is due to extensive cost escalation and the supplier’s failure to deliver the aircraft within the stipulated timeframe,” said Maseko.

    In December 2004, when the South African government announced that it wanted to procure the planes, it was expected that the aircraft would cost ¤837-million (or R6.4-billion at the time).

    However, by the time the contract was signed in 2005 this figure had escalated to R17-billion, and subsequent delays pushed the price up to about R40-billion (¤3.5-billion) according to Maseko.

    Maseko added that this cost would be an “unbearable burden” on taxpayers.

    The final total costs for the planes is, however, unclear as last month Sipho Thomo, head of the State arms procurement agency, said the planes would cost R47-billion (¤4.2-billion). Airbus refuted this, saying although it was still in discussions with government that this price tag was “wildly exaggerated”.

    Minister of Defence and Military Veterans Lindiwe Sisulu has said that government planned to have the R2.9-billion (¤260-million) it has already paid towards the contract refunded to National Treasury.

    Sisulu added that it didn’t make sense to spend so much on the planes when the country had more pressing needs.

    South Africa’s former president Thabo Mbeki, who was more international in his approach to development, has lashed out at the cancellation saying that the country would not be able to meet its peacekeeping commitments on the Africa continent without the investment.

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