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Last Updated: Tuesday, 4 October 2005, 13:07 GMT 14:07 UK
SA-India weapons deal 'cancelled'
Pranab Mukherjee
Defence Minister Mukherjee said in July the contract had been cancelled
South Africa says it is discussing the future of an arms contract with India, after the Indian government apparently cancelled the deal.

An Indian military journal reported the deal with South African state arms maker Denel had been cancelled, after allegations of corruption.

India had been investigating the deal since April. Denel denies impropriety.

The journal, SP's Land Forces, based its article on a statement made by the Indian defence minister in July.

"There is prima facie evidence of violation of clauses relating to use of undue influence and agents/agency commission, as contained in the contracts of Anti-Material Rifles (AMR) signed in 2002," Indian Defence Minister Shri Pranab Mukherjee said in a statement published on the ministry website in July.

"A decision has been taken to initiate action to cancel all contracts entered into with Denel," the statement concluded.

Government officials in Delhi would not comment on the latest reports.

Denel denial

But the Indian deputy high commissioner in South Africa, Banashri Harrison, told The Star newspaper it was not yet clear whether the contracts had been cancelled.

A Denel spokeswoman said the company had received a notice of intention from the Indian government to investigate the contract.

"But they have not informed us of cancellation," she said.

A spokeswoman for South Africa's ministry of trade and industry told the BBC the South African and Indian governments were in discussions on the matter.

"We cannot pre-empt the outcome of that discussion," she said.

In the old apartheid days, South Africa was a successful exporter of weapons, despite sanctions, but in recent years Denel has struggled.

It has been losing money and there have been frequent changes of senior personnel.

The trade union Solidarity has put out a statement saying the cancellation of contracts with India will cost thousands of jobs.

Solidarity has asked the South African government to save Denel from collapse.

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