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Wednesday, 5 December, 2001, 10:35 GMT
South Africa's condoms for submarines
German Submarine Consortium Type 209
South Africa's condom powered ultimate naval deterrent
By the BBC News Online's Stefan Armbruster in Paris

A German company is to build a condom factory in South Africa in exchange for a $594m contract for three German submarines.

The somewhat unusual deal is part of the government's economic development programme.

"It's hard to justify buying military equipment when the country needs schools and hospitals so badly, so this is one way of doing it," said Major General Julius Kriel, deputy director of the South African Aerospace, Maritime and Defence Industries (AMD) trade body.

"The government's main goal is alleviating poverty, which can only be achieved through foreign investment to stimulate job creation and economic growth," he said adding future defence contracts, including private finance initiatives (PFI), will have similar components.

An estimated five million people have HIV/AIDS in South Africa - one in nine of the population - and condoms form a major part of the prevention programme.

Foreign investment

The factory was part of a $4.8bn defence procurement deal in 1999 for jet fighters, frigates, helicopters and submarines, which has been the subject of a lengthy corruption inquiry.

Under that deal, arms makers promised to invest up to $15bn in South Africa by 2011, which is where the condom factory comes in.

Condomi condoms
Defence contracts offer South Africa the chance to test condoms
So far $3.5bn has been invested by defence companies at a time when foreign direct investment in South Africa has fallen by 27% in the first half of the year to $403m.

"There are real benefits for South Africa," said Mr Kriel.

For the contractors, the investments were a small price to pay for access to the South African defence industry after the economic embargo during the apartheid era.

But the benefits for the country may not be as great as they appear, concedes Mr Kriel, because the costs would probably have been factored into the arms deal, despite this being technically illegal.

Mohair jumpers and gold chains

German companies Ferrostaal, which is helping to build the three submarines, and Condomi will build the condom plant in East London, Eastern Cape province, one of South Africa's poorest areas.

One hundred million condoms will be made by Condomi in Erfurt, Germany, before being shipped there for testing and packaging.

But no details have been released on the value of the investment or how many jobs will be created at the plant.

Other arms manufacturers are involved in similar deals.

Italian helicopter maker AugustaWestland will build a $5m gold chain workshop and a $1.5m mohair jumper factory as part of a $312m contract to supply 30 helicopters.

BAE Systems plans to buy forests and saw mills with AngloAmerican after being awarded a contract to supply Hawk training aircraft and being named the preferred privatisation partner of South Africa's largest arms maker Denel.

See also:

03 Dec 01 | Business
Private sector's military bid
04 Dec 01 | Business
Europe shuns defence shake-up show
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