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S.Africa cancels deal for Airbus military planes
Released on - Thursday,05 November , 2009 -13:58 41
South Africa has cancelled a deal to buy eight Airbus A400M military transport planes due to hefty cost overruns and delivery delays, the government spokesman said Thursday.
"The cost escalation would have placed an unaffordable burden on the taxpayer at a time when the national fiscus (Treasury) is under pressure due to the economic downturn," government spokesman Themba Maseko said in a statement.
"Cabinet believes that the interests of the South African taxpayer will be best served by not proceeding with the contract," Maseko added.
The contract was agreed five years ago when the government said the cost of the planes would be around 830 million euros (1.2 billion dollars). At the time, that amounted to 6.4 billion rand.
Maseko said costs were now seen escalating to 47 billion rand (4.1 billion euros, 6.1 billion dollars).
He said South Africa would not incur any penalties because of the delays in the delivery deadlines stipulated in the contract.
An amount of 2.9 billion rand is to be refunded to South Africa, under the terms of the contract, he added.
The A400M plane has been hit by delays in building its massive turbo-prop engines, putting the 20-billion-euro (28-billion-dollar) project at risk.
It was initially scheduled to start being delivered at the end of 2009 but the programme is suffering from a delay of at least three years.
In July seven European countries threw a lifeline to the troubled plane by agreeing to renegotiate their contract to buy the aircraft by year-end.