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Botched defence contract costs taxpayers R300m

Johannesburg - A cancelled contract of the defence department cost the taxpayer about R300m after a ruling of the International Chamber of Commerce arbitration court, Business Day reported on Monday.

According to the report, a 2009 contract for aeromedical equipment with Austrian company AMST was repeatedly botched.

An internal defence department memorandum said AMST claimed that the department had repeatedly failed to respond to numerous letters to honour contractual obligations with regard to advanced payments, Business Day reported.

"As a result... AMST alleges that it was left with no option but to cancel the contract and recover its costs under the agreement.

"The contract provides for an arbitration process in the event of a dispute between the parties in accordance with rules of the International Chamber of Commerce," the memorandum read.

According to the report, AMST initially claimed about R477m (€35.5m) when the proceedings began in Zurich, Switzerland, early in 2012.

In December, the claim was reduced to about R199m (€14.8m) but later increased to about R296m (€22m) in the final award made in July and August this year.

Department spokesperson Siphiwe Dlamini confirmed the ruling.

"I can confirm that the International Arbitration did rule in favour of AMST and that the matter has been settled with the payment of liabilities by the department of defence, at the reduced cost that had been demanded by AMST," he was quoted as saying.

 
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