THE cloak of secrecy concealing the government’s R1.2bn plan to develop a spy satellite secretly in collaboration with Russia is being slowly lifted, with the latest revelation by the auditor-general being that the state was faced with a potential claim of R116m in 2006-07 arising out of the contract.

According to Democratic Alliance (DA) spokesman on defence David Maynier, the spy satellite was commissioned by defence intelligence from Russian company NPO Mashinostroyeni in 2006 for R1.2bn. The project was called Project Flute and later renamed Consolidated Project Flute.

Mr Maynier said on Sunday that the commissioned Kondor-E (E1) radar imaging satellite would reportedly be launched from the Baikonur Cosmodrome in Kazakhstan on February 27.

Nothing is yet known regarding if and how the R116m claim was settled and whether the project is going ahead. The Department of Defence has refused to answer questions about the project on the grounds of national security, and has insisted that all money handled by the department was audited and accounted for.

But Mr Maynier is determined to get to the bottom of why South Africa commissioned a Russian company to develop a reconnaissance satellite over which it would have no control. He also wants to know what are the implications of this for the privacy of South African citizens.

He said on Sunday that auditor-general Kimi Makwetu had given him a copy of the auditor-general’s report on the special defence account (SDA) which refers to the R115.9m as a contingent liability "for a potential claim against the state by a foreign company as a result of the withdrawal of the approval for the sensitive project by the minister".

"This could result in the claim against the SDA being considered as irregular expenditure. The matter is now being pursued at inter-state level by the minister," the auditor-general noted. He said the contingent liability meant there was "significant uncertainty" with regard to the financial statements.

Mr Maynier submitted the request last month for access to records in terms of the Promotion of Access to Information Act.

In a letter dated January 14 2008, the Russians raised their dissatisfaction with South Africa’s failure to make payments under the contract. They claimed that then minister of defence Mosiuoa Lekota had frozen the contract, and implored him to "unfreeze" it.

Mr Maynier claimed that this was the first official statement making direct reference to Project Flute. It was necessary, he said, to find out whether it involved financial misconduct, and if so whether any disciplinary proceedings were instituted as required by the Public Finance Management Act.

During heated debate in the National Assembly last year over the government’s controversial secrecy bill, senior ANC MP Luwellyn Landers made reference to Mr Lekota’s "role in the sorry saga of the Russian satellite". No further comment was made outside the National Assembly, even by Mr Landers.

There was another hint when the Treasury said in its annual budget documents that a steep increase in spending on defence intelligence between 2007 and 2011 was "mainly due to planned investment in and the development of a strategic information-collection capability".

The scandal comes on top of the long-standing one over the African National Congress-led government’s spending billions of rand on arms South Africa either did not need or could not operate and maintain. The deal was made during former president Nelson Mandela’s tenure and is the subject of a commission of inquiry into allegations of corruption and bribery by those who sold arms to South Africa.