Government departments and State-owned companies (SoCs) needed to “drastically” improve their strategic procurement capacity, as well as their localisation compliance levels if local-procurement initiatives were to have any chance of stemming further deindustrialisation, the Manufacturing Circle has warned.

The industry lobby group stressed in a statement that it remained supportive of localisation, despite the fact that only 18% of its surveyed members indicated that they were currently benefiting from the policy.

Executive director Coenraad Bezuidenhout said tender specifications were still failing to fully integrate localisation, which meant that domestic producers continued to “lose out to unfairly incentivised imports”.

The Department of Trade Industry (DTI), which is the custodian of the policy, was equally concerned, having found that 160 public tenders fell foul of local-procurement provisions during its most recent reporting period.

In fact, Trade and Industry Minister Dr Rob Davies said in September that the DTI would engage with the Auditor General to assess whether future flouting of buy-local procurement rules should be flagged as “irregular expenditure”.

He argued that, once a product was designated for local procurement, it was no longer optional, but rather a requirement, for government departments and SoCs to buy local.

The Preferential Procurement Policy Framework Act regulations, which came into force on December 7, 2011, empowered the DTI to ‘designate’ the products that should be sourced locally. Already included on the list are items such as buses, uniforms, power pylons, canned vegetables, rolling stock, pharmaceuticals, furniture, set-top boxes, cables and solar water heaters.

The Manufacturing Circle listed three reasons why it felt the policy was failing, including:

• A lack of strategic procurement capacity, which resulted in the issuing of tender specifications that were insensitive to the localisation policy.
• A lack of regard for local-procurement imperatives.
• And, inadequate communication with local manufacturers to enable them to make specification or pricing adjustments.

“The solution to these problems is that important legislation and policy initiatives launched by government need to become a test case for bringing about what lacks across the State, that is ‘joined-up’ government,” Bezuidenhout argued.

Departments and SoCs also needed to monitor their procurement from local manufacturers and to target constant improvements. In addition, strategic procurement capacity should be developed within the public sector so that instruments, such as tender specifications, could be leveraged in support of localisation commitments.

“The Manufacturing Circle believes that should government be able to get local procurement right, it would set a powerful example to the private sector and consumer to follow suit.”

However, the policy also had strong critics with diplomats and business people from Germany, Japan and the US having recently raised concerns about government’s plan to tighten local-content requirements.

For example, US Chamber of Commerce African affairs and international operations VP Scott Eisner warned recently that American firms were troubled by a growing trend in Africa towards “forced localisation”, which he described as short-sighted and out of kilter with global supply-chain realities.

But Davies countered by arguing that, while South Africa would insist on local content in all public procurement, it did not preclude foreign investors from participation.

Davies told Japanese diplomats and business people recently that, if Japanese companies set up domestic productive capacity, “national treatment” would be given to such goods. “But if you want to put your goods on a boat and bring them over, you don’t count – come here and invest, create productive capacity here and you do count.”