LIFE LINE The power infrastructure industry holds significant potential to sustain the steel industry if it can meet its 100% local designation strategy to procure local steel
Orders for fabricated steel structures for power-line transmission infrastructure have the potential to boost and sustain significant levels of domestic manufacturing capability in the steel industry, says Southern African Institute of Steel Construction (Saisc) industry development executive Kobus de Beer.
This local boost will rely on enhanced local designation of power line infrastructure, which sees State-owned companies required to buy only from local steel manufacturers, with a 100% local-content instruction note having been issued by the National Treasury.
The absolute local content designation of such infrastructure is the culmination of work done primarily by Saisc and the Power Line Association of South Africa (Polasa) over the past eight years.
The local designation specification is also driven and/or supported by the Department of Trade and Industry, the National Treasury, the Department of Public Enterprises, Transnet, the Southern African Institute of Steel Construction, the Aluminium Federation of South Africa, the Association of Steel Tube and Pipe Manufacturers, the Industrialisation Suppliers Development Association, Eskom and the Association of Municipal Electricity Utilities.
With effect from October 21, then South African Finance Minister Nhlanhla Nene approved the instruction note in terms of Regulation 9(2), which serves to instruct buyers appointed by State-owned companies to only procure steel that meets 100% local production and content.
These products include power line hardware, steel power and monopole pylons, steel substation structures, streetlighting steel poles and steel lattice towers and masts.
This is in line with the National Development Plan and industrial policies for local production, which must be included in bidding invitations of power line infrastructure projects and any orders thereof.
Further, the instruction note states that a two-stage evaluation process must be followed to evaluate any bids received for such infrastructure.
Stage 1 includes evaluation in terms of the stipulated threshold of 100% for local production and content. The standard bidding documents – SBD 6.2 and MBD 6.2 – must be completed in line with the requirements of the South African Bureau of Standards-approved technical specification SATS 1286:2011 and the Guidance Document for the calculation of local content, together with local-content declaration templates.
Only bids that meet the stipulated 100% threshold during this stage will be evaluated further.
Stage 2 involves evaluation in terms of the 80/20 percentage or 90/10 percentage preference point system as prescribed in the Preferential Procurement Regulation 2011.
Meanwhile, De Beer notes that enforcing local content for powerline infrastructure provides Polasa and Saisc with greater power to approach other major industries using similar infrastructure such as mobile network operators that use large amounts of steel towers and steel structures.
“Polasa can present case studies and success stories of Eskom using the local designation of power line infrastructure as evidence of what can be and has been done in terms of specifying 100% local content.”
Additional products he would like to see added to local-content designation include a group of products called fabricated structural steel, which could pave the way to large volumes of local steel for steel structures.
Previous attempts to boost local purchases of steel included import tariffs of 15%, but he indicates that these tariffs made “absolutely no impact on the stream of imported steel into South Africa,” as many overseas suppliers could undercut domestic prices by up to 40%, owing to subsidised manu- facturing.