The Steel and Engineering Industries Federation of Southern Africa (Seifsa) has welcomed the High Court ruling in favour of the Department of Trade, Industry and Competition (DTIC) in a procurement matter, saying that it will boost struggling local businesses amid the pandemic-induced economic recession.
Seifsa has also lauded the DTIC for its continuous support to the local industry.
The court challenge had arisen from the DTIC’s refusal to exempt a regional supplier, Continental Power Supplies, from a localisation condition to enable imports of electrical transformers, on the basis that local capacity exists to produce the required transformers.
In a statement on August 6, Seifsa explains that transformers and shunt reactors require a local content threshold of 90% according to the Preferential Procurement Regulations and are among 27 important products that have been designated for local production.
Seifsa chief economist Dr Michael Ade says the designation process is rigorous, involving investigations conducted by various government departments with the local industry before a final decision is made.
“This means that a product cannot just be designated without documented support of the existence of sufficient local productive capacity.”
He adds that the local manufacturing industry has made several submissions to policy makers to help arrest the extent to which total domestic demand for inputs and products in the country is satisfied by imports.
Ade says Seifsa believes the judgment, along with the government’s commitment to assist struggling businesses, will help create an enabling environment for local businesses to increase their production output, and thereby reducing the need for customers to import goods.
“Indeed, this is not just [a] victory for the local industry and the DTIC; it is victory for South Africa Incorporated since, during these tough economic times when companies are low on cash flow, demand for goods is stagnant and jobs are at risk, any form of support – including a backing for local content – is welcome,” he states.
Ade adds that the ruling that the DTIC’s procurement condition was rational, lawful, reasonable and procedurally fair “gives Seifsa hope” that there is commitment across all spheres of the government to assist local businesses, whose struggles predate the Covid-19 pandemic.
“The essence is to be inward-looking in the short term, at least for the next year or so, in order to stabilise domestic businesses through increased demand, to get the country out of the deep economic recession and to boost economic growth in the medium to long term,” Ade says.