The Gauteng High Court recently ruled in favour of government in a matter involving procurement conditions applicable to electrical transformers.
The challenge arises from a government decision to refuse an exemption from a localisation condition to enable imports of electrical transformers on the basis that local capacity exists to produce the required transformers.
The applicant, Continental Power Supplies, contended that government was obliged to offer it an exemption, arguing that, besides others, it had not been consulted and that adequate local capacity to produce transformers did not exist in South Africa.
“I have seriously considered the circumstances of this case, as well as the arguments and submissions made on behalf of both parties, and I can find no substantial reasons why this court should set aside the decision taken by the Department of Trade, Industry and Competition (DTIC), which I find to have been rational, lawful, reasonable and procedurally fair.
"In my view, the decision of the DTIC not to grant the exemption to the applicant was justifiable. It is also my view that the DTIC did not fail to consider the relevant facts at the time when its decision was taken,” acting Judge PD Phahlane noted in a written judgment.
Transformers are one of the twenty-seven products designated for local production under the Preferential Procurement Regulations, which give Trade, Industry and Competition Minister Ebrahim Patel powers to designate products which may only be procured by a public entity from a local producer.
The Preferential Procurement Regulations require that organs of State include local content requirements in the invitation of bids and tenders where a product is designated for local production. All bidders should be subjected to the same local content requirements and conditions.
Where a material to manufacture a designated product is not available in the country, bidders must apply for an exemption from the DTIC. The latter treats any application on its merits based on the availability of the material in the country and also as guided by the conditions as stipulated by the various instruction notes for designated products.
Patel welcomed the court's decision, stating that it provided clarity to the market and helped to support efforts to build strong and resilient local industries.
“The judgment helps our efforts to sustain and create local jobs, deepen the levels of industrialisation and support local businesses. Local procurement also strengthens aggregate demand in the economy, which is particularly important in current circumstances,” he said.
“A number of foreign and domestic investors establish or maintain their plants in South Africa because of the localisation measures by government,” Patel added.
He also emphasised that the judgment was important for both organs of State and suppliers to consider local content requirement in the procurement of goods designated for local production.