By: Mervyn Naidoo (CEO of ACTOM Group), Dr Tebogo Makube (Department of Trade, Industry & Competition) and Tafadzwa "Taffie" Chibanguza (CEO of SEIFSA)

South Africa’s manufacturing sector has become largely stagnant, with years of factory closures, shrinking order books, rising input costs and erratic demand hollowing out industrial capacity that once anchored hundreds of thousands of jobs.

Yet this decline is not inevitable. With smarter localisation, clearer procurement rules and a more deliberate industrial strategy, public spending could again become a powerful engine for rebuilding factories, expanding supply chains and restoring confidence in South Africa as a place that makes things.

For Mervyn Naidoo, CEO of the ACTOM Group, the problem is not a lack of opportunity but a lack of coherence. Public procurement, he argues, is too often fragmented and inconsistent. Contracts are awarded for short periods, with no guarantee of continuity or commitment to local industry.

“Nobody is going to invest in long‑term capacity, automation, or technology upgrades when demand is uncertain. The result is predictable, as imports fill the gap, local factories sit under‑utilised, and the country loses skills, tax revenue, and jobs,” he says.

A different approach is possible

Naidoo points to the Transmission Development Plan as an example of long‑term visibility already in place. With a 15-20‑year pipeline of grid infrastructure ahead, South Africa has a rare opportunity to use this demand to rebuild domestic manufacturing.

If government paired this pipeline with firm local‑content rules, long‑horizon contracts, and sector designation, companies would have the confidence to invest in new plants, expand capacity and train workers.

ACTOM’s acquisition of SGB SMIT’s Pretoria transformer factory illustrates the potential: the plant has four times the capacity of ACTOM’s Wadeville facility, yet it is running at only a quarter of its potential while imported transformers continue to enter the market. Properly structured procurement could reverse this imbalance.

Policy to secure industrial capabilities

Dr Tebogo Makube, Acting Deputy Director General at the Department of Trade, Industry & Competition (the DTIC), emphasises that localisation is a policy tool used worldwide to secure industrial capabilities.

South Africa’s challenge, he explains, is that the current procurement framework places overwhelming weight on price. Under the 80/20 and 90/10 systems, price accounts for up to 90% of the evaluation.

“This makes it extremely difficult for local manufacturers, who face higher electricity tariffs, unreliable municipal services and rising logistics costs, to compete against imports from countries with lower input costs or state‑supported industries,” he says.

He adds that localisation must apply across procurement methods. Whether a project is delivered through EPC contractors, public‑private partnerships or direct departmental procurement, if public money is being spent, local content rules should apply. This clarity is essential to prevent loopholes that allow imported products to bypass designation.

Makube stresses that the Preferential Procurement Act of 2024 intends to rebalance this equation. Once regulations are finalised, designated products will again require minimum local‑content thresholds as a first‑stage evaluation criterion. Bids that do not meet these requirements will not proceed to price evaluation.

Heavy reliance on public procurement

For Tafadzwa “Taffie” Chibanguza, CEO of the Steel and Engineering Industries Federation of Southern Africa (SEIFSA), the stakes are even broader. The metals and engineering value chain relies heavily on public procurement.

Across the sector, roughly a quarter of domestic sales come from the public sector, and in some subsectors the figure exceeds 60%. When procurement is inconsistent, the entire ecosystem suffers.

Chibanguza argues that localisation is not a barrier to global competitiveness but a prerequisite for it. Many manufacturers are operating at 50-70% capacity, with fixed costs spread across too few orders.

“When public procurement lifts utilisation, companies can reduce per‑unit costs, improve efficiency and become more competitive internationally. Localisation, in this sense, is a platform for export readiness, not a retreat from global markets,” he says.

He also highlights the multiplier effects often ignored in procurement decisions. A locally manufactured transformer supports upstream steel and copper producers, downstream fabricators, logistics providers, engineers and service centres. These economic linkages far exceed the value of the final product and are lost entirely when imports replace local production.

Procurement system should drive expansion

Localisation is not about closing the economy; it is about using the state’s purchasing power to build a stronger, more competitive manufacturing base that can serve both domestic and export markets.

Ultimately, South Africa does not lack industrial capability; it lacks a procurement system designed to nurture and expand it. With clear rules, long‑term visibility and firm designation, public spending can again become a catalyst for investment, job creation and industrial renewal.

Rewriting the rules of procurement is not a technical exercise. It is a strategic choice about the kind of economy South Africa wants to build – one where factories are busy, skills are deepened, and public money works harder for long‑term growth.