Business Day – The government’s localisation drive had been delayed by a lack of Treasury approval for designations recommended by the Department of Trade and Industry, its director-general Lionel October said on Wednesday.
The government’s procurement budget is about R500-billion a year and it has set a 75% target for local procurement. One of the tools used to achieve this is to designate products or sectors from which organs of state have to procure locally.
In terms of the Preferential Procurement Policy Framework Act (PPPFA), the department can only recommend products or sectors for designation — the ultimate decision-maker is the Treasury.
October on Wednesday recommended in a briefing to Parliament’s public enterprises committee that, to bypass bureaucratic obstacles, greater use should be made of one of the act’s regulations which allows an organ of state, including state-owned companies, to specify local content as one of the conditions of its tenders.
This regulation can only be used for products or economic sectors not designated for local procurement and must comply with Treasury and department directives.
Department of Public Enterprises director-general Mogokare Seleke said use of the regulation need not contravene the constitutional requirements for open and fair tender processes.
Foreign companies could tender if they complied with local content requirements.
October said Treasury approval for using the regulation would still be required. He said that Treasury had taken about a year to agree to the designation of the local shipbuilding industry.
The department was waiting for Treasury approval for the designation of building and construction materials, yellow metals, two-way radios, solar PV components and rail signalling systems.
"It was a very big struggle for us to win this battle for localisation because people resisted it, thinking we might get it cheaper if we imported the products…," he said.
Democratic Alliance public enterprises spokeswoman Natasha Mazzone highlighted the problem of the same companies being used for government contracts even when they had failed to perform. She called for greater transparency of procurement processes.
Originally published in Business Day