Africa's Public Procurement & Entrepreneurship Research Initiative – APPERI


Rob Davies

SA sets up infrastructure to verify local-content claims

Engineering News

July 5, 2013

A new technical instrument has been introduced to support South Africa’s strategy of increasing the level of local content in the goods and services procured by government and State-owned entities and to add impetus to the country’s re-industrialisation efforts.

The tool in question is a South African Technical Specification (SATS) 1286, which will be administered by a new Local Content Verification Office housed within the South African Bureau of Standards (SABS).

Trade and Industry Minister Dr Rob Davies, who presided over the official launch on Friday, says SATS 1286 sets objective criteria for the issuance of an audited ‘Local Content Certificate’.

The verification process follows on from the initial ‘designation’ of products and services that are required to incorporate minimum thresholds of local content before they can be procured by national and provincial State departments, municipalities and State-owned companies. The requirement is supported by updated Preferential Procurement Policy Framework Act (PPPFA) regulations, issued in December 2011.

The current thresholds range from 100% for textile, clothing and footwear procured for government-issued uniforms to 30% for digital television set-top boxes. But Davies stressed that these thresholds should be regarded as a “floor rather than a ceiling”.

The initial designations announced by the Department of Trade and Industry (DTI) cover rail rolling stock, electrical pylons, textile, clothing and footwear, canned or processed vegetables, some oral solid-dose pharmaceutical products, digital television set-top boxes, furniture, solar geysers and power and telecommunications cables.

But further rounds of designations will be introduced in future, following research and consultations.

SABS CEO Boni Mehlomakulu says the infrastructure is in place for the organisation to conduct the verification process, which will be required only for entities that win government tenders.

The process involves a self-assessment by the company that is delivered to the SABS in the form of a local content-declaration. A team of auditors then conducts an analysis of the documentation to verify the declaration, which is followed but a factory visit by a separate team of auditors. A consolidated document is then sent through to an approval board, which makes a final recommendation to the CEO, who issues the verification certificate. The costs of the process will be born by the winning bidder.

Mehlomakulu believes that multi-step process, which involves separate teams of auditors, has materially reduced the potential for fraud and corruption, but stresses that the SABS also operates an ethics hotline should an individual have concerns. The objective criteria employed also reduce scope for discretion, which tends to contaminate the administration of regulations.

Davies argues that there is significant potential to increase the domestic job creation around government procurement generally and also the multibillion-rand public infrastructure programme. However, without mechanisms to verify local-content claims the impact of ‘buy local’ initiatives could be diluted.

“We now have a standard and the infrastructure in place to verify,” he says, adding that breaches could lead to penalties and even the cancellation of contracts.


New Rea Vaya buses to be SA-made, Joburg council assures

November 4th, 2011

The City of Johannesburg has launched a process to determine the ability of the local automotive sector to build the 134 buses required for Phase 1B of the Rea Vaya bus rapid transit (BRT) locally.

A meeting to provide more information to the industry will be held this month.

Mayoral committee member for transport Rehana Moosajee says the 134 buses – which includes 41 articulated buses – will be operated by a different company from the one managing Phase 1, and will cover a new route through the city, even though it will sport the same branding.

The operating company on the first phase, Pio Trans, includes taxi operators affected by the implementation of the Rea Vaya BRT along the Soweto to Ellis Park route. A crippling bus driver strike has recently halted services on this route for two months.

Phase 1B encompasses the second trunk route of the system, and will run from Noordgezicht to Parktown, and on to the Johannesburg central business district. The 18 km, ten-station project carries an estimated infrastructure cost of R1.2-billion.

The acquisition of buses for Phase 1 of the system was widely criticised as the 143 Scania people movers for this phase were fully imported, even though the company had assembly facilities in South Africa.

Moosajee notes, however, that this was done in order to deal with the “very tight time restrictions” to have the system operational for the FIFA Confederations Cup in June 2009.

“The mayoral committee had then already taken the decision that Phase 1B of Rea Vaya will have to be a catalyst, as far as possible, for local production.”

With Rea Vaya one of many BRT systems being rolled out across the country, national government has taken a particular interest in establishing a viable local bus manufacturing industry in South Africa – one larger than the assembly currently undertaken.

It appears the Department of Trade and Industry will, in December, designate buses for local procurement – meaning it would require government and State agencies to buy locally manufactured buses, as noted by Trade and Industry Minister Rob Davies in a speech at the Johannesburg Motor Show in OctoberRead more.

South Africa: Infrastructure inputs to be designated for local procurement – Davies

September 22, 2011
The initial products to be “designated” by the Department of Trade and Industry (DTI) as ones that should be procured locally by all spheres of government and State-owned enterprises in line with the amended Preferential Procurement Policy Framework Act regulations would be products used in infrastructure programmes, as well as those regularly purchased by government departments, Trade and Industry Minister Dr Rob Davies revealed on Thursday.

Speaking to the business community in Cape Town about the second iteration of the Industrial Policy Action Plan (Ipap2) at an event hosted by Wesgro and Webber Wentzel, Davies stressed that the designation of products was part of a government plan to leverage procurement in order to raise domestic production and employment.

The main vehicle would be the new preferential procurement regulations, which become effective on December 7. These amended regulations allow the DTI to designate particular parts and products that will have to be procured locally by all organs of State and Davies intends that the effect will be felt immediately.

“The 7th of December is actually when the first group of designations takes effect, not the date that we start the work,” he said.

The idea behind the designation was also to stimulate South Africa’s struggling manufacturing sector, the economic importance of which should not be “underestimated” in a developing country such as South Africa. Manufacturing, Davies averred, should not be considered to be dispensable simply if other sectors in the economy are flourishing.

“The lessons of economic history tell us that there is no case anywhere in the world, at any time, of any country that has taken itself out of being an underdeveloped economy to become a developed economy without this being led by manufacturing,” said Davies.

Acknowledging the challenges present in the manufacturing sector as a result of factors such as the 2008/9 global economic crisis, the rand’s overvaluation (which was now rebalancing) and industrial action, Davies said that Ipap2 was attempting to address some of the structural issues around manufacturing, though in an economic climate that is itself not ideal…Read more.

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