Proudly SA CEO Eustace Mashimbye has called on the new minister of trade, industry & competition, Parks Tau, to nudge his peers in the public sector to actively procure from local manufacturers.
Localisation, viewed by critics as a form of protectionism, is a pillar of the government’s plan to revive distressed local industries such as sugar, poultry and steel.
The business community is hopeful that the ANC’s Tau, who takes over from Ebrahim Patel, will champion measures that support key growth sectors, and have a more market-friendly approach than his predecessor.
On Wednesday, the head of SA’s local procurement advocacy campaign, which aims to promote local products and services, said despite the Sakeliga 2022 court case outcome, state entities and departments had a responsibility to ensure the long-term sustainability of the country’s economy.
Mashimbye said for Proudly SA the key issue was to ensure the survival of SA’s economy and local enterprises by having all stakeholders, including state organs, procure from local businesses.
“The collective spending in the public sector can really turn the tide,” Mashimbye said. “While we are waiting for the procurement bill, every single entity of government has the responsibility to introduce their own preferential procurement policies and requirements and local content can be some of the requirements.”
In 2022 business group Sakeliga won a legal battle to get it confirmed that then finance minister Pravin Gordhan had overstepped his authority when he introduced prequalification criteria in the public tendering process in 2017.
The regulations were widely used by Transnet, SAA and Eskom at the height of the state capture project, opening the door for politically connected people to score lucrative tenders and trashing the commercial rationale for companies such as Anglo-American to be suppliers of coal to Eskom.
In an 800-page investigation report into widespread corruption under state capture, chief justice Raymond Zondo outlined how plans to use procurement as a policy tool to advance SA’s transformation goals were “grossly manipulated and abused to advance the interests of a few individuals”.
In its rationale, Sakeliga emphasised that state entities were obliged to apply normal, value-for-money procurement under section 217(1) of the constitution, which stipulates should be cost-effective, competitive and transparent.
They are not compelled to do preferential procurement, but if they do decide to exercise their discretion to do so, then it must meet the requirements of section 217(1) and be in line with the framework provided by parliament.
“Sakeliga was targeting BEE and local content was just a casualty,” Mashimbye said.
The master plans had gone a long way in getting the private sector to make headway in its commitment to localisation, he said, but the new minister needed to continue from where his predecessors left off in terms of trying to get the public sector to play its localisation role.
“We need government now to say over and above what we are expecting the private sector to do to drive localisation, what is government going to do.
“Despite the court case, there are regulations. There are guidelines that the department of trade, industry & competition has developed for government entities to utilise, so government entities can't say they don’t know,” Mashimbye said.
However, critics of the localisation drive say it will kill the competitiveness of local industry. Furthermore, it is considered to be inconsistent with trade agreements that SA has signed, including the new African Continental Free Trade Agreement that is meant to create a liberalised market for goods and services across the continent.
The CEO said Proudly SA’s appeal was for issued tenders to have a local procurement requirement, so ultimately local bidders get preference and bolster the economy and various value chains.
He said there was no reason for decisionmakers in state departments such as health and transport not to opt to buy local, pointing to long-term benefits to the fiscus, through additional tax revenues.
“We understand the thinking where they are saying they have limited resources at their disposal, they will buy it wherever is the cheapest, but what is the cost to the economy?” Mashimbye asked.
“But you give it to a company sitting in India because India has positioned itself well in the pharmaceutical space, the taxes benefit the Indian government, and the Indian citizens benefit as a result of increased revenue at the disposal of their government,” he said.
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