/ 5 October 2018

Davies: Stronger consequences for government institutions who don’t buy local

Seeking solutions: Minister Rob Davies says it is essential to bring about fundamental changes in South Africa’s economy.
Trade and Industry Minister Rob Davies. (David Harrison/M&G)

Trade and Industry Minister Rob Davies has announced that there will be stronger enforcement and consequence management for government institutions that do not comply with local procurement targets.

Davis was making a submission on a panel discussion at the Jobs Summit. The panel was looking at the sectoral interventions that can be implemented to create employment. Panellists included Agricultural Business Chamber (Agbiz) chief executive John Purchase, South African Communist Party’s deputy secretary Solly Mapaila and the Federation of Unions of South Africa’s general secretary Dennis George.

The two-day summit, which began on Thursday, has brought representatives of government, business, labour, and communities together, to chart a way forward on dealing with the persistent unemployment challenge in the country.

The minister said local procurement was a valuable tool to tackle unemployment saying decisions made by consumers and government as procurers can either create jobs in South Africa or create jobs in other countries.

READ MORE: Ramaphosa’s Jobs Summit plan to create 275 000 new jobs annually

Davies said the local procurement framework — which identifies designated local procurement targets for government and different state organs — has been held back by persistent bureaucracy, the effects of state capture and corruption.

“Non-observance of these localisation directives has been evident in many of the tenders that have been problematic. In fact, I would say that almost all of the tenders that were the subject of state capture and corruption had in common the fact that we imported the product rather than manufactured it locally,” he said.

“The auditor general will now make findings because you have not followed the precepts and what you have done is you are not in conformity with the legislation,” he said “You will have an audit finding against you and now there are greater consequences for negative audit findings”.

Davies said they are opening various facilities in government to monitor localisation requirements.

Speaking on behalf of business, Purchase said they would also review its list of designated products with the intention of using it to inform all purchasing decisions, however, he said buying local was dependent on whether the products are cost competitive, provide a similar quality level, and make business sense.

The issue of cost-competitive pricing was reiterated by George, who said high local prices often makes it difficult for organisations with budget constraints to buy local.

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“Whenever we want to procure we get quotations. The things that I always see is the products that come from China are always lower. We cannot run away from prices, this thing of being competitive is something that we have to do and we have to do it right,” said George.

Mapaila said the commitment to buying local comes hand in hand with industrialisation. “Because you can’t buy local if you do not industrialise”.

He suggested that South Africa build local vehicles using locally sourced platinum.

“In this regard, we have Denel that is a state institution that is able to make aeroplanes and military vehicles we can simply give them the mandate for the development of commercial vehicles”.

“There’s nothing sacred about these old cars that have been developed. The Americans have proven to us, for instance, they have put a Hummer on the market. It was a military vehicle, they commercialised it, after a while, it became popular worldwide, we can do so in our case.

Davies said by strengthening local procurement and ensuring policy certainty, manufacturing and agricultural interventions will be delivered in the next 6 to 12 months.

According to the framework agreement signed by all stakeholders on Thursday, the different interventions will result in 275 000 direct jobs a year and 550 000 indirect jobs.

“We believe by 2020, the economy will create approximately 825 000 jobs a year,” said Davies.