SA Creates Local content Policy Leverage for Industries

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South Africa’s Minister of Trade and Industry, Dr Rob Davies has described local content policy as one of the important levers in the Industrial Policy Action Plan (IPAP).

Speaking at the Buy Local Summit which took place in Sandton, the minister noted that local content policy leverages public expenditure and responds to a myriad of economic challenges facing South Africa.

According to Minister Davies, localisation is an extremely important policy tool for industrialisation. Through local content procurement, a policy lever is provided amongst others, to minimize import leakages which represent an outflow of funds whilst at the same time attempting to increase both aggregate demand and supply in the South African economy.

“This is a tool that has been deployed by almost every country in the world at any time when embarking on industrialisation. The Preferential Procurement Policy Framework Act (PPPFA) regulations require all organs of state to purchase only locally-produced goods at a prescribed level of local content. For each designated product, except pharmaceutical products, there are instruction notes which regulate the environment within which government departments and public entities may procure designated products,” said Davies.

Davies said that twenty-one products and commodities have been designated for local procurement with stipulated minimum thresholds of local content and more are in the pipeline. He further added that the economic objective of local procurement is for local manufacturers to receive a substantial share of government business, where sustainable order books will contribute to the development of local industries and the creation of jobs.

“Local content, therefore, must not be seen only as a supply chain instrument to be implemented by procurement officers. Well designed and implemented local content can open up opportunities for local economic development in the furniture, clothing, textiles, and cable sectors. This will require pooling of purchases through transversal contracts at national, provincial and local spheres of government,” added Davies.

Total current investment in building and construction is about R380-billion, the industry having grown seven fold since 2000 when investment was only R55 million. Public sector expenditure accounts for 55% of this at R210-billion. From March 2015 to July 2016, almost R57.06 billion has been locked into the country as a result of local content requirements, mainly as a result of the rail rolling stock fleet procurement.

“It is imperative that the majority of this expenditure benefits the SA economy and leveraged to develop domestic manufacturing supply chains. Government must buy locally-produced goods at a massive scale. South African manufacturing companies have and are developing capabilities, skills and expertise to manufacture, assemble and supply most priority sectors,” said Davies.

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