Earlier this year, the Preferential Procurement Policy Framework Act (PPPFA) was adapted to include the designation of domestic steel, wire and other industry products, and, although it came into effect in April, the South African Wire Association (SAWA) says it is too soon for steel construction and wire companies to reap the benefits.
The PPPFA requires procurement of South African-manufactured products from small enterprises, particularly through subcontracting, if a government tender is set above the R30-million threshold.
SAWA director Keith Campbell says the challenge steel construction and wire companies face pertains to lack of government projects that are profitable for these industries.
“The amount of wire products being used in projects supplied by government is actually very small, so it’s not like they put out a tender once a year to supply wire and nails to the industry. There is a lack of growth because the products used in even bigger projects, for example, at a school, where wire is used for fencing and where nails are used for the timber in the roof, [make up] only a small amount.”
He points out that government projects pose a problem because subcontractors do not pay attention to finer details. “When several million rands are being spent to construct buildings, companies that have won tenders do not pay attention to the origin of nails, wire and diamond mesh fencing.”
Imported wire products also affect wire companies, as local content is not emphasised when contractors buy these products, Campbell adds.
“We have a huge number of imports coming in. The steel industry generally had no import tariff protection at all, which means that importing steel and wire was cheaper than buying from local manufacturers. As an industry association, we, together with our members, applied for import tariffs on wire imports.”
However, he points out that the Department of Trade and Industry (DTI) included the wire industry in the recent PPPFA designations on behalf of the steel industry. A clause in the original PPPFA requires that successful contractors and suppliers make use of locally manufactured products.
The SAWA has been able to successfully apply tariffs on imported fencing, nails and galvanised wire. Campbell points out that import tariffs have also been placed on manufactured imports such as wire mesh, diamond mesh and barbed wire.
“Tariffs haven’t proven to be successful in curbing the imports significantly because of the rand’s strengthening – that makes imports more competitive for the importers, so there has been a trade-off,” he says.
Further, he points out that the SAWA is concerned about how some of the new policies that are being introduced will be policed. “Most of the time, tender winners will hire fencing subcontractors who may not comply with the PPPFA stipulations of the tender.”
The SAWA has successfully trained newcomers to the export sector. He explains that employees from various companies and entrepreneurs that are entering the export industry have received training from the SAWA at its main office in Bedfordview, Gauteng.
“We provide training in business practice and export practice, which is a one-year certificate course or a two-year diploma course, which is very intensive. We’ve trained more than 40 students to become successful entrepreneurs or employees in the wire and other industries over the past few years,” he states.
The training programmes that the SAWA offers are free to successful applicants. He concludes that some of the students who have completed the course were referred to the association by the DTI for training.