Localisation is an important policy tool for industrial development in South Africa and will assist in growing the economy and the manufacturing sector, Trade and Industry Minister Dr Rob Davies said at the 2017 Proudly South African Buy Local Summit, held recently in Johannesburg.
The policy stipulates that it is government’s preference that State entities buy locally manufactured goods.
“It is a widely deployed policy tool. If government decides to source products that are locally made, it will support the enterprises that are producing those products in our own economy, while creating and supporting jobs,” Davies said.
He noted that amendments to the Preferential Procurement Policy Framework Act have allowed government to designate certain products that have to be bought from locally manufactured sources, according to meticulous specifications.
“The designations indicate the percentage of different kinds of products that have to be locally made. All organs of State must purchase products indicated according to the specifications of designations,” Davies said.
He noted that 21 products have been designated for local procurement, with stipulated minimum thresholds of local content.
“And there are more in the pipeline. A new [iteration of the] Industrial Policy Action Plan (Ipap) has been approved by Cabinet and will indicate that work is continuing on another range of products that will be subject to designations.”
He added that, if this policy tool was applied properly, individual enterprises and value chains would benefit significantly.
Davies highlighted that localisation will help to create a more inclusive economy and create more opportunities for entry into the manufacturing space.
He noted that, if government were to offer international companies a tax incentive to set up manufacturing plants, allowing them to take advantage of preferential procurement by advancing localisation, “we will expect them to have a certain level of broad-based black economic-empowerment (BBBEE) recognition.
“Some of this, under the new [BBBEE] scorecard, will have to be earned in some form of enterprise and supplier development,” he said, adding that international companies needed to include black suppliers in their value chain.
He stated that the Department of Trade and Industry’s (DTI’s) Black Industrialists Programme would go a long way in accelerating radical economic transformation and changing the ownership patterns of the country’s economy.
The objective of the scheme is to promote the participation of black industrialists as manufacturers in key sectors of the economy as identified in the Ipap.
The Black Industrialists Programme will ensure that black entrepreneurs are meaningfully involved in the manufacturing sectors.
Davies pointed out that the DTI had, to date, supported 30 black industrialists with over R500-million in incentives.
“Instead of targeting 100 black industrialists within two years [as had been originally intended], we will reach that target in the next financial year ending March 2018,” Davies said.
Meanwhile, Davies said that the public infrastructure build programme, which is operating under the slogan ‘Turn South Africa into a Construction Site’, has 17 strategic programmes that are both geographic and sector specific.
“The programme has led to a significant increase in investment in building and construction. The industry has grown sevenfold since 2000, with investment increasing from R55-billion to R380-billion,” he said.
He noted that public expenditure accounts for 55% of total building construction and that closer monitoring of local content in the infrastructure programme is part of the work being undertaken by the Presidential Infrastructure Coordinating Commission.