Public procurement is one of the key industrial levers in the Industrial Policy Action Plan (IPAP). The revised Preferential Procurement Policy Framework Act (PPPFA) regulations which came into effect on 7 December 2011 empower the department of Trade and Industry (the dti) to designate industries, sectors and sub-sectors for local production at a specified level of local content. Five sectors (rolling stock, power pylons, bus bodies, canned/processed vegetables, and textile, clothing, leather and footwear) have so far been designated for local production with minimum local content thresholds.
South Africa has a large public investment programme in the electricity and transport sectors in particular. This presents a massive opportunity for a range of manufacturing sectors producing components and final products in designated sectors as well as the sectors which provide intermediate inputs into these components and final products.
These intermediate input industries - such as flat primary steel products, generally enjoy significant protection in the form of a high level of domestic market dominance coupled with high logistics costs for imported alternatives.
Excluded in the first round of designations are certain steel product inputs into the components and final products purchased by public entities: particularly flat primary steel products.
It is the view of the dti that this is a patently sensible decision. The absence of such exclusion would effectively allow such intermediate products to be priced at any level chosen by the producer in the context of high domestic market dominance, with a single company often the sole domestic producer of a range of product lines.
It is self-evident that - far from being a negative development for intermediate input industries such as steel - that the designation process will provide a massive boost to these industries over coming years provided they ensure that their products are competitively priced both in relation to imports and in relation to prices charged in other comparable markets.
This general principle will apply across public procurement is not specific to any particular input sector and is in keeping with government’s objectives of building a competitive domestic manufacturing supply chain. the dti looks forward to ongoing constructive engagements to ensure the competitive growth of both downstream and upstream segments of the value chain.
Enquiries:
Sidwell Medupe (Departmental spokesperson)
Cell: 079 492 1774
Tel: 012 394 1650
E-mail: MSMedupe@thedti.gov.za
