Keynote address by Deputy President Paul Shipokosa Mashatile at the Localisation Gala Dinner of the Buy Local Conference and Expo, Sandton Convention Centre, Johannesburg
Programme Director;
Minister of Trade Industry and Competition, Mr Ebrahim Patel
Chairman of the Proudly SA Board, Mr. Howard Gabriels and the Board Directors of the Proudly SA;
CEO of Proudly SA, Mr Eustace Mashimbye;
CEO of Southern Sun, Mr Marcel von Aulock;
CEO of ABSA, Mr Arrie Rautenbach;
The CEO of Business Leadership South Africa, Ms Busisiwe Mavuso
All CEO’s and Captains of Industry present here this evening;
The recipient of The Order of Ikhamanga, Dr John Kani;
Leaders of Civil Society and Organised Labour;
Distinguished Guests;
Ladies and Gentlemen,
Let me first convey the apology on behalf of President Cyril Ramaphosa, who would have loved to be here with you tonight, however due clashing government commitments, he has asked me to represent him at this important occasion.
We are extremely grateful for the opportunity to be part of this localisation gala dinner, which brings together a group of industry professionals to discuss the next steps for expertise driven solutions, in creating much needed jobs in our country.
You may recall that in 1998, President Nelson Mandela called a Presidential Jobs Summit under the auspices of NEDLAC to bring together all social partners and determine how jobs could be created within the South African economy.
One of the interventions resulting from the 1998 Summit was the establishment of a 'Buy Local Campaign’, a targeted initiative to encourage all sectors of society to support locally produced goods when making procurement decisions.
This is what gave birth to Proudly South African, whose role and mandate is to lobby and advocate for increased procurement and consumption of locally made products and services. This campaign will help contribute to the companies that manufacture these products and provide services, while remaining operational, retaining the jobs they have created, potentially creating new opportunities, and ensuring meaningful economic growth.
Additionally, we are pleased that the Proudly South African Buy Local Conference and Expo has successfully carried that baton by striving to teach, educate, and empower business owners to help them rebuild our economy.
As South Africans, we must be proud of our locally produced goods and take the initiative to support the small businesses who produce them. We must make our products the first choice.
Shopping locally has an incredible ripple effect
This is because every local transaction has a ripple effect that extends beyond our comprehension. By purchasing locally produced food and other goods, consumers support their local economy, families, communities, and promote the culture of entrepreneurship.
Moreover, supporting local businesses can stimulate the local economy, since it redirects funds back into the community rather than into the coffers of ambiguous national chains and corporations.
We have also observed that money circulated throughout a community has the potential to finance public infrastructure such as schools, libraries, roads, and parks.
For this reason, as Government, during the 2018 Presidential Summit, together with our social partners, reaffirmed the commitment to localisation. We need to ensure that we support the investments being made in the country by improving the uptake of those products and services that will flow from these investments in new and existing production plants.
This coincided with the investment drive that has been introduced at the time, including through the commitments made at the newly introduced SA Investment Conference.
On the other hand, localisation can play a crucial role in achieving Goal 8 of the Sustainable Development Goals of promoting sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all.
By encouraging the use of local products in government contracts, we can create jobs in areas critical to economic growth, such as manufacturing and agriculture, which have historically been vital to economic progress.
We support local businesses because they offer the most significant untapped potential for growth, and economic transformation.
Studies have shown that local businesses recirculate a more significant share of every Rand as they create locally owned supply chains and invest in their employees, something that needs our collective encouragement.
We therefore call on businesses and other sectors of society that do procurement to support government policies that encourage and promote the localisation of supply chains. Organisations should change their inclusiveness and localisation delivery models to increase partnership with the local market.
Challenges and opportunities
Ladies and gentlemen
As the Government, we cannot call on others to do what we are not doing. It is, therefore, imperative that, as the Government, we support localisation by improving the ease of doing business in oaaur country and procuring goods and services from local manufacturers.
During the 2023 State of the Nation Address, President Cyril Ramaphosa announced that South Africa will host the 5th South Africa Investment Conference in April 2023. Linked to this investment drive, South Africa has further committed a new target to mobilise more than R2 trillion in new investment by year 2028.
However, according to the most recent annual rankings by the World Bank as of December 2022, South Africa ranks 84 out of 190 economies on the ease of doing business index. If we want to attract more foreign direct investment, we must improve our ranking to encourage more investments that concurrently combat underdevelopment and youth unemployment.
In this regard, urgent work is being finalised by Government to create an enabling regulatory framework, attract foreign investment, reducing red tape, and improve ease of doing business.
Further, the Red Tape Reduction Team, which resides in the Office of the President has made headway in reducing complex regulations, procedures and processes that impede economic growth and job creation in important sectors of the economy.
In February 2020, Cabinet approved the publication of the Public Procurement Bill for public comment, setting in motion legislation for procurement strategies that support Government’s socio-economic objectives.
The draft bill aims to introduce a single regulatory framework for local, provincial and national governments and state-owned enterprises. The draft bill proposes the creation of institutions necessary to ensure the procurement system's integrity and address potential violations.
To this end, the National Treasury has conducted a public participation process in relation to the amendment of the Public Procurement Bill, and the Bill has been included in the 2023 Legislative programme as a priority Bill for Cabinet approval, and for introduction to Parliament.
We are also pleased that during the 2018 Presidential Jobs Summit, more than 20 large corporations made firm commitments to improve their levels of local procurement in their respective supply and value chains.
However, the COVID-19 pandemic has created significant challenges. The pandemic disrupted global supply chains and created economic uncertainty, making it difficult for businesses to invest in local production.
It has had a devastating effect on many small firms, resulting in massive employment losses.
On the other hand, the pandemic opened opportunities for those who were unemployed and forced to get creative to make ends meet by starting their own businesses.
Moreover, the pandemic and the subsequent necessity to respond appropriately to its demands led to the introduction of many interventions that required substantial localisation.
The ventilator localisation programme is one such example, and the work done by Business For South Africa (B4SA), spearheaded by organised business, working together with Government, organised labour and civil society representatives, saw capacity being built up for medical grade sanitisers, respiratory masks, face shields, medical gloves and other items required during that time, where most of these had been largely imported at the commencement of the pandemic period.
This was a clear demonstration of the power of collaboration and an example of what can be achieved if those leading the country across all sectors of society work together towards a common goal.
This ensured supply security for our country and region, not just during the initial years, but also if global supply chain disruptions affecting products entering the country occurred again.
During this period, many companies refocused and repurposed their businesses to survive, as most of them could not produce and supply their usual products due to the extremely necessary restrictions imposed on the country at the time.
Once again, one such company is Sanath Trading, which traditionally supplies décor products to the events and entertainment industries. They had recently invested in machinery for manufacturing events and décor linen, but due to restrictions on the hosting of events during that time, they decided to use these newly acquired machines to produce face masks.
The company was able to keep its doors open and keep all their jobs due to orders from various private sector entities.
Ladies and Gentlemen
The current constraints, such as a lack of dependable electricity, significantly impact localisation initiatives. As we all know, businesses rely on a consistent supply of energy to run their operations, and the availability of electricity is a significant element in determining where companies choose to invest.
Without dependable electricity, businesses may struggle to operate and may be forced to invest in costly generators or other backup power sources. This might increase prices and make it difficult for firms to compete internationally.
Correspondingly, if power outages are frequent, local factories may be unable to produce goods that are up to par with South African Bureau of Standards requirements as well as global norms.
To address this issue, the Government is investing in reliable energy infrastructure, such as renewable energy sources, to give businesses the electricity they need to grow.
President Cyril Ramaphosa presented solutions in the 2023 State of the Nation Address. They include declaring a national state of disaster and creating a Ministry within the Presidency to accelerate the implementation of the agreed-upon strategy to reduce and terminate load-shedding.
While the grid's energy constraints threaten businesses and regional development, they also present an opportunity. This pertains to the production of wind turbines, solar panels, and other forms of energy storage, among other things.
By producing it domestically, we may avoid paying import taxes on similar machinery, and the current energy crisis presents an opportunity to expand employment opportunities in a field with significant demand.
Compatriots, it is still the State’s intention to support all industries that remain competitive, as well as those where capacity has been built up over the years, because of the designation of sectors for local procurement by the Government.
Significant investments were made by current and new producers of these designated products in the country due to this instrument and policy of designating sectors for local procurement by the Government. This is highly welcomed and is much needed at this time.
As a result of this, the modification of procurement legislation, in this regard that came about because of a ruling by the Constitutional Court should not lead to the loss of this capacity and investments because of the State's new preference for imported products, even in situations where these products can be sourced locally.
We are thus making a concerted effort to ensure that we remind all procurement authorities and decision-makers in the public sector of this dynamic. As part of this effort, we ask them to maintain local content standards in their preferential procurement policies.
During this 11th edition of the Proudly SA Buy Local and Expo, a public-sector procurement session was hosted. An engagement in this regard was held with senior representatives from all public sector spheres, and we have been assured that this work will continue beyond this conference.
If we keep moving in this direction, our economy will reap the rewards not just in terms of new jobs, but also in terms of new tax income collected from citizens and the businesses that stand to gain from increased local procurement by the public and private sectors.
We cannot have economic growth without localisation. The study, commissioned by Proudly SA and done by Dr Iraj Abedian's PAIRS outfit, confirms the link between localisation and economic growth and the different steps that the private and public sectors need to take in this area.
Some of the most important things in the report are the positive effects of domestic manufacturing investment on the GDP, fiscal revenue, real wages, and consumer inflation.
Moreover, the report showed that the SA economy could benefit from an increase of just 10 percent in investment spending in the manufacturing sector.
This is what would happen if investments in this labour-intensive industry went up by 10 percent:
- 13% GDP growth
- 8% more jobs created
- 8.3% overall boost to investment across the economy
- 9% jump in tax revenues
The same goes for the private sector as a strategic partner of the Government whose buying power can help turn the economy around. We want to see consolidations at the industry level, so that ailing industries or industries threatened by illegal and sometimes legal imports can be helped by local procurement policies and preferences that companies in those industries choose to follow.
Let's collaborate to meet localisation targets
Ladies and gentlemen
As we put the spotlight on the value of local procurement and localisation tonight, we would like to take this opportunity to thank the businesses that have emerged as leaders in this area around the country.
These are companies that have walked this journey with us, from when we first introduced the first set of localisation commitments, and publicly proclaimed their commitments at the 2018 Presidential Jobs Summit.
These companies set localisation targets for themselves, some informed by the sectoral masterplans driven by Government. They continue to be brave enough to report these annually, review and improve on the targets where possible and are impacting many other enterprises as part of their respective supply and value chains.
This group of businesses will be recognised tonight as the first batch to publicly announce their localisation efforts, establish goals and work towards them, and agree to be held accountable for meeting those goals by the dates they have established. According to the goals of these businesses, localisation takes the shape of:
- Favouring locally made products over imported goods/services, i.e., increasing their local procurement spend.
- Investing in an Enterprise/Supplier Development Programme (and/or including a localisation condition for companies that may or have benefitted from their respective Enterprise and Supplier Development programmes).
- Expansion plans (building additional factories or adding more production capacity).
- Introducing additional product/service offerings in their local manufacturing facilities.
- Increasing levels of local content in raw materials and/or components utilised for producing their products and rendering their services.
- It could also be to give more “shelf space” or “target more” local manufacturers.
Through the localisation commitments given, the companies also highlight the medium to long-term impact their commitments will have, especially in growing the economy and job creation and retention.
The collaboration between Proudly SA, South Africa's national Buy Local campaign, and Business Leadership South Africa exemplifies the dedication we seek from the private sector, where businesses continue to localise their supply and value chains, with a clear focus on growing those industries in which we have a competitive advantage.
One way the social partners have been able to work together to maximise the potential of identified industries is by introducing Sectoral Masterplans.
These plans focus on specific industries, such as the automotive, steel, furniture, sugar, clothing, textiles, leather, and footwear industries, and they do so by capitalising on the existing demand, which comes primarily from the private sector.
On that note, we urge all South Africans to support Proudly SA's call to "buy local to create jobs" and make this mantra a rallying call as we work together to boost our economy.
Finally, on behalf of the Government and all South Africans, we would like to express our deepest gratitude to the companies that have contributed to the success of the Proudly SA Buy Local Summit and Expo, including Southern Sun, ABSA, Coca-Cola, and SAB, as well as Sasol, Brand South Africa, Aspen, and Sizwe IT.
These patriotic companies have successfully illustrated the partnership between the private and public sectors in working together to turn around the fortunes of our economy. Their deeds must be emulated by all of us.
We wish you all a successful and productive Proudly South African evening.
I thank you.
