South Africa SMEs dismiss public procurement opportunities

30 November 2011

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30 November 2011 | Adam Leach

Small- and medium-sized enterprises (SMEs) in South Africa are making a “conscious decision” not to compete for government contracts, according to a report.

Priming The Soil: Small Business In SouthAfrica, published yesterday by the SBP, which represents SMEs in the country, said the complexity of the public sector procurement procedures had led many businesses to dismiss government contracts as a growth opportunity.

The report, which consulted representatives from 500 SMEs, revealed that many were put off by the complex nature of the tender process, an unwillingness from government to pay deposits and late payment.

It also found that while companies believe the policy commitment to direct 75 per cent of state procurement to local firms provides a big opportunity, the benefits risk being squashed by burdensome regulation. It said: “This [opportunity] will not materialize if they [SMEs] are stymied by regulatory constraints.”

It added: “South Africa has a limited pool of productive SMEs capable of producing quality products and services in sufficient quality and within timeframes, and this is unlikely to expand if they are hemmed in by demands of scant relevance to themselves.”

Under new regulations, which come into force on 7 December, the Department of Trade and Industry (DTI) will be awarded powers to mandate that certainproducts, such as buses and power pylons must be sourced locally.

Outlining the spirit of the policy, DTI minister Rob Davies previously told SM: “We say to foreign companies: ‘You come here and manufacture, and you will be eligible for public sector contracts. You come here and bring your goods by boat, you won’t’.”    

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