The South African government is too “institutionally weak” to enforce local content rules in public procurement, according to a report.
The Industrial Policy Action Plan (IPAP), produced by the Department of Trade and Industry (dti), said almost R59.95bn had been “locked into the country” through local content rules between 2015 and 2017 but only 4.4% of this figure had been verified.
“Government is currently too uncoordinated, fragmented and institutionally weak to carry out the function of adequately monitoring compliance on localisation,” said the IPAP.
“This suggests the need for tighter coordination between the dti and NT [National Treasury] to ensure these matters are vigorously followed through, with appropriate consultation and capacity building and with an eye towards identifying gaps in the existing legislative and regulatory framework that need to be filled.”
Under local content rules 23 products, ranging from rail rolling stock to wheelie bins, must have percentages of local production ranging from 30% to 100%.
Suppliers are required to meet these minimum thresholds when they bid for public tenders, which are then verified by the South African Bureau of Standards (SABS).
“However, the challenge remains the verification of the real achieved value,” said the report.
“SABS has been given an urgent mandate to step up its efforts to carry out accurate and trustworthy local content verifications.”
The IPAP said: “The dti is currently exploring funding options to cover the cost of verification such as creating a budget line/cost allocation to cater for verification, within the SABS budget. High value /volume contracts will be prioritised for verification.”
The report, which said public procurement amounted to R842bn in 2017, said the government’s Medium Term Strategic Framework 2014-2019 had a local procurement target of “75% of all products capable of being manufactured locally on a commercially viable basis”, to be achieved by 2019.
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