Anew technical instrument has been introduced to support South Africa’s strategy of increasing the level of local content in the goods and services procured by government and State- owned entities and to add impetus to the country’s reindustrialisation efforts.

The tool in question is a South African Technical Specification (SATS) 1286, which will be administered by a new Local Content Verifi- cation Office housed within the South African Bureau of Standards (SABS).

Trade and Industry Minister Dr Rob Davies, who presided over the official launch in early July, says SATS 1286 sets objective criteria for the issuance of an audited ‘Local Content Certificate’.

The verification process follows on from the initial “designation” of products and services that are required to incorporate minimum thresholds of local content before they can be procured by national and provincial State departments, municipalities and State-owned companies. The requirement is supported by updated Preferential Procurement Policy Frame- work Act regulations, issued in December 2011.

The current thresholds range from 100% for textile, clothing and footwear pro- cured for government-issued uniforms to 30% for digital television set-top boxes. But Davies stressed that these thresholds should be regarded as a “floor rather than a ceiling”.

The initial designations announced by the Depart- ment of Trade and Industry (DTI) cover rail rolling stock, electrical pylons, textile, clothing and footwear, canned or processed vegetables, some oral solid-dose pharma- ceutical products, digital television set-top boxes, furniture, solar geysers and power and telecommu- nications cables.

But further rounds of designations will be intro- duced in future, following research and consultations.

SABS CEO Boni Mehlomakulu says the infrastructure is in place for the organisation to conduct the verification process, which will be required only for entities that win gov- ernment tenders.

The process involves a self- assessment by the company that is delivered to the SABS in the form of a local-content declaration. A team of auditors then conducts an analysis of the documentation to verify the declaration, which is followed by a factory visit by a separate team of auditors. A consolidated document is then sent through to an approval board, which makes a final recommendation to the CEO, who issues the verification certificate. The costs of the process will be borne by the winning bidder.

Mehlomakulu believes that multistep process, which involves separate teams of auditors, has materially reduced the potential for fraud and corruption, but stresses that the SABS also operates an ethics hotline should an individual have concerns. The objective criteria employed also reduces scope for discretion, which tends to contaminate the admini- stration of regulations.

Davies argues that there is significant potential to increase the domestic job creation around government procurement generally and also the multi- billion-rand public infrastructure programme. However, without mechanisms to verify local-content claims, the impact of ‘buy local’ initiatives could be diluted.

“We now have a standard and the infrastructure in place to verify,” he says, adding that breaches could lead to penalties and even the cancellation of contracts.