Designation of products for local procurement in public-sector procurement system

8th March 2013

In the year ahead, the Department of Trade and Industry (DTI) will significantly scale up product designations and use other procurement policy levers to support domestic manufacturing.

The DTI announced in February the further designation of valves, manual and pneumatic actuators, and electrical and telecommunica-tion cables, as well as components of solar water heaters, for local production and content would form part of the public-sector pro-curement system, this year.
Public procurement is one of the key industrial levers in the Industrial Policy Action Plan. The revised Preferential Procurement Policy Framework Act (PPPFA), which came into effect on the December 7, 2011, empowers the Minister of Trade and Industry to designate industries, sectors and subsectors for local procurement at specified levels of local content.

Trade and Industry Minister Dr Rob Davies has signed the necessary authorisation in terms of his powers under the amended regulations of the PPPFA. The National Treasury will soon circulate the instruction notes, which will regulate the environment within which government departments and public entities may procure designated prod- ucts. The instruction notes will have mini-mum local content thresholds.

The designation policy instrument is one of a suite of policy levers designed to increase support for domestic manufacturing. The others are the competitive supplier devel-opment programme, which is led by the Department of Public Enterprises and governs the procurement programmes of State-owned companies, and the National Industrial Participation Programme (NIPP). This instru- ment obliges overseas companies which have won tenders worth more than $10-million, to provide offset obligations through investments in the domestic economy.

Sectors already designated for local pro- duction with minimum local content thres-holds are rail rolling stock, power pylons, bus bodies, canned/processed vegetables, certain pharmaceutical products, furniture and products, as well as the textile, clothing, leather and footwear sectors.

At the end of 2012, Cabinet signed off on a set of policies which tighten the NIPP framework, close existing loopholes and align the policy with other public procurement instruments.

Details of these provisions will be made public when Davies signs off the new regulations. “The DTI is confident that local production of designated products will help to stimulate aggregate demand and strengthen support for the domestic manufacturing sector. In so doing, the deployment of procurement policy levers is an added incentive for foreign direct investment in the production sectors of the economy,” it said in a statement.