Buy local or face audit findings!

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RobDavies_ProudlySA.jpgUnder the World Trade Organisation’s agreement on Trade-Related Investment Measures, The South African government cannot prescribe to the business sector that they must follow localisation (75% local content in purchases) in the same way it prescribes to public entities.

“We don’t have that ability, and are challenged internationally [if the topic of localisation is broached with international organisations],” said Minister of Trade and Industry, Rob Davies.

However, some business organisations have embraced the spirit under which the Economic Development Department (EDD) negotiated the local content designations, to drive economic development in the country.

Minister Davies shared some of these corporate-level local procurement stories at Proudly SA’s Buy Local Summit, in early April.

The Franchise Association of South Africa (FASA)

Franchising businesses cover a significant number of the country’s enterprises. FASA has taken decisions to support local purchasing, and locally produced products for the inputs for brands sold under franchises, to a greater extent.

Clothing and Textile Competitiveness Programme

The clothing and textile industry is recovering from its nose dive. Clothing manufacturing companies are becoming more competitive - in many cases using the incentive programme provided by the EDD to improve their competitiveness, and position themselves as fast fashion providers to retailers.

Retailers have taken up an increasing percentage of these products from local producers and local manufacturers. “Foschini has invested in clothing manufacturing in SA, and is in the process of expanding it operation”, noted Minister Davies.

Operation Phakisa

A drive in the mining sector, Operation Phakisa has led to a commitment to increase the purchase of local mining equipment by the mining industry. Phakisa began with the development of a mining hub - by the Council for Scientific and Industrial Research (CSIR) – to research and perform development work on mining equipment. The mining hub will develop and implement a supplier development and localisation programme, for mining equipment.

Proudly SA and NEDLAC

Proudly SA is not only working with government to foster commitment from procurement officers to local content, localisation and the creation of jobs, it is working with the private sector in an initiative with the National Economic and Labour Council (NEDLAC), supported by NEDLAC’s social partners.

“Sadly, monitoring of the commitments of trade unions has shown a mixed picture”, said Minister Davies.
While trade unions are buying local when it comes to the things that they themselves procure (T-shirts, clothing, office furniture), there is a challenge for the trade unions to become more involved in the industries and sectors in which they participate, as a way of leading a stronger buy-local campaign.

Purchasing ‘designated’ is no longer an optional decision for public procurement officers

If a product is designated it is no longer an optional decision for a procurement officer in a public entity. The product must be procured from local sources or manufacturers.

“If anyone is aware of a case where this is not happening we would be very interested to know about it,” said the Minister. He added that “it is now an auditable matter. It is an issue of compliance with applicable legislation, and we are working with the Auditor General to ensure that where compliance is missing, the entity in question will be subject to an audit finding, as they will have failed to follow a legal requirement.”

Work is continuing on another range of products which will be subject to designations.

Minister Davies concluded that “the new Industrial Policy Action Plan (IPAP) has been approved by cabinet and will be released in due course”.

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