By Lerato Mpembe
Designation research studies are currently underway to boost the role of local production and content in South Africa’s public procurement system, according to senior officials at the Department of Trade, Industry and Competition (the dtic). This ongoing initiative, presented by Chief Director of Industrial Procurement and Development at the dtic, Makube, during the 11th Manufacturing Indaba Conference, aims to reframe public sector procurement policies to benefit local manufacturers, bolster economic growth, and tackle key challenges such as high unemployment and declining industrial output.
Localisation as a Pillar of Economic Recovery
Public procurement, particularly the localisation of goods and services, has been identified as a crucial driver for the revitalisation of South Africa’s manufacturing sector. At the conference, Makube emphasized that the current economic landscape necessitates deliberate and strategic interventions. South Africa has struggled to meet the growth targets laid out in its National Development Plan, with persistent structural challenges. Key among these is the diminished contribution of the manufacturing sector to the country’s GDP, compounded by high unemployment rates.
The dtic’s localisation strategy seeks to directly address these issues by leveraging the state’s purchasing power. Localising procurement means prioritising South African-made products and services, which can reduce the country’s reliance on imports and stimulate domestic industries. In doing so, it could generate significant economic multipliers such as job creation, increased industrial capacity, and greater economic resilience .
Key Policy Adjustments and Opportunities
The Manufacturing Indaba served as a platform for the dtic to outline the importance of local content in procurement policies. Makube highlighted the role of sectors like manufacturing, which historically had a strong contribution to the GDP. By implementing targeted interventions through public procurement, the government aims to revive sectors where South Africa holds a competitive advantage, such as pharmaceuticals, textiles, and construction materials.
In his speech, Makube pointed out the legislative framework supporting these efforts, particularly the Public Procurement Act of 2024. This new legislative instrument offers a renewed commitment to ensuring procurement processes not only meet constitutional and fiscal requirements but also contribute to economic transformation by creating more inclusive markets for local producers .
Sector Designation and Minimum Content Thresholds
Since 2011, the South African government has used the designation of sectors for local content production as a key industrial policy tool. These designations stipulate minimum local content thresholds across various industries, ensuring that only goods produced in South Africa meet procurement standards. For instance, sectors like rail rolling stock, textiles, pharmaceuticals, and solar water heater components have designated local content thresholds of 65% to 100%, depending on the product .
Further designation of industries is expected in the upcoming years as the government continues to evaluate and refine its localisation strategy. The dtic has already announced designations for additional sectors, such as electrical and telecom cables, valves, and fire fighting vehicles .
Challenges and Path Forward
Despite the strategic value of these efforts, several challenges remain in fully realising the benefits of local procurement. A notable issue is the lack of visibility for tenders and the difficulty local manufacturers face in navigating procurement processes. Additionally, matching supply with demand continues to be a challenge, particularly for industries where local capacity is limited .
To overcome these hurdles, the dtic has been actively working to streamline procurement processes, ensure adherence to local content requirements, and facilitate better access for small and medium-sized enterprises. By enhancing transparency and competitiveness, the department aims to create a more inclusive market that supports previously marginalised South Africans .
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