Deputy President Cyril Ramaphosa says there are government mechanisms in place to encourage state institutions and the private sector to procure local products.
He said this when he fielded questions in the National Council of Provinces on Wednesday.
The National Development Plan and the Industrial Action Policy Plan, the Deputy President said, both placed a significant emphasis on leveraging public procurement to grow the domestic manufacturing sector and to create decent jobs.
He said that because the state is a large consumer of a wide range and variety of products, public procurement is a very strong policy instrument that can be utilised to support local manufacturers and also can be used as an instrument to engender transformation.
“The Department of Trade and Industry works closely with the National Treasury to support localisation and Industrial Development through policy instruments for designated products.
“The Preferential Procurement Regulations requires that all organs of state should procure and purchase only locally produced products at a prescribed level of local content.
“This policy lever has been used with considerable positive results to raise aggregate demand for local manufacturers and to improve the competitiveness with these manufacturers,” he said.
He said further work is needed to maximise the impact of this programme.
This includes ensuring that there is compliance across all public sector procurement and that government builds a requisite capacity across all organs of state for local procurement and supplier development.
“The localisation and supplier development processes that are embedded in the competitive supplier development programme, which is the responsibility of the Department of Public Enterprises, has met with considerable success across the energy and rail value chain, including localisation empowerment, support for new market entrants, technology transfer and absorption as well as job creation.”
He said, however, that South Africa is constrained by its commitments as a signatory to the World Trade Organisation in prescribing local procurement requirements to the domestic private sector. Despite this, government is working with business and labour through the Proudly South Africa to promote the buy local campaign.
“Our social partners understand that there are massive economic benefits from buying local.
“If, for example, large corporates in just the retail, the construction, the health, tourism and mining sectors could clearly commit to local procurement and supplier development, this would raise aggregate domestic demand, supporting transformation and supporting new entrants into key value chains.”
He said government deploys a range of incentive programmes to companies that produce value added goods locally with a range of conditions.
This includes the Manufacturing Competitive Enhancement Programme, the Special Economic Zones and the Black Industrialist Programme, amongst others.
“South Africa has a number of critical initiatives to promote local procurement because we have realise that it is when we promote local procurement and encourage role players to buy local, that we will be able to create more jobs and we found that a number of countries in fact are precisely doing this.
“I know of Uganda for instance where they are preaching more and more product substitution by saying [instead of importing], make your own product so that you make more products available to your citizens.
“So through import substitution and a number of programmes, we should be able to localise more and more so we need to expand and intensify these initiatives as part of our strategy to significantly grow our manufacturing sector and encourage the development of SOEs and if we were to focus on this in a very strong and focussed way. I have no doubt that we would be able to see an improvement, particularly in our manufacturing sector because that is the real engine that can ensure that the engine of our economy begins to employ more and more people.” – SAnews.gov.za
