It was interesting to hear a senior Department of Trade and Industry (DTI) official acknowledge recently that many government departments are still flouting procurement rules on local content, despite specific regulations having been introduced compelling all spheres of government and State companies to source ‘designated’ products from domestic producers.

In 2011, the National Treasury, guided by the DTI, amended the regulations to the Preferential Procurement Policy Framework Act to enable the designation of products, which range from railways equipment and power pylons through to canned food and uniforms.

Speaking at the inaugural Manufacturing Indaba last week, deputy director-general Garth Strachan revealed that, eight months after clothing, textiles, leather and footwear products were designated for local procurement, the DTI discovered 160 government tenders in breach of the rules.

It had also discovered that certain municipalities were still favouring imported products and solutions procured through black-empowered intermediaries over local products – even products produced by local labour at companies operating within the municipality’s own boundaries.

“So, passing the law is one thing, getting the requisite capacity for strategic sourcing and supplier development across government institutions may be another altogether.”

But Strachan also called for a change in the “mind set” of the private sector, which had also increasingly turned to imported products, which had served to compound South Africa’s current account and trade deficits.

Government would be reviewing the procurement and empowerment regimes to place a greater emphasis on aligning transformation with localisation, possibly through the introduction of set-asides for black firms and the inclusion of local-procurement targets for companies requiring a licence to operate, such as mining companies.

“We have to have a mind-set change across all spheres of government, but it’s also about leveraging private-sector procurement,” Strachan argued.

Speaking from the same platform, economist Dr Iraj Abedian reported that the majority of the 54 respondents to the Manufacturing Circle’s latest survey, which was complied by Abedian’s Pan-African Investment and Research Services, concurred that local procurement was important to the growth of manufacturing. However, the survey also found that most of the respondents did not benefit directly.

The companies, which include small-, medium-sized and large manufacturers, were equally concerned about delays to the public infrastructure programme as well as reduced demand from the mining sector, partly owing to a protracted strike in the platinum sector.

There is little question that the local-content rules and the programmes to localise major aspects of multibillion-rand infrastructure roll-out could, in the longer term, provide an important demand stimulus.

However, it will be equally important for government to become more consistent in the way it compiles and releases tenders. In addition, it will be critical that it applies its own rules fairly and strategically so that some of the current contradictions between economic transformation and industrialisation are ironed out.

Ultimately, though, it will be up to domestic manufacturers to use the locali- sation schemes not simply as a price-gouging exercise, but as an opportunity to build long-term sustainable businesses, with their ability to export being a key test of their competitiveness.