Trade and Industry Minister Dr Rob Davies signalled on Monday that government would be demanding higher levels of compliance with local-content requirements, arguing that once “designation notes” had been issued by the National Treasury it was no longer a choice, but a requirement, for State departments, companies and agencies to “buy local”.

Speaking at the second Manufacturing Indaba, hosted in Ekurhuleni, Gauteng, Davies described localisation of both infrastructure components and regular government purchases as a critical feature of government’s reindustrialisation vision, which was itself seen as central to the country’s future growth and development.

In fact, Davies argued that the past growth driver of the high consumption of imported products, namely the favourable terms of trade for South African commodities received during the recent resources supercycle, needed to make way for a growth path underpinned by industries that could supply value-added products for the infrastructure and consumer markets of both South Africa and the rest of the continent.

The immediate limitation imposed on manufacturers by the electricity crisis was being addressed by government, in partnership with the private sector, with the intention being to secure a solution that ensured reliable and affordable electricity for industry over the long term.

Davies dismissed assertions that this local-content thrust – which had featured in all of the Department of Trade and Industry’s (DTI’s) Industrial Policy Action Plans, including the seventh iteration, which was released in May – was having no impact. To illustrate the point, he highlighted the fact that all of the “several hundred” buses being procured for the various bus rapid transit programmes around the country were being produced locally, in stark contrast to the high level of bus importation associated with the 2010 FIFA World Cup.

But enforcement of the designations remained an area of concern and there was “still quite a bit of slippage”. The DTI’s message within the public sector was that compliance was a requirement once the National Treasury issued a “practice note” on the designations and that it should, in fact, become an audit requirement for departments and State-owned companies (SoCs).

The designation had been given legal weight through the Preferential Procurement Policy Framework Act, through which the Trade and Industry Minister had the authority to direct government departments, agencies and SoCs to procure specifically selected products and services from local manufacturers, or providers. Over the past few years a number of designations have been made, covering everything from transport and energy equipment through to canned-food products and uniforms.

The issue of local procurement had also been supported by the domestic industry, with the Manufacturing Circle, which hosted the indaba, including it in its recently published document titled ‘Three Goals to Grow Manufacturing’.

The vision statement, which was formally released by chairperson Bruce Strong, who is also CEO of packaging group Mpact, calls for an environment more conducive to the “resilience and growth” of the domestic manufacturing sector.

Strong indicated that preferential procurement of locally manufactured, but competitively priced, products was critical to supporting a sector that not only mirrored the overall economic performance of the country, but began “driving” higher, job-rich growth.

The other goals outlined included: achieving a competitive manufacturing environment; attaining a supportive trade position; and advancing the reputation of South African manufactured products.

UNFAIR COMPETITION

Strong also stressed, however, that fair trade conditions were also vital, noting that South African manufacturers were currently confronting a host of unfair and predatory import practices, from dumping through to the flow of products that had been subsidised in their home markets.

Davies promised that government planned to “up its game” in dealing with substandard imports, as well as with the chronic practice of under invoicing, which was undermining the effectiveness of the country’s tariff protection.

He argued that substandard products were not only, in some cases, a danger to citizens, but also a threat to legitimate domestic manufacturing enterprises. The Minister was particularly concerned currently by the slew of noncompliant paraffin stoves and heaters entering the country, where the flame did not extinguish itself when the appliance toppled over, raising the risk of fire.

Government also estimated that up to 60% of all clothing imports entering the country were being under invoiced and Davies indicated that there were moves afoot to deal with what he described as a “constant battle”.

He appealed for business to approach it with any intelligence it might have to assist government in tackling unfair import competition.