The South African government is pursuing legislative and regulatory processes that will seek to ensure that the R800-billion-plus infrastructure investment programme, as well as other public procurement initiatives, more fully integrate the objective of local industrial development and job creation.

Trade and Industry Minister Dr Rob Davies reports that the preferential procurement laws and regulations are currently being overhauled to ensure that greater attention is given to the issue of local content so that public procurement can be leveraged in support of industrialisation.

The Preferential Procurement Policy Framework Act (PPPFA) is being redrafted to empower the Department of Trade and Industry (DTI) to “designate” sectors that will be required to integrate the emerging local-content thrust. In the process, the PPPFA’s points system will be aligned to broad-based black economic empowerment codes, so as to ensure that both industrial development and transformation objectives are catered for.

The latest version of the Industrial Policy Action Plan (Ipap), covering the fiscal period 2011/12 to 2013/14, indicates that the initial sector designations should be published during the first half of 2011.

The first designations are likely to focus on big-ticket items, such as equipment and components for the coal-fired power stations programme, railways rolling stock, busses and even wind turbines. In the longer term, the nuclear programme is likely to be integrated, along with other renewable energy technologies.

Deputy director-general Nimrod Zalk, who is responsible for industrial policy, says while it is premature to offer specifics he could confirm that significant work is being done to understand the industrial opportunities arising from the proposed deployment of renewable-energy technologies into the power mix.

The newly endorsed integrated resource plan for electricity proposes that some 17 800 MW of renewable energy capacity be added to the power mix by 2030.

Zalk reports that the DTI is working with technical teams at the Department of Energy and the National Treasury to understand, for instance, the various components that are required for a wind farm and to then assess what could be produced locally at competitive prices. The early studies suggest that the towers and possibly even the blades could be made in South Africa, but the DTI is keen to engage with original-equipment manufacturers (OEMs) to understand what other components could be produced by domestic industry.

A key feature of the plan would be to ensure that government departments and the State-owned enterprises extend “fleet” procurement terms, so as to create the critical mass required for the OEMs, component makers and other service providers to invest in local capacity and production.

An early emerging example was the Passenger Rail Agency of South Africa’s (Prasa’s) feasibility study into a R97-billion, 18-year modernisation and expansion of South Africa's aged passenger rail rolling stock.

The procurement process, which was being overseen by Prasa, together with an interdepartmental task team, should begin by March 2012 and a preferred bidder should be selected by August of the same year.

But the interdepartmental task team, comprising the Departments of Transport, Public Enterprises as well as the DTI and National Treasury, will also insist on a 65% minimum level of local content.

Davies also pointed to the recent R4,2-billion antiretroviral (ARV) tender as an example of what government would seek to achieve. Through the process, government achieved 72% local production of the medication and a substantial discount to imported ARVs.

Under the fleet procurement arrangement the procurement items will be packaged and the suppliers will be expected to meet clearly defined local content obligations. If they are unable to do so immediately, government will enable them to phase in localisation, or pursue offset.

The National Industrial Participation Programme and the Competitive Supplier Development Programme would also be merged and recalibrated to ensure that all public procurement over $10-million is accompanied with localisation obligations.

Davies stressed that the DTI was committed to reviving South Africa’s productive sectors and said that far greater “care” would be taken to ensure that government investment programmes where properly leveraged in support of that objective.