Cape Town - Trade and Industry Minister Rob Davies vowed this week that the government would step up verification around its ‘localisation’ policy, where the state buys certain classes of goods only if they are produced in South Africa.
Davies was speaking to the media at Parliament after the department of trade and industry delivered its 2016/2017 annual report to the portfolio committee on trade and industry.
“We are working now towards much more effective monitoring and enforcement of localisation,” he said.
Davies said that, once Treasury had designated a commodity for localisation, it was "no longer an option” for all spheres of government to follow the policy.
The goal of the policy is to improve skills and increase employment.
The government has to date designated 21 commodities as part of its localisation drive. These goods have varying “local content thresholds”, which can make verification difficult. Generally, more than 50% of the commodity must be produced in South Africa for it to qualify.
Some commodities include rail rolling stock, bus bodies, clothing and residential electricity meters.
“The department of performance monitoring and evaluation is going to be following up on this issue, so that we make sure that the ‘leakages’ which we have seen from localisation as a result of some tender decisions, are plugged,” said Davies.
He said the policy was working, giving the example of how bus bodies and clothing for the government sector are being manufactured locally.
The issue of localisation made headlines earlier in the year, when questions were raised about whether South Africa’s national rail company Transnet flouted localisation policies over its R50bn tender for over 1 000 new trains.
While Davies did not want to go into specifics of alleged cases of flouting of the localisation rules, he said he had seen with “concern” how some larger tenders had gone to non-South African firms.
The policy does not apply to the private sector.
“It’s not about the ownership of the company. It is a question of whether they are domiciled and produce (the goods in question) in the country,” said Davies. “It doesn’t mean a foreign investor doesn’t get a contract."
Davies said firms that flout the directive could be punished under the DTI's Preferential Procurement Regulations. Under these regulations, a firm can be banned from tendering for contracts if it does not follow government guidelines.
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