Public and private professionals in South Africa assert that strategic procurement, including smarter localisation and clearer rules, could revitalise the nation's manufacturing sector. With smarter localisation, clearer procurement rules, and a more deliberate industrial strategy, public spending could again become a powerful engine for rebuilding factories, expanding supply chains, and restoring confidence in South Africa as a manufacturing country, public and private professionals say. They indicate that public spending has the potential to become a significant engine for rebuilding factories, expanding supply chains, and restoring confidence in South Africa as a manufacturing hub. This approach aims to foster industrial growth and strengthen the country's economic foundation, moving beyond fragmented and inconsistent practices that have previously hindered progress.
Current Procurement Shortcomings
Public procurement practices in South Africa are frequently fragmented and inconsistent, with contracts often awarded for short durations. This approach offers no guarantee of continuity or commitment to local industry, and public procurement is too often fragmented and inconsistent, with contracts awarded for short periods, offering no guarantee of continuity or commitment to local industry. A significant challenge within the current procurement framework is the overwhelming weight placed on price during evaluations. The current procurement framework places overwhelming weight on price, with 80%:20% and 90%:10% systems meaning price accounts for up to 90% of evaluation criteria. Systems such as 80%:20% and 90%:10% mean that price can account for up to 90% of the evaluation criteria. These factors contribute to an environment where many of South Africa's manufacturers are operating at only 50% to 70% capacity, indicating underutilization of industrial potential. Many of South Africa's manufacturers are operating at 50% to 70% capacity, reflecting the impact of these procurement challenges. The short-term and price-centric nature of procurement hinders the ability of local manufacturers to plan for long-term investments and growth, thereby limiting their contribution to the national economy and job creation.
Policy and Opportunities for Growth
The Preferential Procurement Act of 2024 is designed to rebalance procurement processes by introducing minimum local-content thresholds as an initial evaluation criterion for designated products. The Preferential Procurement Act of 2024 aims to rebalance procurement by requiring minimum local-content thresholds as a first-stage evaluation criterion for designated products. This legislative change aims to foster domestic industrial growth by ensuring local manufacturers receive preference in public tenders, thereby creating a more stable and predictable demand environment.
Another significant opportunity for the manufacturing sector arises from Eskom's Transmission Development Plan. This initiative provides a projected 15- to 20-year pipeline of grid infrastructure projects, which could serve as a catalyst for rebuilding domestic manufacturing capabilities within South Africa. Eskom's Transmission Development Plan offers a 15- to 20-year pipeline of grid infrastructure ahead, presenting an opportunity to rebuild domestic manufacturing and supply chains. This long-term visibility is key for manufacturers to make necessary investments in capacity and technology.
Public sector demand already constitutes a substantial portion of sales for certain industries. Approximately one-quarter of domestic sales within the metals and engineering value chain originate from the public sector. About one-quarter of domestic sales in the metals and engineering value chain stem from the public sector, a figure that can exceed 60% in some subsectors. In some specific subsectors, this figure can exceed 60%, noting the significant impact government procurement can have on local industries and suggesting that a strategic shift could unlock considerable growth.
Expert Views on Localization
South Africa possesses industrial capability but lacks a procurement system designed to nurture and expand it, according to analysts. South Africa does not lack industrial capability; it lacks a procurement system designed to nurture and expand it. The country's manufacturing sector has become largely stagnant over recent years, marked by factory closures, shrinking order books, rising input costs, and erratic demand. South Africa's manufacturing sector has become largely stagnant, with years of factory closures, shrinking order orders, rising input costs, and erratic demand. This situation has hindered the sector's ability to grow and contribute effectively to the national economy. The absence of a supportive procurement framework is cited as a significant factor in the manufacturing sector's current challenges, despite existing potential for growth and development. The stagnation reflects a broader issue where industrial capacity is present but not adequately utilized or supported by public purchasing mechanisms, showing the urgent need for reform.
