PRESIDENT Jacob Zuma is engaged in talks with business in a bid to get the top 80 companies listed on the JSE to commit to buying more of their inputs from local companies, Trade and Industry Minister Rob Davies said on Tuesday.
The talks are taking place within the president’s Business/Government Working Group on Inclusive Growth and are intended to prod a reluctant private sector to contribute more to the growth of local manufacturing.
The example has been cited of mining industry, which is reported to be increasingly bypassing the local mining and transport equipment industry, despite its competitiveness, in favour of foreign suppliers.
The Department of Trade and Industry’s chief director of industrial policy, Garth Strachan, said in a parliamentary briefing earlier this month that there had been rising import penetration in the sector.
Business is understood to be dissatisfied with the presidential working group, which it believes does not address the real constraints to economic growth, namely a lack of strong leadership by the government and the lack of political will to address institutional bottlenecks and a strike-torn, inflexible labour market.
Instead of trying to extract concessions from business, the government should deal with these problems, according to business.
Mr Davies emphasised the need for more local procurement during his speech in Parliament on the department ’s budget vote. He called on the private sector to adhere to the commitments it had made under the local procurement accord signed a few years ago.
In his speech, Deputy Trade and Industry Minister Mzwandile Masina noted that the department would be engaging with the private sector "on its reluctance to follow government’s lead of targeting 75% local content in its procurement".
This drive by the government to secure more of its procurement locally through its designated products programme has not been very successful so far. It is largely ignored by departments that are required to source 75% of their requirements for these goods from local companies.
Nevertheless, Mr Davies announced the addition of five new products to the designated list.
The new products are steel, conveyance pipes, transformers, building and construction materials, and rail signalling and components. The existing list includes rail rolling stock, power pylons, buses, canned and processed vegetables, textiles, clothing, leather and footwear, solar water heaters, TV set-top boxes, pharmaceuticals, furniture, power and telecommunications cables, and valve products and actuators.
"To unlock the value of localisation for South Africa, further refinement of procurement legislation will be required — including a focus on compliance across all tiers of government — and improving transversal procurement processes," Mr Davies said.
The public sector’s R1.5-trillion infrastructure build programme would support local industry, especially in the rail, electricity and construction sectors.
The Manufacturing Circle’s executive director, Coenraad Bezuidenhout, said business supported local procurement in principle. "However, manufacturers are currently facing stark choices to ensure the reliability of supply in respect of production inputs sourced locally, and to keep local manufacturing going in the light of protracted strikes.
"It is likely that any government efforts to promote local procurement by the private sector will fail until it grasps the nettle and makes the necessary institutional changes in the labour and social dialogue dispensation to promote labour stability and for government to lead more decisively on the economy," he said.
Democratic Alliance spokesman on trade and industry Geordin Hill Lewis said during the parliamentary debate on trade and industry that the dysfunctional labour relations environment had to be addressed urgently to put an end to "the continuous cycle of strike action that lowers productivity, and undermines economic stability".
Another priority stated by Mr Davies was to beneficiate South Africa’s mineral resources. Success with beneficiation had remained "elusive" for many years. A minerals beneficiation action plan would be devised this year.
Mr Davies also highlighted the importance of foreign direct investment (FDI), the total stock of which currently accounted for about 42% of gross domestic product. South Africa had performed well in international surveys of the relative attractiveness of investment destinations.
Mr Davies referred to research by the University of Berne, which showed that more than 130 foreign firms either entered South Africa or expanded their investments last year. The research was done by the World Trade Institute’s international investment initiative director, Stephen Gelb.
The 2014 AT Kearney FDI confidence index ranked South Africa 13th among 25 leading economies.