The private sector has not contributed enough to the drive towards localisation, which is central to the government’s push to industrialise and expand the domestic economy.
This was according to Trade and Industry Minister Rob Davies, who spoke at the weekend during a business forum in Mangaung where the African National Congress is holding its national electoral conference.
Commitments to local procurement were made in an accord signed in October between the government, business and labour. But Mr Davies said "progress by the private sector has been minimal. Greater impetus to convert high-level commitments into concrete actions is required," he said. Much stronger processes were needed "to secure private sector commitments to local procurement in key sectors such as mining, construction, health, retail and so forth".
The failure by provincial and local government to promote local procurement meant that "significant leakages from the economy persist," Mr Davies said.
He said the initiative had had negative consequences, such as excessive premiums for localisation. Vigilance was also required to prevent "ongoing import fronting" and government oversight of large and strategic procurements was necessary to better monitor costs, technical specifications and technology spillovers.
The Department of Trade and Industry has initiated a number of measures to accelerate local procurement, including amending the regulations under the Preferential Procurement Policy Framework Act so that the department could designate industries for local procurement.
Sectors designated so far include buses, rolling stock, power pylons, canned vegetables, clothing, textiles, leather and footwear, set-top boxes and 70 pharmaceutical products in the oral dosage tender.
Mr Davies said work on a third wave of designations was under way and would include school and office furniture, solar water heaters, cabling and capital equipment. More designations would follow during the 2013-14 financial year and thereafter.
The Cabinet had also signed off on policy proposals for a new national industrial participation programme which will align it with other procurement instruments and provide for greater support for key sectors identified in the department’s industrial policy action plan.
The programme requires successful foreign bidders of state contracts above a certain monetary threshold to commit themselves to investing in the domestic economy.
Mr Davies told the forum that it was "pie in the sky" to expect that labour market reforms could enhance the competitiveness to SA’s manufacturing sector. He added that the price of energy — in the past a key competitive advantage — could only be expected to be "neutral to negative".
He said South Africa should pursue the beneficiation of primary products — already a competitive advantage — and use tariff structures to promote or protect industrial sectors with potential.
Mr Davies emphasised that no country had enjoyed sustained industrial development without systematic development finance, referring to the success of Brazil’s state development bank.