A plan to procure more business locally has kicked in, tender-rigging will be penalised.

DURBAN - A plan to procure more business locally kicked in on Wednesday, with the aim of boosting local manufacturing input and arresting industrial decline.

"We have achieved too little local manufacturing input and need to change this," minister of trade and industry, Rob Davies, told a media briefing in Durban.

The first wave of designations become effective on Wednesday.

Government will be seeking more local procurement in power pylons, rolling stock for Transnet, buses needed for the "Bus Rapid Transport" system in cities, canned vegetables, Set Up Boxes and workwear, including clothing, textiles, footwear and leather products.

A minimum level of local content will be stipulated for the relevant sectors and products.

The minimum level of local content on railway stock is expected to be 65%.

More products destined for local procurement will be announced next year.

Davies says there had been around 10% too much "import leakage" from existing procurement.

There's concern that the new procurement plan will lead to more fronting and tender-rigging. But Minister of Economic Development Ebrahim Patel, told Moneyweb that government will be cracking down hard on this and will use "every ounce of the law" to make sure that procurement is above board.

"We want to eradicate tender rigging and collusion," he said.

The new policy states that government retains the right to 'undesignate' sectors if there's proof of anti-competitive behaviour.

Competitive pricing will be crucial.

"We won't allow companies to seek maximum short-term gain. We're focusing strongly on price. We're looking at a strategic approach where we focus on aggressively growing the private sector order book, rather than creating companies that are reliant on state orders for survival,' Patel said.

As well as negotiating on price, companies will be expected to negotiate on skills development, improving overall competitiveness and expanding markets.

The new regulations also intend to align government's procurement policy more closely with broad-based black economic empowerment.

Achmat Toefy, a partner at corporate law firm, Webber Wentzel, has welcomed the regulations, saying they are a step closer towards routing out fronting and driving economic transformation and empowerment. He's also welcomed the fact that the quality of the bid will be critically important.

""Now functionality (or quality of the bid) is seen as a gateway mechanism where bidders must obtain a minimum score for functionality in order to remain in the bidding process and thereafter to be scored for price and BBBEE considerations," said Toefy.

He's also pleased about regulations for a more stringent and thorough rating process by accredited rating agencies.

But there are concerns. Small and medium businesses may not be able to access the procurement as readily.

Davies says there isn't any particular provision for SMMEs at the moment, although this is pending.

Companies, both small and large, may also have to wait some time before they can make the most of the new regulations.

"There may be many private entities – both transformed or not – that are not yet rated. Such entities are unlikely to be completely disqualified from the bidding process, but they are however, unlikely to qualify for preferential points until they are rated," says Toefy.

Davies said foreign companies who have local manufacturing operations in South Africa will also be eligible for preferential procurement.

Kim Cloete