Target: 75% of goods and services to be from SA.

JOHANNESBURG - A "Local Procurement Accord" was signed between big business, government, labour unions and civil society on Monday which hopes to act as a cure for struggling manufacturing sectors.

The accord will attempt to have at least 75% of all goods and services procured in the country.

While this accord marks a rather significant high level agreement between the different parties, the details still need to hammered out and the viability of the idea proven.

IDC chief economist Lumkile Mondi said one of the first hurdles will be for the different parties to remain on the same page and work together.

Thereafter, the target seems rather ambitious for certain ailing manufacturing sectors: "One wonders how you can procure 75% if you cannot address the basic fundamentals of high input costs such as labour and energy," Mondi said, adding that it would be extremely difficult to quantify the monetary value of the procurement target.

According to Oupa Bodibe, chief director: sector specialist at the Department of Economic Development, 84 of SA's biggest businesses formed part of the accord.

Neither Business Unity SA, nor Business Leadership South Africa - the two organisations that reportedly led the business sector in the discussions - were able to comment on the agreement or its implementation immediately.

Bodibe said that the stakeholders do not know where local procurement currently stands, or the value thereof, and are as a result unable to set a timeline for the 75% target. He added that the target was set across the entire economy which includes private business, government, labour and communities: "It is very ambitious, that is why we say 'ambitious'".

He said the different partners will need to agree on a current baseline and plan the way forward from there. A steering committee will receive quarterly reports from all the partners and the first report is expected in June next year.

Bodibe added that government's new procurement regulations which come into effect on December 7, as well as the big business buy-in, will lead the local procurement drive.

In a statement, the department added that government procurement would initially focus on buses, power pylons, railway rolling stock, pharmaceuticals, set-top boxes for televisions, uniforms and other clothing products, certain food products and office furniture and school furniture. This list has been expanded from the one Finance Minister Pravin Gordhan announced in the Mini-Budget last week. According to a treasury spokesperson, the trade and industry department will create the list going forward.

Bodibe said the forum avoided setting specific targets as sectors differ and because one needs to look at its specific dynamics.

However, he defended the accord's ability to transform struggling or expensive manufacturing sectors: "On the one hand you need to create demand in the local market and on the other increase efficiencies... We don't just want to protect local producers from imports. We want to give them an opportunity but they also have to become more competitive, increase productivity and enhance their measures.

"The market reality is a constructed reality that we want to change. We are saying that there is a market for your business because the state and big business will procure from you. The businesses need to become competitive; there needs to be a business and commercial case to procure locally."

Author: Hendri Pelser | 01 November 2011 08:23