SA in landmark empowerment deal

Johannesburg – Billions of rand are set to be funneled to South African companies after the government, business, and labour signed an accord on local procurement this past week to increase purchase of goods and services local firms. The idea is to increase local procurement to 75 percent of all goods and services so as to boost industrialization and create employment. Analysts say business went into the accord following the government’s challenge to the Walmart-Massmart deal and talk of nationalization within the ranks of ruling African National Congress. Businesses, the analysts say, hope this will offset some of the talk of nationalization, though it is just one of several demands being made by disaffected youths. The New Growth Path Local Procurement Accord emerged from talks on the government’s economic revitalization plan seeks to “lay a foundation for a localisation programme”, Economic Development Minister Ebrahim Patel said. Trade and Industry Minister Rob Davies indicated that the accord covered the initial list of designated products with stakeholders. The first designations cover the public procurement of buses, power pylons, railway rolling stock, some pharmaceuticals, set-top boxes, clothing, textiles and leather footwear, and certain food and canning products. A standard is being established to govern whether or not a product can be considered to be local, with Davies stressing that the definition related to local production and not to the ownership of the supplying organization. Patel added that the government wanted to enhance South Africa’s manufacturing sector. “The accord brings together the efforts of the public and private sectors and will direct billions of rands to local manufacturers,” he said at the signing in Pretoria. “It must go together with other efforts to improve competitiveness, skills development and better economic infrastructure, to achieve our goal of five million jobs by 2020.” Departments involved in the drafting of the accord included finance, trade and industry, labour, energy, public enterprises, and rural development. Patel said in some sectors, more than half of the goods consumed were imported. New regulations on state procurement will come into effect on December 7 to expand the value of goods and services the government procures from local producers, said Patel. “We have begun to do an analysis product-by-product, and government will soon release a designated list indicating where we see the biggest problems.” Nomaxabiso Majokweni, CEO of Business Unity South Africa (BUSA), said the accord was a platform for business to contribute to the economic transformation of South Africa. “We are beyond talking about some of these things and we are at a point of injecting action,” she said. The 84 top companies represented by BUSA — including Absa , Anglo American and General Motors South Africa — will analyze their procurement to determine the proportion of imports. By the end of the month the first list of products designated for local procurement will be forwarded to companies party to the accord. The first annual report on the attainment of their procurement targets is due next June. “This will not only help with job creation, but it will also create enterprises that could supply products that are competitive, rightly priced and of good quality,” said Majokweni. Congress of South African Trade Unions general secretary Zwelinzima Vavi said the agreement would require the support of consumers. He said the accord’s target vindicated labour’s demand that Walmart agree to stringent conditions for the Massmart deal, including 75 percent local procurement.

November 2011
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