Comply: Trade and Industry Minister Rob Davies wants better monitoring of compliance with the localisation policy. Picture: SUPPLIED
Comply: Trade and Industry Minister Rob Davies wants better monitoring of compliance with the localisation policy. Picture: SUPPLIED

Trade and Industry Minister Rob Davies is concerned about the implementation of the state’s localisation policy and wants it to be enforced more strictly.

Talks have been held with the auditor-general’s office over noncompliance with procurement legislation being made an audit finding and for consequences to follow on it for those responsible, such as CEOs of state-owned firms and accounting officers of departments.

The policy aims to encourage local manufacturing. To this end, the government has designated about 20 products that departments and state-owned enterprises are obliged to procure from local firms, including steel, bus bodies, clothing, textiles, footwear, electricity and water meters, valves and high-voltage transformers.

Addressing a media briefing on Tuesday, Davies pointed out that once the designations had been published by the Treasury, noncompliance was no longer an option.

He noted that localisation did not mean the company could not be foreign-owned as long as production took place within the country. This was his response when he was asked whether the reported negotiations with the Chinese Construction Company over the R16bn construction of a dam on the Mzimvubu River in the Eastern Cape and the R57bn construction of the Moloto rail corridor did not undermine the government’s localisation drive.

The minister stressed that localisation was a key concern of the government’s infrastructure programme.

"We are concerned when we see that large decisions are taken around procurement, some of which is outside of the realm of the designations."

The department was in discussions with the private sector to promote local procurement, although World Trade Organisation rules meant the state could not force the private sector to buy locally, he said.

Trade and industry director-general Lionel October said despite challenges with the Transnet and Passenger Rail Agency of SA locomotive contracts, there had been successes. Several multinational companies had invested in the domestic economy in order to supply the designated products.

"We are working towards much more effective monitoring and enforcement of localisation," Davies said.

The Department of Performance Monitoring and Evaluation planned to undertake an overall evaluation of localisation to ensure it was effective.

It would also follow up on implementation to ensure any "leakages" were plugged.

The department’s incentive development and administration division has released the 2016-17 annual incentive performance report that indicates that 1,549 enterprises have been approved for incentives totalling R12.8bn and attracting about R39.4bn in investment.

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