Transcription of LOCAL CONTENT POLICY & DESIGNATION
1 1 LOCAL CONTENT POLICY & DESIGNATION MEASURES TO ENSURE COMPLIANCE AND VERIFICATIONDATE: 11 MARCH 2020 PRESENTATION TO THE PORTFOLIO COMMITTEE ON TRADE AND INDUSTRYC onfidentialPRESENTATION OUTLINE POLICY AND REGULATORY CONTEXTS DESIGNATION PROCESS PRODUCTS DESIGNATED COMPLIANCE WITH LOCAL CONTENT REQUIREMENTS VERIFICATIONS BY SABS CHALLENGES ON VERIFICATION2 PREFERENTIAL PROCUREMENT REGULATIONS 2017 ON LOCAL CONTENT Regulation8(1):empowersthedtitodesignate specificindustries/sectors,whereonlyloca llymanufacturedproductsthatmeetthestipul atedminimumthresholdforlocalcontentwillb econsidered. Regulation8(2):organsofstatemustincludel ocalcontentintheirbidinvites. Regulation8(3):NationalTreasurymustinfor morgansofstateviacircular. Regulation8(4):allowsorgansofstateto selfdesignate Regulation8(5) FOR NON-COMPLIANCE AcrucialaspectofLocalContentisitsverific ation,andtheSouthAfricanBureauofStandard s(SABS) :Remedies 14(1)Anorganofstatemust,upondetectingtha tatenderersubmittedfalseinformationregar dingBBBEE,LocalContentoranyothermatter:( a)informthetendereraccordingly;(b)giveth etendereranopportunitytomakerepresentati onswithin14days;(c)ifitconcludes,afterco nsideringtherepresentationsthatfalseinfo rmationwassubmitted disqualifythetendererorterminatethecontr actinwholeorpartandifapplicableclaimdama gesfromthetenderer.
2 14(2)AnorganofstatemustinformtheNational Treasuryofanyactionstaken. 14(3) PROCESS FLOWG azette Regulations & Circulate Practice NotesDesignation of Industries & Sectors Industrial / SectorResearch & ReviewConsultation & Stakeholder ManagementApproval by the IDD EXCO thedtifollowsarigorousresearchprocessbef oreaproductcanbedesignatedforlocalproduc tion. Thedesignationframeworkrequiresthatthere mustbeevidenceindicatingthatthegovernmen tbuysproductwhichisunderdistresscausedby importswhichdisplacelocalproductionandjo bs. Duringtheresearchstage,thedesignationpro cessinvolvesconsultationwiththeindustry( associationsandlocalmanufacturers)aswell asprocuringauthorities. DESIGNATED FOR LOCAL PRODUCTION 2012/132013/142014/152015/16 Working Vessels (Boats) Residential Electricity and Water* Meters Two-way Radios Solar Photovoltaic System Components Rail-Signalling System and Components Wheelie bins Fire Engine/Truck Steel Products and Components for construction2017/18 Plastic Pipes Bulk Material Handling Lead Acid Batteries MV Switchgear27 designations over 8 years2016/17 Rail Rolling Stock Steel Power Pylons and Substation Structures Bus Bodies Canned/Processed Vegetables Textile, Clothing, Leather and Footwear Sector Pharmaceuticals Solar Water Heater Components Set-top Boxes Furniture Products Electrical and Power Cables, Valves Products and Actuators Steel Conveyance Pipes Transformers and Shunt Reactors2019/20 Rail Perway (Track) Pumps & Medium Voltage Motors67 PRODUCTS DESIGNATED FOR LOCAL PRODUCTION Designated ProductsLC ThresholdDate16.
3 Two Way Radio Terminals60%30-06-201617. Solar PV Components70%30-06-201618. Rail Signalling System65%30-06-201619. Wheelie Bins100%18-08-201620. Fire Fighting Vehicles30%21-11-201621. Steel Products and Components for Construction100%13-01-201722. Rail Perway (Track) Infrastructure90%13-11-201723. Pumps & Medium Voltage Motors70%12-12-201724. Plastic Pipes & Fittings100%16-08-201925. Air insulated MV Switchgear50%20-12-201926. Bulk Material Handling 85%20-12-201927. Industrial Lead Acid Batteries50%20-12-20198 AcrucialaspectofLocalContentisitsverific ation,andtheSouthAfricanBureauofStandard s(SABS) :Remedies 14(1)Anorganofstatemust,upondetectingtha tatenderersubmittedfalseinformationregar dingBBBEE,LocalContentoranyothermatter:( a)informthetendereraccordingly;(b)giveth etendereranopportunitytomakerepresentati onswithin14days;(c)ifitconcludes,afterco nsideringtherepresentationsthatfalseinfo rmationwassubmitted disqualifythetendererorterminatethecontr actinwholeorpartandifapplicableclaimdama gesfromthetenderer.
4 14(2)AnorganofstatemustinformtheNational Treasuryofanyactionstaken. 14(3) FOR NON-COMPLIANCE9 AREAS OF NON-COMPLIANCE TO LOCAL CONTENT REQUIREMENTSNon-complianceisacomplexmatt erandhasdifferentphases: Advertisementoftenderswithlocalcontent(L C)conditions. SubmissionofcorrectLCdocumentsbybidders( ). Selfdeclarationofcorrectminimumthreshold sforlocalproductionbybidders. ProperevaluationofbidsintermsofLCrequire ments(nopointsallocatedforLCbutitisthefi rsthurdlethatmustbeachievedbybidders). UnderstandingofLCrequirementsandindustri alpolicyobjectivesbybothBidEvaluationand AdjudicationCommittees. Posttenderawardreportingtothedtibytheorg ansofstate(submissionofsignedBiddingDocu mentsandAnnexures). Turnkeyprojects(design,build,operateandt ransfer) IN PLACE TO ENSURE COMPLIANCE TO LCR Industry(includingunionsandbusinessassoc iations)areencouragedtoflagtendersandspe cificationswherelocalcontentandproductio nrequirementshavebeentransgressed. Specificationsforproductsdesignatedcanbe doneincollaborationwiththedtitoensuretha tspecificationsaresetaccordingtofunction ality( )ratherthanbrand,producttypeorpastpracti ces.
5 EffortsaremadethroughMasterPlanstoencour ageprivatesectorfirmstoalsobuyfromlocalp roducerstostrengthenthedemand,andcapabil itiesofsupplierstomeetglobalstandards,wh ereappropriate. TheJobsSummitincludedactionstostrengthen localprocurementfromtheprivatesector,inc ludingakeyroleforProudlySAtoengagewithfi rmstosupportthenationaleffort. WorkingcloselywithProudlySAthroughtheten dermonitoringsystem. thedtiisworkingcloselywiththeOfficeofthe AuditorGeneraltoscaleuptheauditingoftend ersdesignatedforlocalproduction. on1 April2019,theamendedPublicAuditAct(PAA) NTissuedanInstructionNote(No2of2019/2020 )onirregularexpenditureeffective17 May2019, OF PROUDLY SA IN SUPPORT OF LOCALISATION13 IndicatorsKeyProgrammesPublicsectorinter ventioninsupportofdesignations Tendermonitoringsystemdeveloped, PublicSectorProcurementForumsestablished atProvinciallevel. AnMOUconcludedwithSALGA andtheactivitiesincludeaccesstobegivento educateSpeakers,Mayors,MunicipalManagers ,CFOs, Databaseoflocalproductsandservices,withr ecruitmentofmembersintensifiedindesignat edsectors.
6 'mark'oflocalmanufacturing FundinghasbeenmadeavailabletoProudlySAto enableittoimplementitsactivities,includi ngmarketingactivities,resuscitatingtheBu yBackSAcampaign, :promotionofbarcodesofalllocallymanufact uredandpackagedconsumergoods Retailersareengagedtoensurethattheysuppo rtlocalmanufacturersandincreasetheirleve lsoflocallymadeproductssoldintheirrespec tiveretailstores. EDCON committedtoincreaselocallymadestocktobeo ver50%. Woolworth, OF PROUDLY SA IN SUPPORT OF LOCALISATION Thepublicsectortendermonitoringsystem. Thesystemmonitorstendersissuedbyallorgan sofstateandadvertisedononlinewebsites. Currentlylinkedtoover763websites(entityw ebsitesandNTmandatoryonlineplatforms/sit es). Continuouslysearchfortendersissuedfordes ignatedproducts(sectors)usingkeywords. Assiststateorganswithcompliancetolocalco ntentprovisionsofthePPPFA. Advertisedbidsareforwardedtothedtitointe rvenewhentendersareissuedandnotaftertend ersareawardedorcontractsareconcluded. Value-addforProudlySAmembersastheyarenot ifiedoftendersrelatedtotheirofferings(an dintheirareasofoperation locality).
7 141516 POST AWARD REPORTING: BIDS REPORTED FROM MARCH 2015 TO FEBRUARY 2020 TheallocationofR22millionmadebythedtitof inancetherolloutoflocalcontentverificati oncontributedsignificantlyinimprovingthe levelofverification. SABSL ocalContentdivisionhasbeenabletoconduct5 5verificationandvisitedmorethan374tier2a ndtier3suppliersintheprocess. Only15projectsarestillunderwayresultingi n70projectsintotal. OftheR22millionallocatedbythedti,R17,7mi llionhasbeenexpendedandthebalanceofR4,3m illionwillbeexpendedbytheendofthecurrent financialyear. Outofallthetendersreportedsinceimplement ation,74%invalueoftendershavebeenverifie d. Thenumberoftendersverifiedishoweververyl ow,reportedtobelessthan10%.17 POST AWARD REPORTING: BIDS REPORTED FROM MARCH 2015 TO FEBRUARY 2020 Thetablebelowdetailsthenumberoftendersaw ardedandreportedtothedtisinceinceptionof localproductionandcontentandthenumberoft endersreportedinthecurrentfinancialyear( April2019toFebruary2020). Thetablealsoreflectthenumberoftendersver ifiedineachofthedesignatedsectors.
8 Designated ProductsSigned Standard Bidding Documents Submitted to the dtiTotal Value per SectorR'000No. of Companies VerifiedTenders for the period April 2019 to February 2020R'000 Tender Value VerifiedR'000% Verified: (total verified/ total valueTextiles & Clothing Products 549 2 946 21 9 1 259 43%Furniture Products 230 208 13 23 27 13%Electrical & Telecom Cables 96 1 984 8 77 263 13%Canned & Processed Veges 23 697 4 - 2 0%Valves & Actuators 25 299 8 3 26 9%Rail Rolling Stock 4 49 547 4 - 49 547 100%Set top boxes* 1 4 300 3 - 600 14%Power Pylons 11 2 253 3 - 1 146 51%Solar Water Heaters 14 456 12 10 303 66%Steel Products 16 423 5 72 0%Busses 3 806 1 - 132 16%Working Boats & Vessels 3 4 299 2 - 4 213 98%Transformers 42 4 490 3 10 14)
9 0%Construction 38 3 389 - 3 211 - Total 1 055 76 102 87 3 417 57 536 76%* One tender but different suppliers appointed as a panel by USAASAS ource: Dept of Trade & Industry & SABS: LOCAL CONTENT databases, 201818 LOCAL CONTENT verification CONDUCTED IN THE CURRENT FINANCIAL YEAR (2019/2020) Eleven designated sectors/products were prioritised. SABS LOCAL CONTENT division managed to conduct verification on 55 tenders and only 15 projects are still under way resulting in 70 projects in total: #Designated SectorNumber of Tenders Selected1 Rail Rolling Stock42 Furniture133 Frozen Vegetables44 Electric Cables85 Electricity Metres26 Steel Power Pylons17 Transformers38 Steel Structures49 Textiles2110 Valves811 Vessels2 TOTAL70 LOCAL CONTENT verification CHALLENGES Manipulationofthebidpricetomeetlocalcont entthresholds. Noncompliancetothelocalcontentrequiremen tsoncethetenderhasbeenawarded( ). Inadequatefundingoflocalcontentverificat ion.
10 Anti-competitivebehaviourbysomemanufactu rers( ).1920 LOCALISATION PROGRAMME IN THE TRANSPORTATION SECTOROEMPROGRESSRail ManufacturingofRailRollingStocksystemsan dcomponents(locomotives,electricmultiple units,wagons,andcoaches) ManufacturingofRailInfrastructuresystems andcomponents(signalling,perway,andoverh eadtrackequipment) Maintenance&refurbishmentofRailInfrastru cture&rollingstockAutomotive Manufacturingofmotorvehicles Manufacturingofmotorcycles ManufacturingofcomponentsMarine Building&repairofships Building&repairofworkingboats/vessels Building&repairofpleasure/sportingboatsA erospace Manufacturingofcomponentsforaircraftands pacecraft21 PROGRESS MADE IN LOCAL CONTENT IMPLEMENTATIONS teelIndustryLargeBorePipes AMSA hadengagementswithWaterSOEs, ,withdirectprocurementof28ktand29ktHotRo lledCoilrespectivelyfromAMSA(100%localst eel), , TransnetEngineering(TE)forLocosandWagons ,TEconsistentlyrequestsinformationfromAM SA aboutproductavailabilityduringdesignphas eandpriortoprocurementphase.
