LOCAL CONTENT REQUIREMENTS IN THE PROCUREMENT …

1 LOCAL CONTENT REQUIREMENTS IN THE PROCUREMENT OF PERSONAL PROTECTIVE EQUIPMENT & NIPPDATE: 13 OCTOBER 2020 PRESENTATION TO THE PROVINCIAL HEALTH DEPARTMENTSPRESENTATION OUTLINE POLICY AND REGULATORY CONTEXTS IMPLEMENTATION OF LOCAL CONTENT IN THE PROCUREMENT OF PPE COMMODITIES COMPLIANCE WITH LOCAL CONTENT REQUIREMENTS CHALLENGES ON REPORTING AND VERIFICATION PURPOSE OF NIPP BACKGROUND OFFSET FLOW CHART BUSINESS CONCEPT PROPOSALS SPREAD OF OBLIGORSPROCUREMENT LEVERS IN SOUTH AFRICA Governmentpurchasingpowerthroughpublicpr ocurementcontributesbetween15%and25%toGD P(valuethatisextractedfromlargescaleproc urements) NationalIndustrialParticipationProgramme (NIPP).

2 ImportedContent=>US$10million DefenceIndustrialParticipation(DIP) >US$2million CompetitiveSupplierDevelopmentProgramme( CSDP):managedbyDPEinconjunctionwithState OwnedCompanies(SOCs). Designation&LocalProduction TheRenewableEnergyIndependentPowerProduc erProcurementProgramme(REIPPPP) TheLocalProcurementAccordPREFERENTIAL PROCUREMENT REGULATIONS ON LOCAL CONTENT Regulation8(1):empowersthedtictodesignat especificindustries/sectors,whereonlyloc allymanufacturedproductsthatmeetthestipu latedminimumthresholdforlocalcontentwill beconsidered. Regulation8(2):organsofstatemustincludel ocalcontentintheirbidinvites Regulation8(3):NationalTreasurymustinfor morgansofstateviacircular.

3 Regulation8(4):allowsorgansofstateto selfdesignate Regulation8(5):bidthatfailstomeettherequ iredlocalcontentisunacceptableLOCAL CONTENT REQUIREMENTS AND THE EXEMPTION PROCESS Biddersmustclearlyindicateintheirbids,th equantitytobesuppliedandtheleveloflocalc ontentforeachproductinlinewiththeinstruc tionnotes/circulars Ifthequantityofmaterialsand/orproductsca nnotbewhollymanufacturedinSouthAfrica,th edtic,inconsultationwiththeprocuringenti ty,willgrantexemptiononacase-by-casebasi soSpecifications,designs,standards,mater ialavailability,technologicalchoicesandv olumesarethemaincausesofexemptions thedticwillrevertbacktothebidderwithin48 hourseitherwitharesponseoranacknowledgme ntthattherequestisbeingconsidered.

4 Ifanexemptionisrequestedontheproductthat hasalreadybeingexempted,thenthedtictakes 48hourstoprocesstherequest. Incertaininstances,thedticconsultswithth eindustry,especiallyiftheexemptionisvolu me- IMPLEMENTATION OF LOCAL CONTENT IN THE PROCUREMENT OF PERSONAL PROTECTIVE EQUIPMENT (PPE) TheNationalTreasuryinsupportofthedtichas calledonallcompliant,particularlylocalsu ppliersprovidingpersonalprotectiveequipm ent(PPE)commoditiestodirecttheiroffersto theProjectManagementOffice(PMO)setupfort hispurpose. AnyprocurementofPPEwhichincludesdesignat edproductsshouldbesubjectedtothelocalcon tentrequirementsinlinewithRegulation8(2) ofthe2017 PreferentialProcurementRegulations.

5 Whereaproductisnotdesignatedforlocalcont ent, TheNationalTreasury COMMODITIES REQUIRING ADHERENCE TO THE LOCAL CONTENT REQUIREMENTSP roductStandardsThresholdClothing and Textiles: EN 14683100%3-ply Surgical MasksSANS 1866 Clothing and Textiles: EN 149100%Respirators ( FFP2 N95)Clothing and Textiles: Department of Health Specifications 100%Medical Textiles ( Linen, Curtains, Gowns, Coveralls; overshoes; swap suits; etc.)Clothing and Textiles: Fabric/Public usage / consumer face masksPer the guidelines issued by the dtic100%Leather and Footwear: Hospital cleaners' closed work shoesSouth African Military 100%Health Service and Department of Health SpecificationsLeather and Footwear: Nurses' shoesSouth African Military 100%Health Service and Department of Health SpecificationsLeather and Footwear: Patient shower slippers / sandalsDepartment of Health Specifications 100%Leather and Footwear: Service footwearSouth African Police, SANDF100%Furniture.

6 Beds and MattressesDepartment of Health Specifications 100%NON-DESIGNATED PPE COMMODITIES WHICH CAN BE LOCALLY PROCURED USING REGULATION OF 2017 PREFERENTIAL PROCUREMENT REGULATIONSP roductsStandardsThresholdGogglesEN 166 is SANS 140480%Face shieldEU standard directive 86/686/EEC (very broad), EN 166/2002 (Eye protection)ANSI/ISEA ApronsDepartment of Health Specifications100%Gloves:SurgicalExamina tionDepartment of Health Specifications100%100%Body BagsISO 22609 ISO 13485: 2016100%Bio hazard bagsASTM D1922 Tear resistance 500g ASTM D1709 Impact resistance 165g 100%Ventilators:CPAPBiPAPD epartment of Health Specifications90%80%Diagnostics:Molecula rSerologicalDepartment of Health Specifications60%70%SanitisersSANS 490: 2013 SANS 185390%DisinfectantsSANS 490: 201380%THE ROLE OF THE MEDICAL EQUIPMENT PPE LOCAL MANUFACTURING PARTNERSHIP Therearework-streamsinthePPEL ocalManufacturingPartnershipaimedatensur ingthatSAbasedmanufacturersareabletomanu factureandsupplyPPEproductsinthecountrya swellasexport9 Source.

7 PPE LOCAL Manufacturing Partnership at 10thSeptember 2020 Production and Demand of PPE Products, September 2020 ProductionDemandBalanceDisposable/Reusab le Gowns3 500 000 4 500 000 1 000 000- Aprons1 600 000 5 900 000 4 300 000- Gloves40 500 000 44 475 885 3 975 885- FF2 Respirators14 900 000 12 200 000 2 700 000 Surgical Masks20 700 000 17 300 000 3 400 000 Sanitizers (medical & non-medical)93 978 070 7 043 186 86 934 884 Disinfectants17 248 428 74 969 17 173 459 CRITICAL AREAS AFFECTING THE LOCAL PROCUREMENT OF PPE AvailabilityofrawmaterialinSouthAfrica Testing,certification&standards Expansionofproduction Matchingofdemandandsupply Visibilityoftendersandawards,especiallyf romprovincialandlocalgovernmentsisamajor problem Adherencetoprocurementregulationsandthei ssuingoftimelyordersbytheorgansofstate Reportingoncontractawardsandexpenditure1 0 WAY FORWARD StrengtheningtheworkofthePPEL ocalManufacturingPartnership.

8 WorkinginpartnershipwiththeNationalTreas ury,BusinessandLabourtomonitorPPEtenders ,contractawardsandexpenditure. Continueeffortstomatchthesupplyanddemand ofPPE. ScaleuptheworkbytheSABS totestandapprovethequalityofPPEcommoditi esandreportonlocalcontentverification. Continuetoenforcelocalcontentrequirement s. Enforcecompulsoryreportingoftenderawards withinascheduledtimeintheCentralSupplier Database(CSD) Industrial Participation Program Leveraging Industrial Development through the national Industrial Participation Programme & LOCAL Content13 The national ChallengesThe national AgendaGovernment Response Unemployment Inequality Skills shortage Growing population Infrastructure shortage Limited industrial capacity Reliance on resource export Job creation Skills development Normalising society and economy Reduce the inequality levels Infrastructure development Diversification and industrialisation NDP New Growth Path NIPF/ IPAP LOCAL PROCUREMENT Accord CSDP PPPFA.

9 Designation NIP/ DIP B-BBEE SME development Overall policy reformSocio-economic challenges facing South AfricaSOCIO-ECONOMIC CHALLENGES FACING SOUTH AFRICAKEY OPPORTUNITIES IN PUBLIC PROCUREMENT ,thisspendisanticipatedtogrowexponential ly. Giventhismagnitude,publicprocurementprov idesopportunitiesforgovernmentto: Stimulatedomestic manufacturing capacity Attractforeign direct investment Increaselevels of industry competitiveness Create export markets for locally produced goods Contribute to job creationor retentionThese signify the key objectives of the NIP programmeSIGN OBLIGATION AGREEMENT BEFORE CONTRACTC ompany to provide a 5% PERFORMANCEGUARANTEEIMPLEMENT PROJECTSUBMIT CREDIT CLAIMS AGAINST DELIVERY OF PROJECTAPPROVED BY IPCCDISCHARGE OBLIGATIONSUBMIT BUSINESS CONCEPT PROPOSALSUBMIT BUSINESS PLAN AND FINANCIALSSUPPORTED BY ICCAPPROVED BY IPCCTO BE DISCHARGED OVER 7 YEARSRFP advertise to include

10 Condition that winning bidder signs NIPP agreement before contractM&E ENTITY to provide quarterly reports to national treasury & dtic Compliance by dticNIPP Flow DiagramNDoHNIPP valueFully importedWith LOCAL contentSpecificcontract calculationContract valueR100 000 000,00R100 000 000,00R312 000 000,00 Imported contentR100 000 000,00R70 000 000,00R307 000 000,00 LOCAL contentR30 000 000,00R5 000 000,00 NIPP @30%R30 000 000,00R21 000 000,00R92 100 000,00performance guarantee @5%R1 500 000,00R1 050 000,00R4 605 000,00 NIPP milestones over discharge periodYearsM130%3R27 630 000,00M270%5R46 050 000,00M3100%7R92 100 000,00 Example of NIPP CalculationQualifying NIP Projects in supported sectors17 InvestmentLicensee ProductionExport promotionSubcontractingTechnology TransferResearch and DevelopmentBUSINESS CONCEPTPROPOSALPARTNERS & OWNERSHIPSMME PRODUCTS & SERVICESMANUFACTURING PROCESS LOCAL and imported materialsManufacturing processesMARKETL ocal demandExport demandCompetitionMarket penetrationSKILLS DEVELOPMENTTECHNOLOGY TRANSFERFINANCIALSI nvestment required Revenue expected 18 PHARMACEUTICALS19 MARINE, DEFENSE & OIL AND GAS20 AEROSPACE COMMERCIAL AND DEFENSE21 AUTOMOTIVE.