The purpose of the networking sessions are to engage with consulting engineers, project houses and third party companies that handle either the procurement process or projects on behalf of state owned entities, including municipalities, specifically with regards to designated products.
Mark Wilson, the current cluster champion, opened the proceedings and provided a brief overview of the Department of Trade and Industries designation and local content requirements relating to valves and actuators, as well as an overview of the Instruction Note issued by National Treasury – applicable, in all instances, with state expenditure.
“One of the biggest challenges that we as local manufactures with designated products are experiencing is conveying the message that local content and the procurement of designated products still applies, even if the transaction takes place through a third party. If the money is from the government, local content must be adhered to”, says Mark Wilson.
The floor was then opened to discuss issues being experienced by the project houses and consulting engineers:
The Tender Process
It came out clearly that in the tender process the local content requirement was not being clearly communicated, nor the calculation of local content as well as the verification process. VAMCOSA has asked that, in instances where there is no specification for local content and valves are required, to please bring this to the cluster’s attention, where the cluster through the SACEEC (South African Capital Equipment Export Council) will take it up through the appropriate channels at The DTI.
Specifying a brand is against the rules of the PPFMA.
Calculating Local Content
Procuring entities are required to stipulate the local content requirements, which in the case of valves is set at 70% local content threshold. Calculating the local content is for some, open to interpretation - some believed that it was simply averaging out percentages, others believed that local content included buying imported products from a local supplier. At the end of the day – the calculation is 70 % of each valve should be sourced and manufactured locally – from the casting through to the end product.
The intended “multiplier effect” is to create jobs locally and stimulate local manufacturing in South Africa.
Not all valves can be manufactured locally and where applicable, in instances where local manufacturers cannot meet the requirements in the case of import substitution, whereby an equivalent can be procured locally or the lead-time is too short to develop a local product; the procuring entity may approach the dti for an exemption.
At present the SABS has been tasked by the dti to verify local content. There are some challenges with SATS 1286, and these are being looked into. The Instruction Note issued by National Treasury is currently in the process of being updated, however the one issued remains in force until such time as the new one is issued.
Local content is not just a buzzword. State-owned entities that do not comply with the Local Content Directive will receive an Unclean Audit – the results of which can have large monetary repercussions if they are looking for finance for projects.
In Closing – “South Africa needs to become a manufacturing giant.” Through designation and local content, we can create sustainable job creation which impacts on all the sectors of our economy from tax, to the health sector, to the education system etc. Simply put, if people have sustainable employment they will pay their taxes, school fees, purchase clothing and food. Crime levels will decrease while the economy rises. All the while creating a South Africa that uses South African products. “Let’s get South Africans to employ South African’s and let the Chinese employ the Chinese.” stated Wilson.
The day ended with one on one discussion, networking and lunch.
VAMCOSA was formed in July 2011 and works within The DTI’s designated cluster parameters. VAMCOSA’s focus is to bring local valve and actuator manufacturers together in order to create a common focus and goal for the respective industries. VAMCOSA provides an effective platform for its members to Lobby Government through designated channels of The DTI and the SACEEC with regard to industry specific concerns.
The aim is to:
Encourage and promote local manufacturing Promote job creation within the sector Promote export of locally manufactured valves and actuators Promote transformation Create a respected quality marquee VAMCOSA is available to come onsite and assist your team in better understanding designation and local content, please contact us.