Superficial commitment to localisation is dealing a death blow to job creation and local industries

The decision by the Constitutional Court to declare the Preferential Procurement Regulations invalid has considerably derailed the localisation agenda and hamstrung the government’s ability to leverage its reported R1 trillion procurement expenditure to support locally manufactured goods and impeded the economy’s ability to generate much-needed jobs, said Eustace Mashimbye, Chief Executive Officer of Proudly South African.

Mashimbye was speaking in a panel discussion at the ABSA G20 B20 media roundtable event that was held under the theme: A Pan-African Perspective on Trade Finance and Growth.

Mashimbye pointed out that the draft Preferential Procurement Regulations that were published by the National Treasury in 2022 for public comment made provision, among others, for local production content for the procurement of 26 designated goods and services.

“In our engagements with government departments on localisation of the economy, they often cite the Constitutional Court ruling, which invalidated the draft Preferential Procurement Regulations and inadvertently nullified local procurement. As a result, we are struggling to secure the kind of support we ought to receive from the public sector due to the court ruling. Localisation was dealt a severe blow and continues to be on the back foot because of this,” he said.

Notwithstanding the court ruling, Mashimbye lamented the half-hearted commitment by the public and private sector to follow up on localisation pledges they made in the Economic Reconstruction and Recovery Plan that President Cyril Ramaphosa established in the aftermath of the outbreak of the COVID-19 outbreak, where they vowed to make localisation at the heart of economic recovery.

Mashimbye noted that localisation is an existential imperative for the private sector as the sustainability of their businesses hinges on the availability of robust demand. “In our engagement with the private sector, we always remind them of the greater responsibility we all have to curbing the high unemployment rate. There will never be a market for the private sector when millions of people continue to swell the ranks of the unemployed and potential customers don’t have the disposable income to afford and purchase their products,” said Mashimbye.

One of the founding mandates of Proudly South African is to influence consumers' purchasing behaviour to be biased towards locally manufactured goods. However, hard-pressed consumers who must contend with escalating living costs often base their purchasing decisions on stretching the limited disposable income they have, Mashimbye said.

He conceded that the South African market is not sufficient to absorb all the locally manufactured products that have been slapped with punitive tariffs by the United States, “but we believe that domestic consumption, spurred by improved job creation through amplified localised procurement, will go a long way to cushioning some of the industries that will be affected by higher tariffs”.

He cited the study commissioned by Proudly South African and compiled by Dr Iraj Abedian, Chief Executive of Pan-African Investment & Research, which found that a 10% increase in investment spending in the manufacturing sector could lead, in the medium term, to 13% GDP growth, 8% more jobs created, 8.3% overall boost to investment across the economy, and a 9% jump in tax revenues.