1 / 18

Broaden participation

Industrial Procurement Presentation to the Parliamentary Portfolio Committee on Trade and Industry 22 August 2014. Broaden participation. Industrial Procurement.

davidpdavis
Download Presentation

Broaden participation

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Industrial Procurement Presentation to the Parliamentary Portfolio Committee on Trade and Industry 22 August 2014 Broaden participation

  2. Industrial Procurement A system of interlocking policy instruments and programmes, widely used in other countries; requires systematic and incremental strengthening across the public sector and securing support from the private sector. Key instruments are: Designations 9 (1) of the PPPFA which public sector tenders to contain local content provisions The Competitive Supplier Development Programme (CSDP) applicable to SOE’s NIPP, Provisions in the Renewable Energy Independent Power Producers (REIPP) contracts and other public procurement in the renewable energy sector Identification of further opportunities to secure localisation with appropriate policies and institutional arrangements e.g; defence procurement 2

  3. Industrial Procurement On-going effort to secure alignment with other public policies such as Mining Charter and alignment with PICC led infrastructure programme Alignment with BBB-EE policy and Codes Persuasive efforts to secure private sector support for localisation and supplier development – Procurement Accord; Proudly SA campaigns and sector specific engagements Review and strengthen enabling policies; programmes and institutional architecture to secure compliance; build strategic sourcing and supplier development capacity Aligned to other instruments where appropriate, including export promotion and investment programmes. 3

  4. Designations • To date 11 sectors; sub-sectors; products - Designated for local procurement. Pipeline of further Designations in place. • Designations undertaken after rigorous research and engagement with public and private sector entities: template includes levels of state procurement; existing domestic capacity and capabilities; cost competetiveness; imports etc by DTI sector Chief Directorates • South african Bureau of Standards (SABS) provides local content verification • Designation proposals are considered by the Designation Advisory Panel prior to sign-off by Director General and Minister. • Instruction Notes are issued by the National Treasury in consultation with the DTI to all government departments, provincial governments, metros and State Owned Companies (SOC’s) • Met with significant support from local manufacturers and investors and ‘Push-back’ from importers including legal challenges. Impact assessment going forward. • Useful learnings and capacity has been built with important supplier development initiatives. Procurement policy instrument embedded in national development discourse

  5. Designations • Revised Codes secure alignment with BEE • But further effort to secure deeper progress with respect to the following is indicated: • compliance across spheres of government and SOE’s public sector • much stronger capacity building across government to secure strategic sourcing capabilities • Cost to companies of SABS localcontent verification and complications related to traceability issuesLack of clarity regarding ‘traceability’ • By most accounts there is minimal use of 9 (1) of the PPPFA which enables localisation to be applied as a criteria for adjudicating state tenders in non-designated sectors • All points to need for faster progress in NT led process of reviewing public procurement legislation and institutional architecture.

  6. Competitive Supplier Development Programme (CSDP) The Competitive Supplier Development Programme (CSDP) has the objective of leveraging State Owned Companies (SOC) procurements for development and transformation. The CSDP involves: • the SOC systematically planning and executing procurements to promote investment in plant, skills, and technology and the development of new capabilities in existing, emerging and new suppliers so as to drive the growth, industrialisation and transformation of the economy. • The systematic alignment of broader Government policy and mobilisation of resources to support and incentivise the supplier development and transformation process. • CSDP increasingly embedded in procurement framework and practices of Eskom and Transnet inclusive of: • Supplier development and localisation plans, inclusive of efforts to support black industrialists • Strategic sourcing capabilities including benchmarking

  7. Competitive Supplier Development Programme The Programme is measured against a number of Key Performance Indicators. These indicators and associated targets were included in the Shareholder Compacts for both Transnet and Eskom.

  8. Competitive Supplier Development Programme • Areas for strengthening the CSDP include stronger mechanism for determining actual progress in Transnet, PRASA and Eskom localisation and supplier development. • Parts of the Eskom build programme are funded by international sources, e.g. World Bank which according to Eskom restricts the application of designation, CSDP and local content • Splitting of contracts and different standards probably reduce the ability to leverage local production capabilities • Overlap and lack of policy coherence between Designations and CSDP leading to confusion and applications for exemptions (especially where intermediate inputs are required).

  9. National Industrial Participation Programme (NIPP) • Launched 1997 to leverage government procurement to leverage investment, exports and technology transfer/Development. • Administered by the DTI through its Industrial Participation Secretariat • NIP binding on all procurement contracts where imported content is above US$10 Million. • Supplier required to invest in the economy under terms and conditions of Guidelines • New policy framework (Revised Guidelines) adopted in 2013 strengthens NIP with strong focus on direct NIP and tightens ‘loopholes’ including with respect to multipliers. • But needs to be translated into stronger practice; • Non-compliance by procuring entities • Need for stronger process to steer direct NIP to build strategic industrial capabilities in key IPAP sectors

  10. Renewable Energy Independent Power Producers (REIPP) process • Renewable energy generation programme falling under the Department of Energy (DOE) • First and second rounds of process - local content target provisions of 30 and 40% achieved • Local content provisions of REIPP played singular role in attracting foreign direct and domestic investment into component manufacture of R8 billion

  11. The Renewable Energy Independent Power Producers (REIPP) contract process. Total investment of R75 Billion was received during BID windows One and Two. 31% of this investment will go to local content, at the lower end of the value chain. The rest will be imported. The imported content is where highest MVA located. Source: SANEDI

  12. Percentage of Megawatts by Technology • Solar and Wind remains dominant technologies and offers opportunity for Local Content. These components range from primary to secondary components. They include. • Trackers, • Turbine Towers • Pumps, • Storage, • Power Block, • Mirrors and receivers • Control System, etc. • However Waste to Energy Technologies offers most opportunity for job creation and local economic development in the semi-skilled and unskilled segment of the economy. Source : SANEDI.

  13. Renewable energy and localisation • Domestic manufacturing capacity is slowly increasing. • In the Solar PV industry, there are two manufacturers who entered the market before the REIPPP (Solaire Direct and SunPower), mainly for the export market • Two more Manufacturers (ART Solar and Jinko Solar) have since set up as a direct result of localisation requirements. • In Wind Energy two wind tower manufacturing facilities (DCD Wind Towers and GRI Renewable Industries) are being set up in Coega and Atlantis, respectively. These investments are also a direct outcome of localisation requirements • Currently the local content is at threshold 40% with target 65% for most renewable energy technologies. • Critical Mass to drive local manufacturing is very difficult at this point because of the diversity of technologies; lumpy demand

  14. Defence Procurement • Utilisation of defence industry capabilities built up under apartheid limited. Public sector support confined largely to NIP • Strong potential exists to utilise defence procurement to support local industry with strong spill-over effects • SA has strong capabilities in aerospace and land systems, with some boatbuilding capabilities. • Capability also exists in components and systems integration • Experience (including from A400M Airbus process) suggests local manufacturers can become integrated into global supply chains to good effect.

  15. Defence and aerospace industries • Requires a ‘joined up’ strategic sourcing model to leverage procurement for building industrial capabilities. e.g. ‘Canada First; Leveraging Defence Procurement- Key Industrial Capabilities’ model/policy involves much more than offsets to strategic, targetted programme aimed at building key industrial capabilities. • 2014 Defence Review explicitly comments on the role of the dti in terms of industrial opportunities. • A structured policy framework isunderconsideration which; inter alia; • Secures optimal direct NIP into key areas to build SA capabilities • Deployment of complimentary DTI incentives in defence sector

  16. Private Sector Procurement • Limited traction/progress with respect to persuasive efforts to secure private sector support for localisation i.e: Procurement Accord. • Private sector support for local procurement in retail; mining; health sectors could make a very significant ‘step-change’ difference in support for local manufacture • In the Clothing, Textile, Footwear and Leather (CTFL) sector important agreement in DTI supported Clusters to support local manufacturers based on security of supply; quick turn around for niche products and fashions • Need for more focused PSA campaigns such as the ‘Buy Back SA’ campaign. PSA review nearing completion with recommendations for stronger focus.

  17. Conclusion • Significant improvements over life of successive IPAP’s: ramping up use of procurement lever to support local manufacturing • Requires stronger policy coherence; improved legislative framework; alignment across departments; spheres of government and entities • Persuasive efforts to secure private sector support for local manufacturing.

More Related