The President found his ‘lost pen’, bringing the Public Procurement Act into operation: the “designation” of government tenders for local production and content is now back, but in a better form than before.
President Cyril Ramaphosa signed the Public Procurement Act into law on 23 July 2024. This resuscitates the policy of “designation” of local tenders for local production and content. Designation is one of the ways the government tries to localise the production of goods and services.
Localisation as a government policy was officially minted in the 2011 Local Procurement Accord which set a lofty target of 75% local content for goods and services. This was then translated into practice through initially, the 2011 and then the 2017 Preferential Procurement Regulations (PPR) under the Preferential Procurement Policy Framework Act 5 of 2000 (PPPFA) where designation was allowed to require local production and local content in government tenders. The power to designate fell on the Department of Trade, Industry and Competition (DTIC) in consultation with National Treasury (NT). Designation was outlawed in the Constitutional Court decision in Minister of Finance v Afribusiness NPC [2022] ZACC 4 when it was deemed to be the fruit of the poisoned tree because of the unconstitutionality of the prequalification criteria, which rendered the full set of regulations under the PPR as unconstitutional.
This designation was mired in a myriad of administrative irregularities. There was no investigation report nor public consultation. No reasons were offered for a proposed designation. There was no way to assess whether the policy had succeeded, because no data was made available by the DTIC so the programme could be assessed.
As we have noted before here , the new Public Procurement Act scores a few notable victories for good governance and industrial policy such as requiring a specific period of designation, and a procedurally fair and responsive process. There are now specific criteria for designation where the Minister of Trade, Industry and Competition is required to assess whether there are sufficient local manufacturers in the country who are capable to compete for the provision of goods designated for local production and content, before a product can be designated.
The positives do not stop here. The Minister can grant a waiver on the local content requirements, and he must give reasons for it. Designations must also be reviewed in the interim to see if they are still needed. XA has been lobbying for the last five years for an improved, open and transparent designation process so we are very happy to see these changes.