Public sector driven localisation is a relatively new topic in South Africa. It depends heavily on the buyer’ s ability to provide detailed forecasts of purchasing, often over long time frames.
Localisation for Africa
Comparing the priorities of private sector localisation with public sector localisation
by Dr Shawn Cunningham
In working with the metal sector to strengthen local supply chains, I have come across both public sector and private sector driven localisation. There are some interesting similarities’ and important differences between these two approaches.
Private sector-led localisation does not refer to demand that is created through political or public sector pressure, such as a successful bidder in a Transnet tender wanting to create local value. Rather, this is classified as public sector-induced localisation. On the other hand, a pump manufacturer wanting to shift orders from China to South Africa in order to increase competitiveness or local content is clearly private sector driven.
In facilitating localisation I have often encountered vagueness on the part of“ buy local” purchasers in terms of their requirements and objectives. By the same token, the abilities, competencies and capacity of our local manufacturing sector is neither visible nor apparent. It is very hard to identify local firms with unique capacity, equipment or process skills.
These two distinct groups of buyers have different objectives for localisation. The highest priority for public sector procurement strategies is securing local suppliers that can meet volume and quality commitments. Of course, broadbased black empowerment credentials are also important, but in many cases the ability to supply higher value products competently is more important.
Firms involved in public sector-driven localisation are often required to work closely with successful foreign bidders. Because public procurement is all about local value add, the competencies required and the ability to absorb foreign technologies is also important. Strangely, creating unique local capacity is often mentioned but not specially addressed.
I have also come across many private sector buyers that want to strengthen their local supply chain. Their main priority is a reliable partner who can strengthen their supply chain, not only by supplying with the right product quality at the right time, but also by developing new markets and competencies.
Buyers typically have two priorities: to make the local supply chain more flexible and responsive; and to identify partners with whom new markets can be explored. Here, the ability to start small and then grow with demand is important. Perhaps most critical is that the local suppliers must be able to deliver good quality much faster than an international supplier can. Public sector driven localisation is a relatively new topic in South Africa. It depends heavily on the buyer’ s ability to provide detailed forecasts of purchasing, often over long time frames. This means that buyers must negotiate with their first tier of suppliers to commit to local value addition. It often also involves centralising decisions that have been delegated in recent years.
For instance, for Eskom to commit to local valve procurement, the central buying department, the decentralised maintenance and site managers, and the subcontractors involved must all commit to localisation. It is therefore a slower process that involves many meetings, many reports, many questions and very few concrete answers about when orders will materialise.
Public sector driven localisation is a relatively new topic in South Africa. It depends heavily on the buyer’ s ability to provide detailed forecasts of purchasing, often over long time frames.
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