Localisation for Africa
It seems that the average SA supplier is either consciously or sub-consciously unaware that the end client for their product has certain developmental and transformation goals in mind. In addition, in the majority of cases, we found SA suppliers to be far more expensive than imported components and systems when compared to suppliers from other emerging markets, even after taking transport and logistics costs into accountIn many cases this has led to the OEMs deciding to open their own plants in SA( with suitable transformation partners) which will allow them to maintain control of these developmental obligations without the risk of engaging SA suppliers that seem ambivalent to government requirements.
I would recommend that SA suppliers become aware of the procurement environment the OEMs are operating in, meet the SOCs’ supplier development departments, get a copy of the tender and review the B-BBEE, localisation and other socio-economic requirements. Government and SOCs are demanding large quantities of detailed information about the OEMs’ localisation and other socio-economic obligations and SA suppliers need to see how they can take control of their portion of the OEMs obligation, and as part of their sales pitch, assist them meet these obligations and. The alternative is to give up control and simply have the winning OEM tell the supplier“ you will spend X % of the contract on skills development”,“ you will employ X many people” etc.
The danger to SA suppliers who do not take the initiative in the localisation / socioeconomic arena, are multiple. Firstly they may lose business to better prepared and more responsive competitors, secondly, the OEM may decide to do the work in-house in SA and cut them out of the value chain or finally they may have obligations foisted on them in a top down manner from the OEM.
The danger to South African industry is the OEMs may use the poor response of the local supply chain as a justification for reduced local content targets and a wholesale substitution of local content with imported.
For further information contact: Greg Poisson, EX Consulting- 083 3888 399
www. localisationforafrica. com 47