Often, when we talk about the government's obligations in terms of the Preferential Procurement Policy Framework Act, we encounter questions around pricing, and last week was no exception.
A local municipality procurement official, a delegate at our event, asked how one could justify spending more on a tender to procure a locally produced item versus a lower-priced imported equivalent when they have services to deliver to their residents. This was completely understandable, but here was my answer:
In the context of public sector procurement for designated sectors and items, local procurement is legislated and compulsory.
The best-priced bid will still win the tender if, after the first round of evaluation weeds out non-compliant bidders offering imported goods, the procuring entity is left comparing apples with apples. It can then make a predominantly price-based decision. Treasury regulations with regard to local procurement clearly stipulate that the government cannot make first-round price decisions in favour of local procurement, but that price will form part of the final evaluation of submitted bids or proposals.
All tiers of government, their agencies and state-owned enterprises are bound by this legislation, and so that is why they must follow the law in this regard.
As for the justification of how this can be right when the money that is the difference between buying a cheaper, imported item could be spent on service delivery, I responded as follows:
Sometimes we need to pay an acceptable premium to save money in the long term.
If the government wants to grow the economy, and to create more jobs, with a larger workforce in the private sector making a bigger contribution to the fiscus, then supporting local businesses is the only way to go.
More jobs mean more financially independent citizens who can play a greater part in the formal economy. There will be a consequent reduction in the number of service delivery protests, and less destruction of government property when anger turns into violence. Millions of rand spent on replacing existing infrastructure can instead be diverted to building new facilities and providing more basic services.
Spend money to save money. This translates as well into the private sector as it does in government procurement - in commerce as well as in our own private purchasing habits. Sometimes, economic circumstances dictate that we buy the cheapest available product in its range, but given the freedom of economic choice we would all choose the best value for money. The adage, "you get what you pay for" generally holds true. If you buy a cheap shirt, it is unlikely to last long, showing early signs of wear and tear and not surviving more than one or two machine washes. It pays to spend more on a quality shirt that you know will last and from which you will get your money's worth. The same is true of electronic goods, grocery items and most other things you can think of.
Proudly South African member companies’ goods carry our tick of quality assurance, and this is the best guarantee you can get. We have spoken before about the other criteria for membership, but that an item is industry registered and approved and is deemed to be of a high quality is undoubtedly the deal maker for someone with a rand value choice to make.
This column may make it sound, however, as if everything made locally is always more expensive than its imported equivalent. “Cheap imports” are just that. Imported goods in any category can be more or less expensive than those Made in South Africa. In designated sectors, the government has no choice but to procure locally, but every single day, across all product lines businesses and individuals have the freedom of choice.
The answer to why we need to spend money to save money is that buying local is an investment in our country's long-term future, and each of us is in a position to contribute to the building of a sustainable and economically viable South Africa where as many of us as possible can be employed and access economic opportunities.
Zonke Dikana’s song Si Jiki Zinto advocates change, and only through change, especially in how and what we buy, can we turn the economy around.
Eustace Mashimbye is the chief executive of Proudly South African.
The views expressed here are not necessarily those of Independent Media.
- BUSINESS REPORT