our economy, our jobs, our quality of life...
TRANSCRIPT
LOCAL CONTENT VERIFICATION
OUR ECONOMY, OUR JOBS, OUR QUALITY
OF LIFE AND THE SABS
PORTFOLIO COMMITTEE ON TRADE AND INDUSTRY18 NOVEMBER 2014
1
SABS was formally established in 1945
Standardization activities in South Africa date back to early 1900s From the start SABS offered:
Development of National Standards Testing Certification (SABS Mark) Regulatory function (Compulsory specs –
legislation change in 2008 ) Training & Advisory services Later – Design Promotion and Local Content
Verification
2
A SEA OF
CHANGE
OUR RICH HISTORY
3
STANDARDS
Fully equipped and accredited training centreTraining against standardsUnderstanding and application of standards in various industries
Founding member of ISO & IECRemains the only organisation in South Africa with co-ownership of ISO brand – SABS is ISO South AfricaMaintain over 7500 SANS
TRAINING
OUR SERVICES
4
CERTIFICATION
Over 90 different tests, 72 labsConformance against standardsExpectation from industry for the Bureau to be in a position to test every product in the marketUnique infrastructure and capacity - necessary to lock out low quality goods
TESTING
Famous ISO 9001, 14001 system certification schemesProduct certification -consumers confidence
OUR SERVICES
5
Dedicated Design and Innovation Entrepreneurship Lab
Focus on:Youth EntrepreneursSME Development & SupportInnovation Business SupportDesign Promotion and Advocacy
DESIGN INSTITUTE
OUR SERVICES
LCV has a dedicated strategic focus within the SABS
Focus on:So far about 2200 verification hours of ‘local content’ - covering a range of companies, involving teams of both technical and financial auditors, at factories located across a number of provinces
LOCAL CONTENT VERIFICATION
6
Procurement of poor quality products hampersservice delivery
Most products have quality specifications butthese are not used when tenders are advertised
It is our citizens that ultimately pay a price forshoddy work – sometimes with their lives
SERVICE DELIVERY AND PROCUREMENT
7
SERVICE DELIVERY AND PROCUREMENT
IMPACT OF MUNICIPALITIES PROCURING OUTSIDE OF STANDARDS
8
SERVICE DELIVERY AND PROCUREMENT
HUMAN DEVASTATION – DESTRUCTION OF VALUE
9
SERVICE DELIVERY AND PROCUREMENT
HUMAN DEVASTATION – DESTRUCTION OF VALUE
10
SERVICE DELIVERY AND PROCUREMENT
ON AVERAGE SA PAYS 3 TIMES MORE IN REPAIRS AND MAINTENANCE
Low quality materials on the roads causes losses ~R200 b/y to the economy
SANRAL
MUNICIPALITIES
11
SERVICE DELIVERY AND PROCUREMENT
THE SIMPLESTOF PRODUCTS ARE NOW IMPORTED
Low quality materials on the roads causes losses ~R200 b/y to the economy
INFLUX OF LOW QUALITY PRODUCTS
Safety of products
Unfair competition to local industry
Loss of jobs in the economy
T
H
R
E
A
T
S
Stringent customs and regulatory regimes – SARS and the NRCS
Compulsory Testing – products of concern
Public awareness – understanding of the impact by consumers
S
O
L
U
T
I
O
N
S
12
13
CONSUMER SAFETY
Product testing - simulation of the real life conditions for the application of a product
Paraffin stoves fires and paraffin poisoning
14
STIMULATING OUR ECONOMY
GOOD POLICIES – POOR IMPLEMENTATION AND ENFORCEMENT
15
LOCALISATION NEEDS A TECHNOLOGY FOUNDATION
16
TECHNOLOGY TRANSFER AND LOCALISATION
TECHNOLOGY TRANSFER IS MOSTLY RESPONSIBLE FOR CHINA & INDIA’S GROWTH
INNOVATION CHASM REALITIES
IMPORTS
INCREMENTAL
& ARCHITECTURAL
INNOVATION
TECHNOLOGICAL
DISCONTINUITY
(New Knowledge)
Culture
Finance
Skills
TENDERS
IP GENERATION START-UP EARLY EXPANSION MATURITY MANUFACTURINGSEED
17
PROTECTING THE FUTURE OF OUR NEXT GENERATION
18
DETAILS ON THE IMPLEMENTATION OF LOCAL CONTENT VERIFICATION
An initiative of the dti
19
An initiative of the dti
1. INTRODUCTION AND BACKGROUND
LEVERAGING PUBLIC PROCUREMENT FOR LOCAL INDUSTRY
The Industrial Policy Action Plan (IPAP) ‘industrial localisation’ objective took firm rootwhen the amended Regulations to the Preferential Procurement Policy Framework Act(PPPFA), Act 5 of 2000, were promulgated in June 2011 and became effective onWednesday 7 December 2011.
At the helm of the IPAP implementation, the Minister of Trade and Industry acquired thepower with these regulations to designate specific sectors for local content.
The dti has set up the machinery to ensure implementation of the designations.
An initiative of the dti
Cont… INTRODUCTION AND BACKGROUND
LEVERAGING PUBLIC PROCUREMENT FOR LOCAL INDUSTRY
The SABS finalised SATS 1286:2011, the technical specification for assessing local content in2011.
This is an essential element of the dti-led IPAP Programme of work on stimulating localmanufacturing.
SABS was appointed as a Local Content Verification Agency by the dti in September 2012and the Local Content Verification Office was launched in July 2013.
The SABS has so far undertaken about 2200 verification hours of ‘local content’ covering arange of companies involving teams of both technical and financial auditors, at factorieslocated across a number of provinces.
An initiative of the dti
Cont… INTRODUCTION AND BACKGROUND
The economic objective of the IPAP intervention is for local manufacturers to receive asubstantial share of government business, where sustainable order books willcontribute to the development of local industries and the creation of jobs.
The verification and certification by the SABS is designed to give the state proof that it islocal manufacturers who are benefitting from the ‘local content’ requirements inlegislation. The winning bidders in state department, state owned companies and otherpublic entity tenders are required to have their ‘local content declarations’ verified toensure there is no misrepresentation (fronting or misstatement of local content)
REFERENCE and MANDATORY documents
SATS 1286:2011
dti Guidance Documents
Treasury Instructional Notes
LC = (1 – x/y) * 100where ‘x’ is the imported content in Rand
and ‘y’ is the tender price in Rand
Designations
Minimum thresholdsExemptions
An initiative of the dti
23
Cont… INTRODUCTION AND BACKGROUND
An initiative of the dti
Designated Industry/sector/sub-sector % Threshold
Buses (Bus Body) 80
Textiles, Clothing, Leather & Footwear 100
Steel Power Pylons 100
Canned/Processed Vegetables 80
Pharmaceutical Products
o OSD Tenders [volumes] 70
o Family Planning Tenders [values] 50
Rail Rolling Stock 65
Set Top Boxes 30
Furniture Products
o Office furniture 85
o School furniture 100
o Base and mattress 90
Solar Water Heater Components 70
Electrical and Telecommunication Cables 90
Valves products and actuators 70
Electricity meters : Prepaid & Postpaid 70
Electricity meters: SMART 50
Working Vessels (Boats) 60
One audit completed for City of Joburg
20 companies, 59 systems audited for DoE
One audit completed for Telkom
An initiative of the dti
SATS 1286 is a technical specification;
SABS is setting up processes for the progression towards a South African National
Standard (SANS);
Case study evidence from the recent verifications will inform the work of the new
Technical Committee for development of the Local Content Standard.
2. SATS 1286:2011 AND PROGRESS ON THE STANDARD
An initiative of the dti
3. LOCAL CONTENT VERIFICATION PROCESS – METHODOLOGY AND CERTIFICATION
Procuring Organ of State submits documentation of the winning bidder to the dti
The dti submits documentation to the SABS
Scoping of work – requires SABS, Winning Bidder, Procuring Organ of State and the dti
Verification process and Certificate creation
Data base entry and maintenance
Cont…LOCAL CONTENT VERIFICATION PROCESS – METHODOLOGY AND CERTIFICATION
Verification is conducted in two parts:
o Verification of the transactional documentation to ensure local content is as per the designated requirement.
o Factory shop floor technical verification of the local content as described in the documentation verified above
The verification will consist of at least three tiers at the final assembly level and sub-assembly level depending on the complexity of the product being produced.
4. EXAMPLE SANDOWN MOTORS (MARCOPOLO)
City of Jo’burg Tender on buses for Rea Vaya ‘Bus Rapid Transit’ (BRT)
Awarded to Sandown Motors
Designation on bus bodies – verification conducted mainly atMarcopolo the Bus Body supplier to Sandown Motors
An initiative of the dti
28
Input Material Product Supplier/ Location Tier Level
Certus Mudguards Olifantsfontein Level 2
Autobus Articulated System Assembly Alberton Level 2
Triumph Windows Alberton Level 2
AAE Electrical Box Door Germiston Level 2
BoerBull Aluminium Fabrication Alberton Level 2
CoolCab Exhaust System Bryanston Level 2
Questec Articulated Bus Installation Johannesburg Level 2
Sena Roof Assembly Johannesburg Level 2
Umoya Automation Pneumatic and Electric Valves Assembly Alberton Level 2
ProFibre Door Piston Assembly Durban Level 2
Proseat Seat Assembly East London Level 2
PPG Paint Krugersdorp Level 3
Shutterprufe Glass Vereeniging Level 3
Isri (Pty) Ltd Headrest Manufacturer East London Level 3
Extent of Verification – Marcopolo Bus Body Suppliers
29
5. LOCAL CONTENT VERIFICATIONS CONDUCTED Solar water heaters via DoE
– 20 Organisations comprising of 59 systems underwent Local Content Verification expanding over three tiers of the supply chain
Communication cables via Telkom– 1 Organisation underwent Local Content Verification expanding over
three tiers of the supply chain Buses via City of Jo’burg
– 1 Organisation underwent Local Content Verification expanding over three tiers of the supply chain
National Lotteries via National Lotteries Board
An initiative of the dti
30
An initiative of the dti
The SABS found that a considerable degree of value was infused into pre-tenderprocesses with clarifications to procuring entities and industry by the SABS on whattypes of parts/components make up the elements of the minimum thresholds.
Where a company is locally based and incorrectly believes, just on that basis, thatthere is 100% compliance to local content thresholds.
Misrepresentation where the company has some related equipment, but not forthe manufacture of the tendered product.
There was a serious misinterpretation by some manufacturers who had produced‘prototype’ products in a ‘laboratory-environment’ but were not manufacturingthe final product here in South Africa.
6. LOCAL CONTENT VERIFICATIONS LESSONS LEARNT
An initiative of the dti
Organs of State also need to evaluate transformation over time in terms of thedepth to which they are replacing imported content with locally manufacturedgoods.
The SABS has therefore defined the first steps in the Local Contenttransformation required by Organs of State. What this will involve is a ‘baselineassessment’ on exactly where the SOC is in terms of its local content levels, sothat the organisation can monitor progress on Local Content compliance.
This ‘Local Content Baseline’ report includes a risk analysis of areas where theorganisation needs to take strategic action to improve the conditions forcompliance in an effort to support the 75% Local Content goal in StateProcurement.
7. LOCAL CONTENT BASELINE VERIFICATIONS
An initiative of the dti
In an effort to support the 75% Local Content goal in State Procurement, SABS hasengaged all levels of government to undergo a baseline verification of Local Content.
SABS has contacted National, Provincial and Local Governments including State OwnedCompanies and respective government agencies during 2013.
A total number of 28 contact persons were identified by these Organs of State.
SABS has engaged with the responses although no Baseline Verifications have beenconducted to date.
Cont…LOCAL CONTENT BASELINE VERIFICATIONS
An initiative of the dti
The State Owned Companies (SOCs) present the strongest opportunity space forimpacting on ‘localisation’ objectives for the manufacturing sector.
No verification activities have stemmed from SOCs except Telkom; although engagementswith PRASA, Eskom and Transnet have occurred at numerous levels.
The ‘localisation’ targets defined by SOCs are reflected in performance reports againstthe priorities of the SOCs Shareholder’s Compact. These represent material issues withinthe scope of external audits under the auspices of the Auditor-General’s office andreports to Parliament.
Action is needed for the verification of SOC localisation within their supply chains.
8. CHALLENGES AND WAY FORWARD
An initiative of the dti
Textiles & Footwear 2013-2014: 176 tenders have been awarded in thesesectors of which the tender values range from R 21k to R 72 million. Thesecontracts were mainly transversal contracts managed by National Treasuryacross a number of state departments.
Major issues of winning bidders are around ‘who pays?’ and ‘how much’ arethe verification costs?, as some tender values are very low.
The SABS is engaging with the dti to address these challenges.
Cont…CHALLENGES AND WAY FORWARD
CONCLUDING REMARKS
3636
37
Boni Mehlomakulu (PhD)
Chief Executive Officer: SABS
012 428 6002
www.sabs.co.za