Building capacity to help Africa trade better

Dti pushes ahead with localisation to boost domestic growth


Dti pushes ahead with localisation to boost domestic growth

Dti pushes ahead with localisation to boost domestic growth
Photo credit: Graeme Williams | Media Club South Africa

South Africa is working towards more effective monitoring and enforcement of localisation of products and compliance with local content requirements, Trade and Industry Minister Rob Davies said on Tuesday.

Briefing reporters after the Department of Trade and Industry (dti) presented its 2016/17 Annual Report to the Portfolio Committee on Trade and Industry, Minister Davies said localisation and incentives are two policy tools that are the most impactful in supporting industrialisation.

“Localisation is one of the levers that South Africa has identified as a tool to fastrack industrialisation. As South African government we are not signatory to the World Trade Organisation’s Government Procurement Agreement which does allow localisation polices,” said Minister Davies.

“[W]e are working towards much more effective monitoring and enforcement of localisation because once localisation and designations are turned into practice by National Treasury, it’s no longer an option. The Department of Performance Monitoring and Evaluation (DPME) is going to follow up on this issue so that we make sure the leakages we have seen from localisation, as a result of some tender decisions, are plugged,” said Minister Davies.

The Minister said the DPME is already engaged in a process of reviewing the effectiveness of incentives.

“The DPME has started looking at some of our incentives and they’re looking at it from the point of view of how we can we improve what we get from our incentives and their design. They have concluded that there is value for money in the incentives,” said the Minister.

Minister Davies stated that in terms of the trade and investment rules under the WTO, as a country, government cannot impose localisation policies on the private sector.

“We have to use other tools like working together with Proudly South Africa, the private sector and manufacturing sector to engage them on the implementation and also pursue more retailers to come on board too,” added Davies.

Designation gaining traction

Dti Director General Lionel October said the department has so far designated over 20 products.

“In all of them, we’ve seen results. We’ve seen the revival of the clothing and textiles and footwear industry. In terms of the buses that were designated, all the buses from Rea Vaya to MyCiTi are now locally procured. We’ve revived the bus industry,” said October.

The designation policy instrument is one of a suite of policy levers designed to maximise support for domestic manufacturing.

Audit outcomes

The Auditor General’s audit outcomes showed that the department had received a clean audit. Six of the 10 entities, including the department, audited by the Auditor General had clean audits.

The annual report highlighted that the global economic environment remains challenging, albeit Gross Domestic Product (GDP) growth of 2.5% in the second quarter of 2017. Minister Davies said the South African economy still faces poor growth and a lack of inclusivity.

The annual report showed that R7.7 billion (75.03% of the total budget) was transferred to beneficiaries across the various incentive scheme programmes.

In 2016/17, the department approved over 1 400 applications for financial support amounting to about R7 billion to leverage private sector investment of about R 30 billion into South Africa’s economy.

Black Industrialists Programme

The department has now approved 62 people for funding under the Black Industrialists Programme.

The programme is specifically dedicated to supporting the growth and building the global competitiveness of majority black-owned and managed businesses in the manufacturing sector.

“We now have passed the halfway mark of the first 100. In fact, it is now 62 in terms of approvals. The target is for us to reach 100 by the end of this financial year,” said Minister Davies.


Minister Davies said the next six months will be busy for the department, starting with a meeting on a Ministerial level of the Southern African Customs Union (SACU) countries, together with the countries of the East African Community (EAC).

“The aim now is to finalise and finish the tariff schedule between SACU and the EAC as part of the tripartite and as part of broadening the continental free trade area. We are almost there with that work.”

In July, South Africa became the 19th country to sign an agreement establishing the Tripartite Free Trade Area (TFTA). The TFTA represents an integrated market of 26 countries with a combined population of 625 million people and a total GDP of $1.6 trillion.

The agreement will enter into force once 14 countries submit their instruments of ratification. Once the agreement enters into force, it will reduce the tariffs on goods traded between the tripartite countries and create new opportunities for exports, as well as regional value chains.

South Africa is preparing for the World Trade Organisation’s 11th Ministerial Conference, which will be held in Argentina in December.


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