Manufacturing industry leaders have called for a more consistent public procurement system and stronger localisation rules, arguing that government spending should be used more effectively to rebuild South Africa's industrial base, strengthen supply chains and support long-term investment.
Greater certainty over future demand is needed before manufacturers will invest in new production capacity, automation and technology, according to ACTOM Group chief executive Mervyn Naidoo.
"Nobody is going to invest in long-term capacity, automation or technology upgrades when demand is uncertain. The result is predictable; as imports fill the gap, local factories sit underutilised, and the country loses skills, tax revenue and jobs," he said.
The country's Transmission Development Plan provided an opportunity to rebuild domestic manufacturing if it is supported by firm local content requirements and longer-term procurement commitments, Naidoo said.
He pointed to ACTOM's acquisition of SGB SMIT's transformer factory in Pretoria as an example of the industry's untapped capacity. Although the plant has four times the production capacity of the company's Wadeville facility, it is operating at only around a quarter of its potential, while imported transformers continue to enter the South African market.
Localisation remains an important industrial policy tool used internationally to develop domestic manufacturing capability, Acting Deputy Director-General at the Department of Trade, Industry and Competition (dtic), Tebogo Makube, said.
South Africa's current procurement framework placed significant emphasis on price through the 80/20 and 90/10 preference point systems, making it difficult for local manufacturers facing higher electricity, municipal and logistics costs to compete against imports, he said.
The Preferential Procurement Act, 2024, was intended to rebalance the system by requiring designated products to meet minimum local content thresholds before bids proceeded to price evaluation once the regulations were finalised, Makube said.
He added that localisation requirements should apply regardless of whether projects were delivered through engineering, procurement and construction (EPC) contractors, public-private partnerships or direct government procurement where public funds were being used.
Public procurement remains critical to the metals and engineering sector, with around a quarter of domestic sales linked to government spending and some subsectors deriving more than 60% of their business from the public sector, according to Steel and Engineering Industries Federation of Southern Africa (SEIFSA) chief executive Tafadzwa Chibanguza.
Higher factory utilisation would allow manufacturers to reduce unit costs, improve efficiency and become more competitive in export markets, Chibanguza said.
"When public procurement lifts utilisation, companies can reduce per-unit costs, improve efficiency and become more competitive internationally. Localisation, in this sense, is a platform for export readiness, not a retreat from global markets," he said.
He added that locally manufactured products generated wider economic benefits by supporting upstream suppliers, downstream manufacturers, logistics providers and engineering services – benefits that were lost when imported products replaced local production.
