Opinion piece: South Africa’s new Public Procurement Bill will not only reshape procurement practices but also unlock economic growth

By Mervyn Naidoo, Group CEO at ACTOM

President Cyril Ramaphosa’s recent signing of the Public Procurement Bill into law marked a transformative moment for South Africa’s supply chain industry and the broader economy, as the legislation is designed to support the growth of local businesses. This groundbreaking Bill is poised to transform procurement practices, providing significant opportunities and advantages for supply chain professionals, businesses, and communities throughout South Africa.

One of the key objectives of the Bill is to prioritise local suppliers and promote free competition. By localising the supply chain, it also ensures aftermarket support for products. This approach is expected to have a significant impact on the broader economy by creating jobs, fostering entrepreneurship, and driving innovation within the country.

Furthermore, the new procurement legislation potentially offers supply chain professionals, businesses, and communities several other opportunities and benefits by enabling state-owned entities to migrate from transactional to strategic procurement. In the long term, this will create more predictability for suppliers and therefore bankability on investment.

Transactional procurement is typically done on a short-term basis which means that there is no predictability in terms of demand. This hampers investment and the long-term growth and sustainability of businesses.

Removing red tape

By enabling processes that facilitate the migration from transactional to strategic procurement, the Bill will inevitably remove some of the bureaucracy that existed in the past. This in turn has the distinct benefit of facilitating strategic and public-private partnerships. Unlocking investment from the private sector will culminate in the improved efficiency of systems, companies, and logistics, and have a positive impact on the economy.

At the same time, when companies start to invest in capital goods and expand their operations, they will need to employ more people, which will trigger much-needed job creation and the need for skills. As a result, organisations will have to embark on training and skills development initiatives which further provides scope to partner with schools and tertiary institutions to align their curricula based on projected skills set demands. Upskilling the country will certainly create more employment opportunities and this will benefit the entire vertical supply chain.

Importantly, the Public Procurement Bill addresses the problematic issue of a historical lack of policy clarity around product designation and localisation. Effectively prioritising local suppliers and supporting product designation will bolster industrialisation by providing certainty around investments through a forward view of product demand and upcoming projects.

A focus on local procurement will also ensure that there is certainty in terms of demand in the medium to long term, which in turn attracts investment into the country and allows businesses to procure new technologies. Without this predictability, companies are likely to remain reluctant to invest in technology innovations as these are typically high-capital investments.

Driving supplier development

Ultimately, these longer-term investments will impact the entire supply chain positively, as Small, Medium and Micro Enterprises (SMMEs) that supply larger corporations will benefit from this financing, which will inevitably drive supplier development initiatives. SMMEs are crucial to job creation and supporting them through supplier development programmes will see the rise of entrepreneurs and innovation.

By stimulating economic growth, creating employment opportunities, and hence broadening the tax base, the Public Procurement Bill will also improve the efficiency of the state as it will create an economically active population and thus lighten the social burden. Therefore, improving procurement practices will lead to a more efficient public service and a more functional country. This will invariably result in a better quality of life for citizens.

Beyond just improving procurement practices, this Bill can change our current situation and create an inclusive economy. By embracing localisation, it will support investment and the reindustrialisation of the economy, triggering economic growth and setting South Africa on the right trajectory.