Proudly South Africa briefing

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Trade, Industry and Competition

18 March 2015
Chairperson: Ms J Fubbs (ANC)
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Meeting Summary

The Portfolio Committee on Trade and Industry was briefed by Proudly South Africa (PSA). The presentation focused on the campaigns that had been run by the PSA to market the label and promote the buying of local products. These included the “Buy Local” summit and exposition, the SA Premier Business Awards, an Ubuntu Schools Campaign and a “Buy Back SA” road show.

The PSA was working closely with big organisations, such as Pick n Pay, Mango and Transnet, to promote the “Proudly South African” label. It was also working closely with organisations like the SA Police Service (SAPS) and Interpol to prevent illicit trading and dumping of imports, and liaising with diplomats to spread the word. There were four criteria for membership of PSA. Local content must reach at least 50% of the cost of production -- although PSA was not against foreign investment, and in fact, encouraged it; the products had to be of a high quality; there must be fair labour practices; and there should be good environmental standards. The campaigns were expensive and the money was generated via membership fees, sponsors and the DTI.

The two main concerns the PSA raised were the economic hurt and job losses that would be incurred if SA did not meet the challenge of imports, and the fact that the PSA did not have any legislative teeth to enforce its campaign on government, municipalities and big businesses.

Members felt that the presentation was weak, and had lacked detail on its core activities. It was suggested that PSA’s campaigns did not offer much value for money. Dealing with the crime front was not a core function for the PSA, and there were a lot of peripheral functions that were not relevant to the PSA. On a R24 million budget, around 10% of the organisation’s revenue was currently being used to pay one person’s salary, namely the CEO. A big problem was that the government was not buying local -- it needed to get behind the PSA campaign. The Chairperson said that SA was quite soft on the enforcement of local content, and asked what the Committee could do to strengthen this. The PSA was asked to provide the Committee with a written response to all its questions by the following Monday.

Meeting report

The Chairperson welcomed the Committee Members and representatives of Proudly South African, and outlined the meeting agenda.

Presentation: Proudly South African

Adv Leslie Sedibe, CEO of Proudly South African, said it was critical to place Proudly SA (PSA) in its proper place. It was formed in 2001 out of the National Economic Development and Labour Council (Nedlac) and was based on a campaign that would rally South Africans to support local products. It had representatives from government, labour, business and the community. It had a board charter and a memorandum of understanding. The organisation was a not a creature of statute and therefore did not have a legislative mandate. It received a grant from the Department of Trade and Industry (DTI) and sponsorship, as well as membership fees to support the organisation. At the moment, it was busy implementing its strategy. Proudly SA would run a campaign with public advertising.

Strategic platforms included:

  • A “Buy Local” summit and exposition, with big organisations like Mango and Transnet on board;
  • The SA Premier Business Award, to ensure SA enterprises are encouraged to adhere to the highest quality standards;
  • The Ubuntu Schools Campaign, to uncover local young consumers’ buying profile (what made people buy certain goods at a young age); and
  • “Buy Back SA” road shows, which looked at till slips and the buying profile at malls in certain areas (each area differed, from Sandton to Soweto).

Trade follows the flag, and in this respect the PSA looked at the labels of origin and local supplier databases to create national pride and patriotism. Law enforcement agencies were motivated to fight illicit trade and import “dumping.” The PSA was working with municipalities to make sure that there was a combined database of local suppliers. It was working with Interpol to fight criminal activities.

There were four criteria for membership of PSA. Local content must reach at least 50% of the cost of production -- although PSA was not against foreign investment, and in fact, encouraged it; the products had to be of a high quality; there must be fair labour practices; and there should be good environmental standards.

Currently, SA was faced with unfair incentivised imports, which posed a threat to local manufacturers. SA was facing deindustrialisation and a decline in manufacturing production. The country was exporting less than it was importing. It had to look at the multiplier effect, where a R1 investment in manufacturing translated into R1.13 in gross domestic product (GDP) growth. The PSA could now designate certain sectors for local procurement thanks to a new mandate, which was to support the creation of five million jobs by 2020 and support the Industrial Policy Action Plan (IPAP) 2.

Proudly SA was in discussions with companies like Pick n Pay to put advertising on products, to say that each time one bought a product one was helping to create jobs. A loyalty programme, called a “Buy Back SA” campaign, tried to encourage people to buy local products and receive points through a reward system. PSA had used the SA Broadcasting Corporation (SABC), which had a 76.4% footprint in SA, to promote this campaign. Campaign costs started at R4.8 million and could run up to R15 million. The “Shop 600” campaign was to encourage shoppers to look for the barcode 600, which was designated for local products. The PSA was working closely with the police, communities and local bodies. Other activities to promote PSA included the SA Premier Business awards and a “Buy Local” summit, which promoted home grown products. Health labels were also part of the campaign to buy local products.
                                                                                                                                                                                                                             Discussion

The Chairperson said that the presentation was a bit weak as it had not included all the slides in the physical copy, and local content had been discussed only briefly. There was nothing about the SA Bureau of Standards (SABS) in the presentation. She asked how much money was coming from the DTI, what was being spent on campaigns and what was being spent on operations. Were the posters only in malls, or elsewhere as well? What was the size of the PSA staff? What were the remuneration packages for senior management? What was the breakdown of the PSA staff -- their makeup and their responsibilities? Procurement needed to be equitable. How much was the lease, and its length, for the new building? Did the CEO think it would be better to bring the PSA into the DTI, or keep it separate? What was the CEO’s bonus? Campaigns cost money -- was the PSA using transport routes like taxis to advertise? SA was quite soft on enforcement of local content -- what could the Committee do to strengthen this? The PSA should allow the Committee to guide its next annual report. The PSA was asked to provide the Committee with a written response to these questions by Monday, at the latest. Her final statement was to encourage the idea of decent work, and if it came at a premium, it was still worth it.

Mr A Williams (ANC) queried what the civil society component of PSA was. With regard to the membership fees, did companies have to pay PSA to put its logo on their products? Did the local content include packaging? The Minute Maid drinks had “Made in SA,” but did not have a 600 bar code. Consumer information was important – what about adding a label on to products showing the breakdown, whether it was 25%, 50% or 100% made in SA?

Mr M Kalako (ANC) asked what the difference between PSA and Brand SA was. How did PSA work with communities -- did it use parliamentary officers to assist with this, without spending money. What was the core business of PSA?

Mr G Hill-Lewis (DA) said he was not impressed with the annual report that had been given to the Committee by the PSA. Core activities had included one forum, one summit, one awards evening, one campaign and three business forums. This was all -- for an annual commitment. There did not seem to be much value for money. There was not enough volume for this enterprise. Dealing with the crime front was not a core function for the PSA. There were a lot of peripheral functions that were not relevant to PSA. There were no performance targets referred to in the annual report. On a R24 million budget, around 10% of the organisation’s revenue was currently going to pay one person’s salary, namely the CEO. This was extremely high and skewed. His final suggestion was to target the 500 top companies/purchasing entities by a certain date, to penetrate the market.

Adv A Alberts (FF) said that the PSA have certain objectives to meet, but how did it measure success? On the marketing front, people needed to know how the PSA organisation actually worked and what it did. How was the PSA going to capitalise on the movie industry?

Mr D Macpherson (DA) commented that people needed to have a “warm fuzzy feeling.” They needed to know what the benefit from buying an apple grown in SA was. The USA had gone through a manufacturing renaissance, and SA needed to be able to manufacture enough for the campaign to work. A big problem was that the government was not buying local -- it needed to get behind the PSA campaign.

Adv Sedibe responded that the technical component of local content was covered by the SABS, and that PSA dealt with the marketing. It had formalised a relationship and understanding with the SABS. On the Government issue, the PSA could not tell retailers or the government where to buy, as it would break World Trade Organisation (WTO) rules. It could persuade them and encourage them to look at local products, but that was all. The system of procurement must be cost effective, according to the constitution. Often what was cheapest was not local. If the procurement officer bought a more expensive item, he might get into trouble, so this was the quandary. When one looked at the emotive side, the PSA had anchored the idea of Proudly SA in peoples’ minds. The challenge was to get people to spend out of their pockets.

On the staff front, PSA had 30 permanent staff, four executives, and three contract staff. The remuneration for the CEO was R1.5 million, and he received a performance bonus which could be anything from 50 to 100% of his salary. The more sponsorships the PSA got, the better they would be financially. The membership fees used to be based on turnover. When a company had a turnover below R5 million, they paid R500; with a turnover between R10-R15 million, they paid R10 000; between R15–R100 million, they paid R100 000; and over R100 million, they paid R500 000. The PSA looked at swap deals, where businesses could sponsor their membership fees in exchange for airtime on radio, for instance. PSA was looking at creating a partnership with Pick n Pay. The local content target was 50%, so for yoghurt, the packaging may be the other 50%. It would follow up on the Minute Maid bar code issue with the the Consumer Goods Council of South Africa (CGCSA).

In response to Mr Hill-Lewis, Adv Sedibe said the PSA had had a rough year. It would continue to run a number of campaigns and improve year on year. The peripheral conversations were important, including on the crime and diplomatic fronts. These discussions entrenched the PSA idea and concept. There was a co-operation, agreement and alignment between Brand SA and PSA. It would look at using parliamentary constituency offices going forward, to market the campaign.

Some highlights on the public relations front were that the new Springbok jersey would be made locally. There were monthly, quarterly and annual reports, indicating the activities the PSA was involved in, and these were sent to the DTI. There were no audit qualifications. It hoped to have a Proudly SA index going forward, to be able to measure the effectiveness of campaigns. The issue of imports was a massive problem that needed to be addressed. The PSA was working with local film producers, and had its logo at the end of their films. It needed resources to conduct thorough market research, and was in talks with the University of South Africa (UNISA) to try to get research going. The PSA needed South Africans to place their flags on public display and show more patriotism. There was currently no legislative mandate for the PSA which tied its hands.

Adv Sedibe thanked the Committee for its constructive criticism. The PSA would make the changes to the report that had been requested and would provide a written response. It would also submit its annual performance plan – this was where the work that it did would be revealed in detail.

The meeting was adjourned.

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