Local Procurement: Transnet, PRASA, DPE, DOT, Pamodzi Unique, Neledi Inhlanganiso, Smith Capital, Eskom and National Treasury

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Trade and Industry

24 March 2017
Chairperson: Ms J Fubbs (ANC)
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Meeting Summary

A wide range of state-owned companies (SOCs) and government departments briefed the Committee on the challenges facing industry in South Africa with respect to local procurement.

The Neledi Inhlanganiso Group said it was 100% black-owned, established in 2003, and produced ferrous and non-ferrous metals, including iron and steel. It specialised in the manufacture of high quality automotive, transport, railway, mining, energy and valve components. It had been awarded a seven-year contract by Transnet for the supply of forged train wheels. With regard to local procurement challenges, the Group said that there had been challenges in communications, but recent engagements with Transnet had been informative and encouraging on the way forward. There were challenges as they pertained to dealing with Eskom and PRASA/Gibela.

Pamodzi Unique said it was 100% black-owned and Broad-based Black Economic Empowerment (BBBEE) level four certified. It manufactured products such as pantographs, eco-pumps, blast barricades and diaphragm pumps. Clients included Transnet and PRASA. The rail pantograph was 90% local content and 100% suited to the South African rail industry, with more than 20 years of proven service. Challenges that the company was facing, as had been reported on at the time of an oversight visit, were yet to be addressed. It felt that companies should be forced to comply with the local procurement requirements and that the Portfolio Committee should engage with the companies to meet with localisation and black industrialisation regulations.

Smith Capital Equipment (SCE) said that Eskom and some municipalities were included on its list of main customers. Equipment included lifting machinery, aerial platforms, drilling rigs, cranes and other products. SOCs, government departments, metros and municipalities normally went out on tender, using two main strategies -- direct local procurement and indirect local procurement. SCE’s equipment was procured mostly indirectly, and this was a major problem. Contracts were awarded to other companies who in turn sub-contracted to SCE.  It said that its products should be included among the designated products in order to promote and encourage local production, as well improving local competition.

The Passenger Rail Agency of SA (PRASA), referring to the rolling stock refurbishment programme, said that all refurbishment, except for the 8M rolling stock fleet, was contracted to external service providers. In 2000, PRASA had had only four main contractors, but this had been extended to seven through a deliberate capacity development programme. On 14 October 2013, PRASA and Gibela had signed two agreements -- a manufacture and supply agreement (MSA) and a technical support and spares supply agreement (TSSSA). It provided a list of the DTI’s designated components and Gibela’s localisation targets. Manufacture was on track. Gibela had appointed Ubumbano Rail – a 100% black-owned company -- to develop the supplier park that supported the local factory. Seven companies had concluded agreements to have facilities in the supplier park.  Gibela had had an impact on localisation, job creation and skills development. Key considerations and challenges to implement local procurement were volume, value, duration and global competitiveness. Shortcomings for localisation included the lack of insight into current local supply chain capabilities and capacity, the lack of existing industry skills responding to new technologies, low volumes of some key components, investment uncertainty, alignment in planning or economies of scale, and a lack of recognising a partnership approach with government institutions.

Eskom said it had achieved great strides in supplier development and localisation spending, job creation and skills development. In line with national priorities, it had developed a five-year plan to implement radical economic transformation. It had noted the concerns raised by the Committee regarding the impact of the delays in contract conclusion, limited assistance to address working capital challenges, and attempts to discredit suppliers based on perceived quality-related issues. Eskom had responded to these concerns.

Transnet said that the introduction of supplier development had come about from the policies which government had developed in order to address the challenges faced by South Africa. These challenges included unemployment, inequality, skills shortages, a growing population, infrastructure shortages, limited industrial capacity and reliance on the export of resources. Since the inception of the Competitive Supplier Development Programme, supplier development obligations had been committed towards the pillars of localisation, skills development, investment in plant, job creation, job preservation, industrialisation, small business development, rural development technology, intellectual property (IP) transfer and other initiatives. With regard to preferential procurement, Transnet’s recognised BBBEE spend was R31.55 billion, representing 102.30% of the total measured procurement spend of R30.8 billion at the end of February 2017. It was noted that Transnet, through its Advanced Manufacturing arm, was also supporting the development of black-owned suppliers in the rail sector.  

The Department of Trade and Industry (DTI) said that the rail transport equipment sector was classified into two groups: rail rolling stock (locomotives, electric multiple units, wagons and coaches) and rail infrastructure (signalling, perway, and overhead electric transmission). The rail rolling stock sector was designated, including rail signalling and associated components, steel power pylons, electric cable products, transformers, shunt reactors and associated components, as well as steel products and components for construction. Key challenges in the sector included the application of local content requirements, the supply chain policies of Transnet, delays and changes in the delivery schedule, the high import content and black economic empowerment and black industrialisation.

The Department of Public Enterprises (DPE) said that there were on-going engagements between the DTI and DPE to ensure that all issues raised could be addressed. The Competitive Supplier Development Programme (CSDP) had the objective of leveraging SOCs’ procurements for development and transformation. The CSDP involved systematically planning and executing procurements to promote investment in plant, skills and technology and the development of new suppliers so as to drive growth, industrialisation and transformation of the economy. The systematic alignment of broader government policy and mobilisation of resources supported and incentivised the supplier development and transformation process. It described the key performance indicators for industrialisation as local content, technology transfer, skills development, investment in plant, small business participation, job creation and export, while those for economic transformation included spending on black-owned companies, including those owned by women and youths, and those with disabilities. These indicators and associated targets were included in the shareholder compact for both Transnet and Eskom. Challenges came from the Preferential Procurement Policy Framework Act and its regulations, which had been extended to apply to all public entities listed in Schedule 2 and 3 of the Public Finance Management Act. There were challenges relating to ability to optimise supplier development objectives.

National Treasury said that the Constitution recognised the imbalances created by the apartheid regime and had introduced section 217(2)-(3), which had brought about the Preferential Procurement Policy Framework Act and its regulations. Regulations had been promulgated in June 2011, followed by the signing of the Local Procurement Accord on 31 October 2011 between government and social partners, which sought to give local manufacturers an advantage over importing suppliers. The government recognised the strategic role of public procurement in economic development and transformation, and was committed to leveraging on it. Working together with the DTI, National Treasury had issued a number of instructions to designate sectors for local production and content, the aim being to stimulate local industrial development, skills development and employment creation. Government, as the biggest procurer of goods and services, strived to develop a preferential procurement policy and set procurement guidelines. It said there was a need to establish a structure to deal with the process leading up to designations, to establish a designated sectors’ implementation compliance working group, and to formalise a framework for designation. It was of the view that there might be alternative instruments to stimulate local production and content, such as tax incentives, import tariffs, etc.

The Department of Transport responded to concerns raised in the Committee’s report, with a particular focus on the absence of coordinating preferential procurement, and how the Department viewed industrialisation and localisation.

Members felt that the SOCs were flouting or ignoring the 2011 Preferential Procurement Policy Framework Act and its regulations, as well the 2011 Local Procurement Accord. Radical transformation could not be realised if the SOCs were not meeting guidelines on local procurement and local content. Penalties should be introduced to enforce compliance. It was suggested that failure to comply may perhaps be due to corruption. A forensic investigation was suggested to get to the root of the disregard for implementing local procurement regulations.  

Meeting report

Naledi Inhlanganiso Group
Mr Sibusiso Maphatiane, Chairman, Naledi Inhlanganiso Group, said the Group was 100% black owned and had been established in 2003. It produced ferrous and non-ferrous metals, including iron and steel. It specialised in the manufacturing of high quality automotive, transport, railway, mining, energy and valve components. It had been awarded a seven-year contract by Transnet for the supply of forged train wheels. With regard to local procurement challenges there had been challenges in communications. However, recent engagements with Transnet had been informative and encouraging on the way forward. There were challenges as they pertained to dealing with Eskom and the  Passenger Rail Agency of SA (PRASA)/Gibela.

Discussion
The Chairperson sought clarity on the seven-year contract to supply wheels to Transnet, which had been concluded in 2015. Had this contact been performed? What were the challenges?

Mr N Koornhof (ANC) sought clarity on why Mr Maphatiane had briefed the Committee by use of a power-point presentation when, on an oversight visit, he had promised the Committee that he would be speaking from his heart, and whether there were still communication challenges relating to Transnet.

Mr Maphatiane responded that the Group was challenged by interactions and communications with Transnet. However, interactions and engagement had drastically improved. He agreed that communications on how certain procedures could be followed were not satisfactory. Transnet was engaging with the Group. On the question of contact, he responded that the contract was being performed. It had not performed over the first 28 months in terms of volumes.

The Chairperson noted that when the Committee had visited the Group, a number of challenges had been communicated to the Committee. If after the oversight visit there had been such a drastic improvement, why had no update report been submitted to the Committee?

Ms S van Schalkwyk (ANC) said that there had been a complaint about an order which was not coming through, and the issue at the time of oversight visit had not been about communication. She sought clarity on why employees had been retrenched if the Group was facing no substantial challenges due to the improvement in its engagement with Transnet.

Mr B Mkongi (ANC) remarked that if there was such a development, why was such development not featured in the introduction to the brief/presentation? The Group could have communicated those developments to the Committee. He sought clarity on how many people had been retrenched and on what aspects improvements had been recorded. He did not know how to proceed in seeking clarity, as the Group was saying that it was not facing a problem.

The Chairperson asked why the Group was contending that it was not facing a challenge, while a number of challenges had been recorded in the Committee’s oversight report.

Mr Maphatiane responded that the intervention of the Committee had the implication of improving the situation. He said he was ignorant when he failed to update the Committee on the progress of communications with Transnet, or to mention in his introduction that the Committee’s interest in the company’ work had had a positive impact.

The Chairperson said that she was happy to hear that that the Committee’s intervention had had a positive impact and thus sought clarity on whether the improvements had been restricted to Transnet, or had included Eskom and PRASA.

Mr Maphatiane responded that the Group was happy with the improvements in dealing with Transnet, Eskom and PRASA. 

Ms P Mantashe (ANC) said that the issues with Eskom and PRASA should be elaborated on, stating specifically how they were addressed in detail.

Mr D Macpherson (DA) said that he felt that the Committee should not be seen as putting pressure on a state-owned company (SOC) with a view to how they were giving business to certain companies. The Committee should intervene only in instances where communications, or quality of local products or local procurements, were lacking.

The Chairperson agreed.

Ms Mantashe disagreed. She said that Members were not putting pressure on anyone to do this or that, but it should be understood that it was the mandate of the Committee to ensure that local procurement was promoted. The role of the Committee was to ensure that laws were complied with.

Mr Mokongi agreed. He said that the Committee ought to put pressure on an SOC for realisation of the desired social and economic transformation. He felt that he had a duty – as a member of the Committee – to promote black-owned companies for the sake of transformation. On the question of recent development, he made a request for a detailed report on how matters had been improved because such report would provide Committee with a tool to extract certain information it required.

Referring to Eskom, Mr Maphatiane responded that the Group was meeting challenges related to power stations. These problems had been resolved by way of agreeing on standards of the products. On the question of retrenchment, he responded that per the initial plan, the Group supposed to retrench 180 employees. Owing to drastic developments, only 80 employees had been retrenched, meaning that notable improvements in communications with PRASA, Eskom and Transnet saved the retrenchment of 100 employees. Changes had unfolded more quickly and thus saved jobs. The 80 employees who had been retrenched were older people who were about to retire.

Mr Mkongi proposed a motion for the Naledi Inhlanganiso Group to provide a progress report to the Committee detailing the recorded improvement.

The Chairperson agreed.

Pamodzi Unique Engineering
Mr Loyiso Mangena, Chief Operating Officer, Pamodzi Group, said the company was 100% black-owned and Broad-based Black Economic Empowerment (BBBEE) level four certified. The company manufactured products such as pantographs, eco-pumps, blast barricades and diaphragm pumps. Clients included Transnet and PRASA. The rail pantograph was 90% local content and was 100% suited to the South African rail industry, with more than 20 years of proven service. The challenges that the company was facing, as had been reported at the time of oversight visit, were yet to be addressed. There had been no recorded developments. He felt that companies should be forced to comply with the local procurement demand, and that the Committee should engage with the companies to meet with localisation and black industrialisation regulations.

Smith Capital Equipment
Ms Fortunate Mdanda, Chief Executive Officer, Smith Capital Equipment, said that on the list of main customers, Eskom and some municipalities were included. Equipment included lifting machinery, aerial platforms, drilling rigs, cranes, and other products. She said that the SOCs, government departments, metros and municipalities normally went out on tender using two main strategies for their fleet -- direct local procurement and indirect local procurement. Smith Capital’s equipment was procured mostly indirectly, and this was a major problem. Contracts were awarded to other companies who in turn sub-contracted to Smith Capital Equipment. She concluded by noting that the products of Smith Capital Equipment should be included in the designated products in order to promote and encourage local production, as well improving local competition.

Discussion
Mr Macpherson reiterated that the job of the Committee was not to give instructions to PRASA and Transnet with regard to the people with whom it could do business. The Committee could place emphasis on the promotion of preferential procurement, but should not instruct an SOC to do business with certain companies.

Mr Koornhof disagreed. He said it was the Committee’s job to ensure that the SOC procured locally. The Committee had picked up in their oversight that some local black-owned companies were not winning tenders. This should stop. Putting the question to Pamodzi Unique, he sought clarity on what progress it had made in ensuring that copper products were not stolen. Directing the question to Smith Capital, he sought clarity on what products it produced, but which were being imported by the SOC.

Mr Mkongi sought clarity on which municipalities that were not procuring locally. He agreed with Mr Macpherson that the Committee could not tell the SOCs who to deal with. However, there was an obligation imposed on the SOCs to procure locally in that they ought to comply with national legislation and regulations. There was a document providing guidance on local content and local procurement that had been developed by the National Treasury. The SOCs should buy locally, and preferential procurement should be the rule of the game. Transformational change ought to be felt and seen.

Ms Van Schalkwyk referred to products that were being imported products China, and asked Pamodzi Unique if it was repairing those products in cases where they were damaged or broken. If so, what were the charges? She sought clarity from Simth Capital on what security measures had been taken to ensure the sustenance of financial and industrial capability.

Ms Mantashe remarked that the mandate of the Committee embraced duties of ensuring that black industrialisation should be promoted. She was surprised to see that some people felt that colonisation was better than democracy.

Mr Mangena responded that Pamodzi Unique was ready to manufacture and distribute on level one. On the question of whether there were some developments, he reiterated that there were no changes with regard to dealing with SOCs, in addition to having bills which had not been cleared by PRASA. Some bills had been outstanding for months or years. He said that Pamodzi Unique was not repairing damaged or broken pantographs imported from China. 

The Chairperson felt that when the pantographs were damaged, Pamodzi Unique could repair them. She sought clarity on who repaired the pantographs, or if they were dumped in the scrapyards. PRASA and Transnet should provide the answers.

Passenger Rail Agency of South Africa (PRASA)
Mr Piet Sebola, Group Executive: Strategic Asset Development, PRASA, referred to the rolling stock refurbishment programme, and said that all refurbishment, except for the 8M fleet, was contracted to external service providers. In 2000, PRASA had had only four main contractors namely TE Connectivity, Union Carriage and Wagon (UCW), WICTRA Holdings and Commuter Transport Engineering (CTE), which had been extended to seven to include Naledi, RSRS and Goldex through a deliberate capacity development programme. On 14 October 2013, PRASA and Gibela had signed two agreements-- the Manufacture and Supply Agreement (MSA) and the Technical Support and Spares Supply Agreement (TSSSA).

Mr Sebola provided a list of the Department of Trade and Industry’s (DTI’s) designated components and Gibela’s localisation targets. He said that manufacture was on track. Gibela had appointed Ubumbano Rail, a 100% black-owned company, to develop the supplier park that supported the local factory. Seven companies had concluded agreements to have facilities in the supplier park. Gibela had impacted on localisation, job creation and skills development.

Mr Sebola gave details of the key considerations and challenges to implement local procurement. Factors to be considered were volume, value, duration and global competitiveness. Shortcomings for localisation included lack of insight into current local supply chain capability and capacity, lack of existing industry skills responding to new technologies, low volumes of some key components, investment uncertainty, alignment in planning or economies of scale, and lack of recognising a partnership approach with government institutions.

He said the issue of invoices needed to be contextualised. It ought to be noted that some bills were found to be irregular. However, bills submitted by Pamodzi Unique had been cleared in February. A month would be taken for the money to be deposited on account. He remarked that the issue of unpaid bills should not be discussed in Parliament, but Pamodzi Unique should rather have engaged with PRASA.

The Chairperson disagreed. She said that small companies could not survive if they were not paid on time. All the government entities should pay on time, and this included the SOCs.

Eskom
Mr Edwin Mabelane, Senior General Manager, Eskom, said that Eskom had much to be proud of, achieving great strides in supplier development and localisation spending, job creation and skills development. In line with the national priorities, Eskom had developed a five-year plan to implement radical economic transformation. Eskom had noted the concerns raised by the Committee regarding the impact of the delays in contract conclusion, limited assistance to address working capital challenges, and attempts to discredit suppliers based on perceived quality-related issues. Eskom had responded to these concerns.

Discussion
Ms Mantashe said she was not happy with the responses provided in relation to the concerns of Smith Capital Equipment.

Mr Koornhof sought clarity from PRASA on why it was allocating a third to procure locally, and why a tender should be given to a person who was not manufacturing the needed products or components.

Mr Macpherson sought clarity on when local content and local procurement would be finalised by Transnet and PRASA, and remarked that the SOCs should provide a list of bills whose delays for clearance went beyond 30 days. The list should be submitted to the Committee.

The Chairperson agreed. She had raised the same questions with the SOCs. There was a colloquium report on localisation, industrialisation and designation that provided more details on the said concerns. Payment was a must, and a date of making payment should be set out.

Mr Mkongi said that the SOCs were talking about transformation, but they were not providing a statistical break down of such transformation. He viewed this breakdown as a fundamental for engagement. He was concerned with the question of sub-contracting and thus sought clarity on who managed or monitored the relationship of sub-contracting, because this kind of relationship or process was very complex. Why were the SOCs opting for a complex relationship with local companies? 

Ms Van Schalkwyk shared the same concerns.
 
Mr Sebola noted that there was no relationship with the Chinese and that PRASA had a transitional plan to transform the company. On the question of contacting local companies, he said that existing contracts would be running until 2019, and this was when contacting local companies in line with the new preferential procurement policies would be possible.

Ms Van Schalkwyk remarked that radical economic transformation was inevitable and accordingly PRASA should respond to the new policies. The government could not sit and wait for implementation of its policies in or after 2019.
 
Transnet
Mr Edward Thomas, Group Chief Supply Chain Officer, said that the introduction of supplier development had come about from the policies the government had developed in order to address the challenges faced by South Africa. These challenges included unemployment, inequality, skills shortage, a growing population, infrastructure shortages, limited industrial capacity and reliance on the export of resources. Since the inception of the Competitive Supplier Development Programme, supplier development obligations had been committed towards the pillars of localisation, skills development, investment in plant, job creation, job preservation, industrialisation, small business development, rural development technology, intellectual property (IP) transfer and other initiatives.

With regard to preferential procurement, Transnet’s recognised B-BBEE spend was R31.55 billion, representing 102.3% of the total measured procurement spend of R30.8 billion at the end of February 2017. A list of designated and non-designated components and beneficiaries was provided. It was noted that Transnet, through its advanced manufacturing arm, was also supporting the development of black-owned suppliers in the rail sector.  

Discussion
Mr Koornhof expressed his happiness about the comment made by Naledi Group on the progress recorded as it pertained to engagement with Transnet.

The Chairperson appreciated the fact that Transnet’s plans for 2014 and 2015 were set out clearly, and thus sought clarity on why nothing was said in the strategic plans for 2016 and 2017, and what Transnet’s projections might be for 2018 and 2019.

Ms Mmetsa Komane, Director:DTI, said that Transnet was importing pantographs from China and Cambodia in contravention of an agreement between Transnet and the DTI, as well as the DTI’s notes of instruction.

Mr Mkongi said that concerns raised by Ms Komane had been captured in the Committee’s report.

Ms Mantashe sought clarity on whether Transnet was providing a wrong report to the Committee.

Mr Thomas said this was not the case..

The Chairperson said that Transnet should provide a list of local companies with which it dealt. Transnet should be called upon to provide a clear report on what the exact challenges were to deal with local black industries regarding industrialisation and local procurement.

Mr Mkongi proposed that the Department of Public Enterprises should brief the Committee on the role it played in ensuring local procurement policies were complied with.

The Chairperson agreed, and requested Transnet to respond in writing on issues raised by the DTI, as well as in the Committee’s report.

Department of Trade and Industry
Ms Komane said that the rail transport equipment sector was classified into two groups -- rail rolling stock (locomotives, electric multiple units, wagons and coaches) and rail infrastructure (signalling, perway, and overhead electric transmission). The rail rolling stock sector was designated, including rail signalling and associated components, steel power pylons, electric cable products, transformers, shunt reactors and associated components, as well as steel products and components for construction. Key challenges in the sector included application of local content requirements, the supply chain policies of Transnet, delays and changes in the delivery schedule, the high import content, and black economic empowerment and black industrialisation.

The Chairperson said that the DTI had a right to enforce laws that had been adopted in order to contribute towards overall economic transformation and growth.

Department of Public Enterprises
Ms Jacky Molisane, Deputy Director General, DPE, said there were on-going engagements between the DTI and the DPE to ensure that all issues raised could be addressed. The Competitive Supplier Development Programme (CSDP) had the objective of leveraging SOCs’ procurements for development and transformation. The CSDP involved systematically planning and executing procurements to promote investment in plant, skills and technology and the development of new suppliers so as to drive the growth, industrialisation and transformation of the economy. The systematic alignment of broader government policy and the mobilisation of resources supported and incentivised the supplier development and transformation process.
 
Ms Molisane described the key performance indicators related to industrialisation and economic transformation. In terms of industrialisation, key performance indicators included local content, technology transfer, skills development, investment in plant, small business participation, job creation and export. Economic trnsformation included B-BBEE spend, Black Women Owned (BWO) or Black Owned (BO) company spend, disability spend and Black youth owned spent. These indicators and associated targets were included in the shareholder compact for both Transnet and Eskom.

Ms Molisane said that challenges came from the Preferential Procurement Policy Framework Act and its regulations, which had been extended to apply to all public entities listed in Schedule 2 and 3 of the Public Finance Management Act (PFMA). There were challenges relating to the ability to optimise supplier development objectives.

National Treasury
Mr Willie Mathebula, Chief Director, National Treasury (NT), said that the Constitution recognised the imbalances created by the apartheid regime and had introduced section 217(2)-(3), which brought about the Preferential Procurement Policy Framework Act and its regulations. Regulations had been promulgated in June 2011, followed by the signing the Local Procurement Accord on 31 October 2011 between government and social partners, which sought to give local manufacturers an advantage over importing suppliers. This also aimed to empower and protect small, medium and micro enterprises (SMMEs) who were local manufacturers.

Mr Mathebula said the government recognised the strategic role of public procurement in economic development and transformation, and was committed to leverage on it. Working together with the DTI, National Treasury had issued a number of instructions to designate sectors for local production and content. The aim was to stimulate local industrial development, skills development and employment creation. The government, as the biggest procurer of goods and services, strived to develop a preferential procurement policy and set procurement guidelines. Instruction notes processed in terms of the Preferential Procurement Regulations covered the following sectors or products:

  • Furniture products;
  • Set top boxes;
  • Textile, clothing, leather and the footwear sector;
  • Electrical and telecom cable products;
  • Residential electricity meters; working vessels (boats);
  • Solar water heater components;
  • Rail rolling stock sector;
  • Transformer, shunt reactor and associated equipment;
  • Steel power pylons, monopole pylons, steel substation structure, power line hardware, street lighting steel poles, lattice towers and masts;
  • Large bore spiral submerged arc-welded steel conveyance pipes (500mm to 3500mm);
  • Valve products and actuators;
  • Solar photovoltaic systems and components;
  • Rail signalling systems and associated components; and
  • Two-way radio terminals and associated equipment.

Mr Mathebula said there was a need to establish a structure to deal with the process leading up to designations, to establish a designated sectors implementation compliance working group, and to formalise a framework for designation. He was of the view that there might be alternative instruments to stimulate local production and content, such as tax incentives, import tariffs, etc.

Department of Transport
Ms Constance Maleho, Director: Rail Infrastructure, Department of Transport, apologised on the behalf of the Deputy Director General, who was not present due to illness, and also for not preparing a power point presentation. She would be responding to concerns raised in the Committee’s report, with a particular focus on the absence of coordination of preferential procurement, and how the Department viewed industrialisation and localisation.

The Chairperson sought clarity on when the Department had received the invitation, why the DDG had not come to brief the Committee (hence illness was an excuse), and why no power point presentation had been prepared and communicated to Members. She said this departmental behaviour served not only to undermine the work of the Committee, but also to tarnish the image of the Minister of Transport, who had a good record in cooperating with the Committee. The Minister was known as a person who loved to serve the people. She sought clarity on whether the Department was aware of Gibela programme.

Ms Maleho said it was.

The Chairperson said that Ms Mahelo could not speak on the behalf of the DDG, since she was not the person accountable to the Committee and was not in a position to answer all questions. She was there only to cover for the DDG.

Ms Maleho suggested that she should be given an opportunity to respond to some of the questions raised in the Committee’s report, but that she would not respond to questions where the DDG was the right person to give answers.

The Chairperson responded that the Department should take the Committee’s work seriously.

Ms Maleho was given an opportunity to state the position of the Department on preferential procurement, localisation and industrialisation. However, this position was to be communicated to the Committee in writing.

Discussion
Ms Mantashe said, with regard to the challenges raised by the DTI, that it was apparent that the SOCs were overlooking the local procurement policies. The SOCs were not doing what the government was saying they should. These entities should be taken to account. The SOCs could not be allowed to drag the government’s policies into the mud.

Mr Mkongi agreed. He suggested that there should be a forensic investigation into the flouting of the policies of government giving effect to preferential procurement. How could a SOC flout the National Treasury/DTI’s instruction notes for local production and content? Members should move on to discuss a motion of investigating these SOCs’ reasons of overlooking these notes.

The Chairperson said that Mr Mkongi’s point was valid, but the primary responsibility rested on departments to ensure that their entities applied policies on preferential procurement, as well as related regulations and notes.

Mr Mkongi said that there should be a report on the progress in the implementation of industrialisation, localisation and economic transformation policies. He sought clarity on what was so special about the so-called “European high standards” and what the difference was between European and South African standards? When Europeans were, for example, selling their cars to South Africa, they should know about the South African environment. They should know that local procurement was a prerequisite. Europeans were buying locally. The same applied to Americans and Australians. Why not South Africans?

Mr Koornhof stated that when a person was entrusted with dealing with bulk procurements, something would go wrong. He said that he could smell that there was a corruption that might be a cause of ignoring government policies but he could not tell how that corruption took place. He therefore supported Mr Mkongi’s suggestion of investigating the SOCs to determine what might be wrong in their procurements.

Mr Macpherson said that he could smell corruption, but could not see it. He therefore suggested that those individuals who knew what was happening or knew about wrongdoings should come forward and disclose such information to the Committee to avoid forensic investigations and their consequences. Those who disclosed certain information would be protected in terms of the Disclosure Act.

The Chairperson agreed that a firm decision was needed to ensure that the SOCs were compliant, as they could no longer continue to flout the state’s policies.

The meeting was adjourned. 


 

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