19 March 2010 | Jake Kanter

A dispute between two South African government departments is jeopardising plans to overhaul public procurement.

Business Unity South Africa (BUSA), which represents the country’s businesses, said the government’s aim to boost domestic purchasing – set out in the R846 billion (£76.3 billion) Industrial Policy Action Plan (IPAP2) in February – is in danger because the trade and treasury departments disagree on how far the proposals should go.

BUSA chief executive Jerry Vilakazi, said in a statement: “We are concerned that implementation remains a challenge due to an apparent lack of common ground between Treasury and the Department for Trade and Industry (DTI).”  

Local press report that the disagreement centres on the IPAP2’s “point matching” scheme, which would give domestic suppliers a second chance to lower their prices if a foreign vendor wins a contract. The National Treasury fears this policy is unconstitutional, while the DTI is a strong advocate because it would boost local procurement. 

Vilakazi said implementation of local purchasing policies would provide South African suppliers with short and long-term opportunities in sectors including freight and commuter rail and aerospace. Urgent action must be taken for the IPAP2 to be a success, he said.

The industrial policy said public sector procurement was currently “ad-hoc” and does not “deliver adequately on either value-for-money or key industrial policy objectives”.

In its formal response to the IPAP2 proposals, BUSA also said plans need to recognise the constraints to growth that the South African economy faces, adding that financing will be “crucial” to industrial expansion. “The need for coordination cannot be overemphasised. The implementation of industrial policy action plan will require that all government departments act in tandem,” Vilakazi said.