High Court rules in favour of government to localise production of industrial components in South Africa
The Gauteng High Court ruled in favour of Government in a matter involving procurement conditions applicable to electrical transformers, a judgement that will boost efforts to localise production of key industrial components in South Africa.
The challenge arises from a Government decision to refuse an exemption from a localisation condition to enable imports of electrical transformers, on the basis that local capacity exists to produce the required transformers. The Minister of Trade, Industry and Competition, Ebrahim Patel welcomed the decision stating that it provided clarity on to the market and helped to support efforts to build strong and resilient local industries.
The applicant, Continental Power Supplies contended that Government was obliged to offer it an exemption, arguing that among others, that it had not been consulted and that adequate local capacity to produce transformers did not exist in South Africa.
“I have seriously considered the circumstances of this case, as well as the arguments and submissions made on behalf of both parties, and I can find no substantial reasons why this court should set aside the decision taken by the dti, which I find to have been rational, lawful, reasonable, and procedurally fair. In my view, the decision of the dti not to grant the exemption to the applicant was justifiable. It is also my view that the dti did not fail to consider the relevant facts at the time when its decision was taken,” Acting Judge PD Phahlane noted in the written judgement.
Transformers are one of the twenty-seven products designated for local production under the Preferential Procurement Regulations, which give the Minister of Trade, Industry and Competition powers to designate products which may only be procured by a public entity from a local producer.
The Preferential Procurement Regulations require that organs of state to include local content requirements in the invitation of bids and tenders where a product is designated for local production. All bidders should be subjected to the same local content requirements and conditions. Where a material to manufacture a designated product is not available in the country, bidders must apply for an exemption from the dtic. The latter treats any application on its merits based on the availability of the material in the country and also as guided by the conditions as stipulated by the various instruction notes for designated products.
“The judgement helps our efforts to sustain and create local jobs, deepen the levels of industrialisation and support local businesses. Local procurement also strengthens aggregate demand in the economy, which is particularly important in current circumstances. A number of foreign and domestic investors establish or maintain their plants in South Africa because of the localisation measures by Government,” Minister Ebrahim Patel said.
The Minister also emphasised that this judgement is important for both organs of state and suppliers to consider local content requirement in the procurement of goods designated for local production.