OPINION: Procuring from local sources imperative
IOL / 05 JUNE 2018 - 15:30 / EUSTACE MASHIMBYE
JOHANNESBURG - According to StatsSA, the former home of Pali Lehohla with whom I share this page each Tuesday, the South African government spent 21.9percent of R1.37trillion on the purchase of goods and services in 2015/16.
I don't know what that number is - my calculator doesn't have enough decimal places to work it out, but it's definitely a lot. And, if that is a lot of procurement spend, we can only imagine the private sector's outlay on equivalent items in other sectors.
Eustace Mashimbye is the chief executive of Proudly SA.
These could include uniforms, computers and office equipment and furniture, vehicles and pharmaceutical products among an infinite amount of other products which are procured by both the public and private sectors in one form or another.
The example of pharmaceuticals is one where we do in fact have some comparative figures, which came out of a Sector Specific Forum we hosted as Proudly SA in February this year.
In almost the same period cited above, the country spent R48billion on pharmaceuticals, of which the government's portion represented only R7bn, leaving the private sector with a whopping R41bn bill for medicines, contributed to largely by medical aid funders, pharmacy and hospital groups, among others. So, what does this mean? The pharmaceutical sector is only one example of the disparity between what the government has to spend, and what the private sector can.
According to KPMG - and even if some in South Africa may say their data is not to be trusted, this would certainly seem to be true - globally, procurement is one of the fastest growing professions.
The role of procurement within organisations has evolved to become more relevant through the entire value chain.
It is a strategic function that can impact positively or negatively on the company's bottom line, as well as being a tool to advance an organisation’s support of the country’s national economic agenda, and it is therefore being taken way more seriously than in the past.
The public sector has to adhere to regulations and procedures and political interference in the process is said to be prevalent in some major procurement transactions. But the private sector, while it is also bound by normal legislation around fraud and corruption, is not constrained by public sector procurement regulations.
And while it has boards and shareholders to account to, it does not have an entire country as a stakeholder, for whom the procurement of ARVs, or text books as an example, holds great importance.
Private sector procurement is more flexible and can be more innovative than its public-sector counterpart.
Although policies such as those in favour of previously disadvantaged groups are often part of selection criteria when choosing a supplier, the private sector does not necessarily have to take wider social imperatives into consideration, such as representation, black economic empowerment, and equal opportunities, even though they are urged to do so if we are to take this country forward.
In the context of local procurement, what we are saying is that the private sector's ability to make a difference to our economy and to job creation simply by making voluntary local procurement choices is massive.
If the private clinics, pharmacies and medical insurance schemes chose not to procure so many drugs from India, which has become the generic medicine capital of the world, but to divert some of that R41bn to local pharmaceutical manufacturers including major players such as Aspen Pharmacare and Adcock Ingram, who are both members of Proudly South African, as well as to the large number of smaller emerging black-owned pharmaceutical manufacturers, imagine how many more jobs could be created at their plants.
Government departments and state-owned enterprises have designated sectors in which they are compelled to favour local procurement, but beyond that we are appealing to corporate South Africa to consider every segment of their business for which they can make local choices over imported products when procuring.
Reducing the unemployment rate is a long-term investment in the country.
It is not a false economy to spend on procuring local items over imports, if we reduce the impact of long-term unemployment on the social fabric of the country.
I guess the message to be drawn from this is if the government's overall procurement bill is huge, then the private sector's is even larger, and if more of those resources were ploughed into local goods and services, creating a multiplier effect on other sectors and companies, we could soon buy back South Africa.
The hugely successful Casper Nyovest raps about money, calling it Tito Mboweni in one of his latest songs, in which he urges young people to follow their dreams and get the "paper" or money they need.
Without the private sector playing its part in redirecting more of its spend to locally made products, thereby contributing to an economic growth rate that can create job opportunities, the truth is, more dreams will be dashed than fulfilled.
Eustace Mashimbye is the chief executive of Proudly South African.
Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER