The aspect of Local Production and Content is governed by the Preferential Procurement Policy Framework Act Regulations of 2017 and government has designated around 27 different sectors, which must comply with the required local threshold as stipulated, for each designation respectively.
It has become essential for those tendering for government contracts to understand the application of the Local Production and Content regulations, since the High Court in Pretoria recently ruled against a company, who was looking to force the Department of Trade and Industry and Competition (DTIC) to grant it an exemption, since it did not have the capacity to manufacture the goods in question.
The Court was very clear in its judgement that government has the right to dictate policy, demanding that certain thresholds be applicable for designated products in terms of the levels of local content, which must be used to make these goods.
When applicable in tenders, bidders must make a distinction between what is “Exempted Imported Content”, “Imported Goods“, “Local Content” and lastly, “Local Production” or input, respectively.
The SABS has designed a formula on how to calculate the “Imported Content” against the final tender price for the specific item and bidders must collate the necessary information in order to use the formula to assess whether they have met the applicable threshold or not.
If you are tendering for any of the designated sectors, you are required by law to complete the Local Production and Content Declarations, using the applicable formula to indicate whether you’ve met the required threshold or not.
The calculation for the threshold is to be done by inserting the values on Annexures C, D and E, respectively, which will eventually determine, whether the bidder has met the required “Local Production and Content” threshold of the specific designated sector.
If the thresholds are not met, then the bidder is required to either apply for an “Authorisation” or an “Exemption”, respectively, which will only applicable to the specific tender for which it was applied for, and not for future tenders, per se.