Public procurement as driver for industrial development

PUBLIC procurement is the manner in which the State through its ministries, departments, parastatals, local authorities and other Government agencies obtain by various means the necessary goods, services and work to carry out government activities. This is mainly through the purchase, loan, transfer or hire of supplies or services to provide public service.

Public procurement is a critical tool for industrial development. It is a fact, that governments have increased their spending over the past decades. This increased expenditure should directly benefit the local businesses, manufacturing sector and the general population of the country. More so there is growing interest in how governments spend public resources along with the value of public spending.

According to the World Bank, since 2006, public procurement has increased 10-fold, and the World Bank expects this growth trajectory to continue. The World Bank’s estimates suggest that developing country governments spend approximately USD 820 billion a year, or 50 percent of their budgets on the procurement of goods and service. China’s government procurement market, for example, totalled approximately US$88 billion in 2008, more than triple the amount in 2003. The EU’s procurement market was worth over EUR1 500 billion, these values are so large because a wide range of government or public entities are now routinely expected to procure the vast array of goods and services necessary for providing citizens services as diverse as education, security, public health, utilities, infrastructure and renewable energy facilities. It has been estimated that public procurement accounts for around onefifth of global gross domestic product.

According to South Africa’s Estimates of National Expenditure, total government spending is estimated to reach over R1,43 trillion in 2017 financial year accounting for 29,1 percent of GDP (DTI, 2017). This figure demonstrates the significant ongoing purchasing power of the public purse, and the potential for public expenditure to be leveraged to support South Africa’s broader economic, social and environmental objectives.

Zimbabwe’s total government expenditures for the fiscal year 2018 is budgeted at $5,7 billion, financed from Government resources, complemented by loan financing and development partners. Of the total budget, 42 percent constitute public procurement in different sectors and local authorities. For example, procurement of furniture for Government Ministries and departments amount to over $50 million. There is indisputable need for local enterprises to participate in public procurement and to benefit the Zimbabwean industry.

With this background the Government has taken a deliberate move to reform the State Procurement Board (SPB) as part of the Ease of Doing Business reforms. The reform was necessitated by the need to address the inadequacies of the current Procurement Act (Chapter 22:14) of 1999, to effectively regulate public procurement given the dynamic socio-economic environment.

Government recognises that public procurement is an indispensable economic activity for good governance, financial management and sustainable development. The review of the Procurement Act [Chapter 22: 14] was necessitated by the recognition that the piece of legislation was antiquated and was no longer in sync with the current dictates of modern procurement systems both regionally and internationally.

Therefore the new Act is meant to ensure that the legislation meets the needs, demands of the local companies, manufacturers, general population. We cannot solve our problems with the same thinking we used when we created them.” Albert Einstein”

Public procurement is a powerful tool to support economic growth whilst delivering value for money for the taxpayer. To achieve value for money for the goods and services the Government needs is to be subject to the general principles of fairness, equitability, transparency, competitiveness and cost-effectiveness.

With an array of existing challenges in the Zimbabwean economy, employment, inclusive growth, and the invigoration of the industrial sector ought to be the pressing national priorities. The new Act seeks to address the challenges displayed by the State Procurement Board of being a regulator and at the same time a participator in the procurement processes. With this suite of prerogatives in the background, strong capital investment by the public sector in the form of public procurement of goods, services, and infrastructure is anticipated and expected to contribute to improved growth rates for the Zimbabwean economy in the upcoming years.

There is direct correlation between public procurement and industrial strategy. Given the large sums spent on public purchasing, the government of every state is itself an actor in the market, and often is relatively the major purchaser. There is need for the government to explore the possibilities of using government purchases to not only promote redistribution among different segments of the population, but also to develop an industrial strategy, to introduce innovation technologies or foster environmental protection through products or services that have a reduced environmental impact.

Public procurement is typically viewed as a legitimate tool to stimulate domestic production and consumption. By concluding contracts that target particular sectors or groups in society, the government can push forward policies to redistribute wealth, promote industrial strategies to ensure sustainable development.

Growth path in Zimbabwe is led by the consumption driven sectors, the productive sectors have lagged behind. The manufacturing sector has a vital role to play, and particularly in value-adding sectors, in generating employment and economic growth.

Efficient and integrity in public procurement is essential to ensure sound public service delivery and growth in the manufacturing sector thus ensuring government money benefits local industry.

Undoubtedly, realising the full potential of public procurement will eventually require changes in thinking, mindsets and regulations around public accounting and public finance regimes

To achieve industrial development through local procurement there is need to increase focus on local content. Different sectors will benefit from public procurement which includes construction services, pharmaceutical products, health service, telecommunication services, chemical products, machinery and associated products textile, clothing and footwear, plastic products and wood products.