State and unions vow to buy local

● Government departments and trade unions will have to buy local in terms of an economic recovery action plan agreed on this week at the National Economic Development and Labour Council (Nedlac). The plan aims to drive infrastructure investment and local manufacture, and improve SA’s ability to compete and create jobs.

President Cyril Ramaphosa this week described the plan, negotiated by business, labour, the government and community leaders at Nedlac, as a “historic milestone”, calling the agreement an “ambitious social compact for economic recovery”.

The cabinet would build on it to finalise SA’s economic reconstruction plan in coming weeks, Ramaphosa said.

Details of the Nedlac plan have yet to be published, but a draft has been circulated. It comes in a week when the Reserve Bank cut its forecast for the economy to -8.2% for this year, from -7.3% when the Bank’s monetary policy committee last met two months ago.

Also, a worse than expected 9% decline in retail sales for July suggested that consumers were in dire straits and the post-lockdown economic recovery was far from robust.

The Nedlac plan follows the economic plans tabled last month by Business for SA (B4SA), the government and labour at a forum for economic recovery convened by Ramaphosa. It draws on the significant common ground between them. It commits the Nedlac partners to a set of short-term measures to build confidence, mitigate the impact of the pandemic, revive the economy, and longer-term structural reforms.

Ramaphosa’s decision to shunt it to the cabinet disappointed some of the Nedlac participants who had expected he would announce the plan immediately and open the way for an all-party implementation team to proceed with ensuring delivery.

“It is good that the social partners met and were able to agree on immediately actionable items. The ball is firmly in government’s court now,” said Business Unity SA CEO Cas Coovadia.

Said Nedlac executive director Lisa Seftel: “This is a plan where the social partners can hold each other to account.”

Top of the list of immediate actions are the stabilisation of Eskom, with the Nedlac social partners also this week signing a social compact for energy security that had been two years in the making, as well as radically improving efficiency at the country’s ports and implementing SA’s digital strategy.

The action plan calls for fast-tracking self-generation projects and for the next bid window of the independent power producer programme to open by January, and wants digital migration expedited by March 2021.

It also seeks to ratchet up investment in

mining, committing to develop a new exploration strategy within three months to lift SA to 3% of total global mining exploration. And it commits to regulatory reforms to address skills constraints and make it easier for informal businesses to operate — as well as to a review of labour-market regulation.

The social partners have committed to set targets within six weeks for public and private sector organisations to improve their procurement from local manufacturers. Public and private companies and non-profit organisations will be required to publish the value of their procurement from local producers, while labour has committed to buy all clothing, stationery, office supplies, food and vehicles from local manufacturers.

The partners agreed to work to improve the efficiency of local producers and develop export-competitive sectors.

Localisation and import-replacement strategies have been controversial because they often result in higher prices, protect inefficient producers, and enable corruption in public sector procurement.

However, the approach won support at Nedlac in part because of the success of initiatives during the Covid crisis — driven by B4SA in collaboration with the government — to increase the local manufacture of personal protective equipment as well as of locally developed non-invasive ventilators.

Production of masks increased from four million a month to 13.5 million a month — at peak Covid demand was 15 million — at competitive pricing, with 18,000 inexpensive ventilators coming to the market.

The Reserve Bank held interest rates at 3.5%, disappointing some in the market who had expected a further 25 basis-point cut given SA’s lower growth trajectory and continued low inflation.

The Bank has cut interest rates by a cumulative 350 basis points this year.