While Finance Minister Pravin Gordhan's approval for Transnet Freight Rail to proceed with its tender for 1‚064 locomotives will come as a relief to the transport company‚ it carries important implications for state procurement with a view to fostering local industrial development.
The sticking point between the department and the Treasury over the tender was the weighting Transnet would be allowed to apply to evaluate the bids.
Under the Preferential Procurement Policy Framework Act‚ state-owned companies are required to use a 90:10 ratio‚ with 90% of the evaluation based on price and 10% on economic development commitments.
Transnet‚ however‚ had structured its bid using a formula of 60:20:20‚ Transnet's group chief financial officer Anoj Singh said.
In this formula‚ 60% of the competition between bidders would be on price. The other components of the evaluation criteria were for 20% of the assessment to be focused on industrial commitments‚ with the balance being judged on a range of broad-based black economic empowerment criteria‚ Singh said.
The Treasury's concern over Transnet's broader approach to tender evaluation and its shareholder ministry related in part to a fear that the state will overpay for capital goods. Another concern is that local industrial programmes‚ shielded by the state's purse‚ could spawn industries unable to compete globally on quality or price.
Department of Public Enterprises director-general Tshediso Matona said on Monday (13 May) that a "framework" would now be developed to guide state-owned companies' spending on large projects such as the Transnet locomotive tender and Eskom's future nuclear build programme.
The framework‚ which is as yet untitled‚ would need to be based on the existing Preferential Procurement Policy Framework Act and the Public Finance Management Act‚ "while balancing that with industrial development and transformation imperatives" of the government.
Matona said that once a framework was in place it would create flexibility for the state to be able to evaluate programmes "on a case by case" basis.
"This would mean that the potential to deliver desired industrial outcomes‚ such as the revitalisation of the rail industry‚ or stimulating the development of a nuclear industry once Eskom has embarked on a nuclear power build programme‚ could be evaluated," he said.
Infrastructure and Development Advisory Practice's chief executive Ravi Naidoo said the debate over the cost of industrialisation had haunted South Africa for more than 20 years.
"This is not a new debate‚ it has been central to economic tensions since 1990. Many countries have had similar debates‚" Naidoo claimed.
He said South Africa's economy had to diversify as South Africa needed a greater level of industrial depth, particularly if it were to compete actively against other countries in the Brics alliance.
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