The procurement power of government can be a potent force for change. Beni Letebele, the Sustainable Cotton Cluster’s programme manager, explains why the Preferential Procurement Policy Framework Act (PPPFA) is good news for cotton.
What is the PPPFA and what is it meant to achieve?
The PPPFA is the law that directs procurement by all state entities. Its aim is to use state procurement as a tool to address past inequalities, by basing buying decisions on more than competitive pricing alone. The PPPFA allocates preferential points to procurement from persons or groups that were prejudiced by unfair discrimination, and therefore uses the economic muscle of the state to help build an equitable society.
Why is the PPPFA relevant to the aims of the Sustainable Cotton Cluster?
Under the PPPFA, textiles are a 100% designated category, which means that all textile products bought by state entities must be verified to be entirely made of local raw materials and by local labour. Where a specific raw material, for example, is not available, the supplier can apply to the dti for exemption to use imported inputs. The Cluster wants to grow the local cotton value chain, based on consumer demand. It also aims to create an enabling environment for cotton producers and manufacturers to supply local and international customers with fully traceable and sustainable products. The Act fully supports this aim by designating government as a “ideal receiving environment” for textile products.
What steps are the Cluster taking to take advantage of the PPPFA?
The Cluster has already launched several processes focused on taking advantage of the PPPFA:
• It did an industry audit, covering more than 150 companies, to establish exactly what products and capacity the local manufacturing industry has. Armed with this knowledge, the Cluster can help ensure that no input exemptions are granted for products that may be available locally.
• The demand analysis that compared the textiles bought by the retail, industrial and public sectors gave us a sense of government’s size as a market. While it is relatively small compared to retail (the retail industry’s consumption is 60 times that of government and industrial textiles combined), it is significant enough to take up some of the existing capacity in the value chain.
• The Cluster analysed some of the tenders awarded against the local content requirement and, based on the results, started developing integrated supply chains to fill the gaps. The Gauteng Department of Health was the guinea pig, but the project is being expanded as the supply of required fabrics from local suppliers improves.
What is necessary for the cotton industry to benefit fully from the PPPFA?
The short answer is that government needs to pay closer attention to implementation. The legislation is well intended, but at the moment it is difficult to enforce properly, because there is no cost-effective mechanism to verify that goods comply with the local-content requirements. Importers, traders and consumers needs to be informed about the positive impact of local content compliance, and government needs to implement better monitoring systems for compliance. Among others, this means that the influx of illegal and/or under-invoiced imports into the country has to be stopped. When importers under-declare their wares they do not pay the correct import duties and levies and, as a result, compete unfairly with the local manufacturers.