uebtootoo200901

Phosa, who wields considerable influence after his election to the top five of the ANC leadership at Polokwane, said it was time to upthe ante on empowerment when state tenders are awarded,highlighting the route the new ANC leadership may want to take to harness billions of rands awarded in state tenders to give further impetus to the state's empowerment drive. The call adds pressure on the treasury to amend the Prefer entail Public Procurement Framework Act (PPPFA) to give more weight to empowerment when state tenders are awarded. Administered by the treasury, the act prescribes an 80:20 weighting in the assessmentof tenders, with contracts being awarded predominantly based on price, while empowerment accounts for the balance. But local manufacturers, already jittery that procurement processesin the private sector favour empowerment credentials over localcontent, fear that bigger emphasis on black economic empowerment inpublic procurement processes could further disenfranchise them. Local manufacturers across the spectrum increasingly complain thatthey are losing out to empowered suppliers who import products andthen rely on their empowerment credentials to secure contracts inthe private sector. In terms of one of the key elements of the empowerment scorecard --preferential procurement -- companies score points proportional tothe amount of money they spend with empowered companies. However, the procurement spend component has no local contentspecification and commentators say an intermediary sector ofempowered importers has sprung up, where empowerment players importgoods -- often cheaply from China -- add a margin which stillundercuts the price of locally produced goods, and secure contractson the basis of their empowerment status. "These companies add no value and employ few people but arefavoured because their prices are competitive and they come with Bee Product," one commentator says. When the then trade and industry minister, Alec Erwin, introducedthe BEE scorecard in 2003 he hailed it as a "carrot ratherthan stick" approach, where non-compliant companies would notbe directly penalised by government but would rather pay acommercial price because they would be excluded from commercialopportunities. However, even empowered local manufacturers are being hurt by theunintended consequences of the procurement rules. Essentially, the situation means two of the state's key policydirectives -- the empowerment policy and the national industrialpolicy framework -- are fundamentally at odds. The BEE code isundermining a key objective in the industrial policy to advancelocal manufacturing capacity. As the roll-out of the industrial policy framework gains momentum,one of its core objectives is to boost downstream manufacturingcapacity. One of the prime reasons for this approach is themanufacturing sector's potential to create jobs in an economy where40% of people, by the unofficial definition, are unemployed. Interms of the accelerated and shared growth initiative (Asgi-SA) thegovernment hopes to halve unemployment by 2014. Explosives manufacturer AEL, a subsidiary of chemicals group AECI,is a case in point. The company supplies a product mainly to themining industry and has lost substantial market share toempowerment company Lakho, which imports shock tubes from China andhas forced down prices in the local market by between 30% and 35%.And even though empowerment consortium Tiso has a 25,1%-stake inAEL, the company has not been able to win back market share. In the meantime, the company has learned that the shock tubesimported by Lakho enjoy a 15% export subsidy from the Chinesegovernment, an incentive that contravenes World Trade Organisationrules. AEL filed anti-dumping applications with the International TradeAdministration Commission (Itac), which is responsible forfacilitating fair trade, but has had no success.