A shift to strategic procurement is key to driving South Africa’s reindustrialisation efforts

SOUTH Africa’s procurement mindset must urgently evolve from transactional buying to strategic, long-term procurement if we are to achieve meaningful reindustrialisation, because our reliance on transactional procurement is undermining long-term industrial growth.

- MERVYN NAIDOO

By chasing short-term savings, contracts are structured to squeeze suppliers on price and cash flow, leaving them unable to sustain operations.

The recent collapse of transformer manufacturing company SGB-SMIT Power Matla (SSPM) is a case in point. Pushed on pricing, stripped of milestone payments and forced into single-commissioning contracts, the company ran out of cash and entered business rescue. The result is that local manufacturing capacity was wiped out, and prices for imports rose by 10-20%. This is the paradox: transactional procurement destroys domestic industry, only to leave the country paying more for foreign supply. Strategic procurement offers the alternative. It means forward visibility, multiyear commitments and support for working capital so suppliers can invest, expand and deliver sustainably.

Inconsistent and slow procurement pipelines

Currently, manufacturers in South Africa face the harsh reality that they invest in new factories and capacity, but procurement pipelines are too slow and inconsistent to sustain them. Delays in the Transmission Development Plan (TDP), financial bottlenecks in Independent Power Producers (IPPs) and ongoing import competition leave plants idle.