Local valve and actuator manufacturers are calling for tougher sanctions against contractors and importers that violate SA’s localisation regulations.

On paper, SA has a range of punitive measures to penalise contractors that flout localisation rules. In practice, however, enforcement is weak, and transgressors routinely escape punishment. The authorities make little effort to enforce the rules, allowing errant contractors to install imported valves and actuators on water projects that are supposed to use locally manufactured products.

Valves and actuators control the flow of water, gas and petroleum in pipelines, making them critical to infrastructure reliability.

Industry Frustration Grows

Tumi Tsehlo, Group CEO of Dynamic Fluid Control (DFC), says the lack of enforcement is creating an uneven playing field.

“The current environment encourages dishonesty. Procuring entities rely on suppliers to self-declare their compliance with procurement regulations. This approach has been proven ineffective,” says Tsehlo.

Dynamic Fluid Control is one of the local firms hardest hit by contractors who ignore localisation rules. The company, along with others, depends on public sector procurement, which accounts for 58% of total sales in the industry.

Undercut by Cheap Imports

The intention behind localisation rules is to stimulate domestic industry by directing procurement spend towards local producers. But imported products, especially those from China, continue to undercut South African manufacturers.

On average, Chinese valves land in SA at R333 per kg. By comparison, European imports sell at R2 166 per kg, while SA manufacturers export at R2 691 per kg.

“Chinese imports are sold in SA at pricing levels blatantly below local production and market rates. SA exports compare favourably to global peers. The only outlier is imports from China,” explains Tsehlo.

Because Chinese valves are far cheaper, middlemen import them fully assembled and deliver them directly to customers, bypassing the need for local investment in infrastructure.

“This means that a one-man operation can buy container loads of finished products from China and drop them off at customers’ doorsteps without building anything locally,” Tsehlo warns.

Collective Push for Enforcement

There are 22 local valve and actuator manufacturers in SA, represented by the South African Valve and Actuator Manufacturers Association (SAVAMA), an affiliate of the Steel and Engineering Industries Federation of Southern Africa (SEIFSA).

In December last year, SEIFSA and SAVAMA submitted a nine-page document to the Department of Trade, Industry and Competition (DTIC). The submission included recommendations on implementing the new Public Procurement Act (PPA) to better support local industry.

Previously, procurement was governed by the Public Finance Management Act (PFMA) and the Preferential Procurement Policy Framework Act (PPPFA). Both included sanctions for misrepresentation or non-compliance. The PPPFA has since been replaced by the PPA, which carries similar penalties.

Sanctions can include disqualification of bids, cancellation of awarded tenders, blacklisting from state contracts for up to ten years, forfeiture of guarantees, and in severe cases, civil or criminal prosecution.

Laws Without Enforcement

Tafadzwa Chibanguza, CEO-designate of SEIFSA, says the failure to apply sanctions undermines the entire procurement system.

“The core challenge lies not in the absence of sanctions, but in the lack of consistent enforcement. Many contractors transgress because they know that sanctions are rarely applied,” he says.

Chibanguza argues that oversight bodies - including National Treasury, the South African Bureau of Standards (SABS) and state procurement units - must be strengthened to improve monitoring and auditing.

Flaws in Local Content Formula

SEIFSA and SAVAMA also raised concerns about the formula used to calculate local content in tenders:

LC = (1 - x/y) * 100

(where x = value of imports and y = total tender price).

They argue the formula focuses on the ratio of imports to total contract value rather than actual depth of manufacturing. This allows for manipulation and inflates local content percentages without real industrial impact.

“The formula can be distorted by non-productive costs like overheads, logistics and mark-ups, which inflate the denominator without creating value in the manufacturing base,” says Chibanguza.

In some cases, contractors label transactions as “local” even when intellectual property originates abroad - for example, purchasing technical drawings from the domestic arm of a global company.

Call for Genuine Industrial Value

SEIFSA and SAVAMA recommend redesigning the formula to exclude non-productive costs and capture only genuine manufacturing activity.

“This would ensure that only productive value addition is recognised,” says Chibanguza. “Mandatory minimum requirements for inputs such as locally produced foundry castings must also be included. These anchor deep manufacturing and prevent compliance through superficial assembly.”

Related Tags