Local content calculation in tenders
The National Government has introduced "designated sectors" which are sectors, sub-sectors or industries that have been designated by the Department of Trade and Industry in line with national development and industrial policies for local production, where only locally produced services, works or goods or locally manufactured goods meet the stipulated minimum threshold for local production and content1.
What is Local Content and how must we apply it in our tender responses?
Local Content is Local Value Added in South Africa by South African recourses. Where a tender response contains a combination of local and imported goods and/or services, the tender price must be separated into its local and imported components as per the Standard Bidding Document 6.2
Where it becomes tricky is Annexure C, D and E that needs to be completed before Standard Bidding Document 6.2 can be completed. Because little of tender responders read the tender document very carefully this requirement is overlooked. This makes it very difficult to complete Standard Bidding Document 6.2.
It is important to know the sequence in which these annexures must be completed. Completing it in the wrong sequence is going to lead to much frustration on the side of the bidder.
Please remember that you as bidder will be contractually required to maintain records to certify imported content, for example, invoice of materials, expenditure records and income statements.
It must be emphasized that when you respond to a tender you must ensure you know which goods and/or services you can claim as Local Content. Be aware that certain tenders will exclude cost such as the following from Local Content:
- finance charges;
- property; and
- deployment fees of the operations contractor.
The designated sectors together with its minimum thresholds can be found at: http://www.thedti.gov.za/industrial_development/ip.jsp.
There is an increase in the drive from National as well as Provincial Government to promote Local Content. This drive is not a South African initiative but a world wide trend. In a South African context it is good because it stimulates internal growth of the economy.
Local Content is a difficult item in any tender. Many bidders don't know whether or not it is applicable to them. We understand the Local Content criteria and documents.
If you want to know more about Local Content contact us to find out when our next Local Content workshop is taking place in your area.
This article was written by Werner van Rooyen, Director of HowToTender which specializes in tender consulting and tender training. (04/05/2018)
1. Definition of "designated Sectors" as per SBD document 6.2.