For localisation to be successfully implemented, the requirements must be sector and context specific.
This is according to the Small Business Institute (SBI), which held a webinar on the impact of localisation on SMMEs.
It has partnered with the Small Business Project (SBP) on a series of research papers into the condition of SMMEs in the country.
One of the reports titled: “Local May Be Lekker, But is it Possible?” examines the government’s efforts over two decades.
It looks at the consequences of localisation-driven policies during the three eras of Growth, Employment and Redistribution (GEAR), Accelerated and Shared Growth Initiative for South Africa (AgsiSA) and the National Development Plan (NDP).
SPB CEO Chris Darroll said that for the first time, research was able to identify the impact of various industrialisation policies pursued by the state on SMMEs.
“An aggressive localisation policy presupposes (that) sufficient capacity already exists in the economy,” she said.
“This capacity is required to produce more local goods and services at prices poor consumers, the majority of our population can afford.”
Carroll said that to reach the more deprived areas of South Africa, required considerable and innovative thinking to improve industrialisation where there was little.
“Implementation of government’s localisation policies have been ineffective over the years for a number of reasons,” she said.
“The Department of Small Business Development’s programme to frame and implement localisation focuses its intervention without fact-based evidence to substantiate its choices.
“Interventions based on perceptions alone can lead to policy instruments designed to target selective, and often subjectively chosen, elements to the exclusion of the broader value chain,” she said.
“This research demonstrates that ideology, rather than facts, have shaped policy during the three eras, failing to grow the economy, failing to grow small businesses and the country.”
SBI CEO John Dludlu said that the research indicated that the economic policies had failed.
“Records show a countrywide total decline of all secondary industries, especially manufacturing, construction and energy production,” he said.
Also, the contribution to the Gross Domestic Product by tertiary industries, which focus on the provision of services, was muted, exposing the absence of effective policies to accelerate their stimulation, Dludlu said.
“The research also demonstrates that South Africa has not achieved the minimum criteria for GDP growth above population growth for the past eight to nine years.
“In addition, middle income countries are on a trajectory to outperform South Africa, currently classified as an upper- middle income country, in the next two years,” he said.
The document calls for localisation requirements to be sector and context specific.
They must also consider the availability of skills and demand within the sector, the potential for achieving market scale at competitive prices, and the cost of any additional government support or protection to the local industry.