By: Mervyn Naidoo - CEO of ACTOM

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. 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, multi-year 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.

The risk is that companies expand to meet expected demand, but without orders, they bleed losses, eroding confidence and forcing some into business rescue. This cycle destroys local capacity, jobs and skills, while the country ends up importing at higher prices. Unless procurement shifts from short-term transactions to long-term strategic commitments, manufacturers will remain trapped in unsustainable losses.

In contrast, strategic procurement is about long‑term certainty, not short‑term transactions. It means committing to book a supplier’s capacity for five to 10 years, giving them forward visibility on orders. With that assurance, manufacturers can plan their resources, whether it is people, processes or plant upgrades, confidently. They can invest in automation, knowing that a five‑year payback period is viable, and they can make bankable decisions to expand capacity because the return on investment is secure.

Lessons from China

China’s experience over the past three decades offers South Africa a clear blueprint for industrial resilience. China’s industrial resilience was built on deliberate policy. When manufacturing reached 40% of Gross Domestic Product (GDP), the government aligned infrastructure investment with industrial policy, giving state-owned enterprises preferential treatment and long-term visibility. Strategic sectors were supported through subsidies, loans, and protection from foreign competition, enabling manufacturers to invest confidently in automation and capacity.

The results were transformative as GDP per capita grew tenfold in 30 years, underpinned by sustained infrastructure spending. More recently, Made in China 2025, a strategic and comprehensive industrial policy, has pushed advanced manufacturing in areas like microchips and biotechnology, reducing reliance on foreign suppliers.

The lesson for South Africa is clearly that industrial resilience requires deliberate policy choices. Infrastructure spend must be tied to local capacity, procurement must be strategic rather than transactional, and government must provide the certainty that enables manufacturers to invest for the long term. Without this, factories remain idle, capacity erodes, and the country is forced to import at a higher cost. With it, South Africa can replicate China’s trajectory, building jobs, skills and competitiveness while lifting GDP per capita.

Government’s role in the shift to strategic procurement

Government has a decisive role to play in shifting procurement from a transactional exercise to a strategic tool for reindustrialisation. This requires deliberate policy choices and the enforcement of localisation regulations. At present, localisation frameworks exist in South Africa, but they have not been fully embedded into law, which means compliance is optional rather than mandatory.

Without enforceable rules, local procurement remains a matter of discretion, leaving South African manufacturers exposed to imports and inconsistent demand. By legislating and enforcing localisation, government can provide certainty to industry, create forward visibility for suppliers and enable investment in capacity and automation.

In short, government must move beyond intent to implementation. Procurement policy should be designed not only to secure goods and services, but to build industrial resilience, safeguard jobs and drive long-term economic growth.