South Africa Country Commercial Guide
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Selling to the Public Sector
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Selling to the Government

Growth Government purchasing is a significant and growing factor in the South African economy, as it addresses infrastructure deficits that include energy, transportation, communications, health, and education. 

Nearly all purchasing (at all three levels of government -national, provincial, and municipal) is done through competitive bidding on invitations for tenders, which are published in an official state eTender Publication website managed by the Department of Finance / National Treasury: https://www.etenders.gov.za/ and sometimes in leading newspapers. The eTender portal is managed by the Office of the Chief Procurement Officer (OCPO) who sets the policy on content, functionality and coordinates the administration with users at national, provincial, and local government level. 

OCPO The OCPO has a mandate to ensure that public sector organizations in South Africa honors the provisions of the section 217 of the Constitution when spending taxpayer’s money on procurement of goods, services and works. The eTender Publications Portal is one of the initiatives instituted by OCPO to support fair, equitable, transparent, competitive, and cost-effective procurement in an easy to access, single point of entry, technology driven facility. It is worth noting that this portal displays all public sector tenders in South Africa daily.

Local presence Although the purchasing procedures of the central government and parastatal institutions favor local manufacturers, an overseas firm is not precluded from bidding if the firm has an agent in South Africa to act on its behalf. As a general practice, the local agent receives the payment. Several factors outlined below impact the process of selling to the South African Government and its agencies.

Central Government Procurement

CSD The Central Supplier Database (CSD) maintains a database of organizations, institutions, and individuals who can provide goods and services to the South African Government. The CSD has served as the single source of key supplier information for organs of state since April 1, 2016, providing consolidated, accurate, up to date, complete, and verified supplier information to procuring organs of state. The central government procures through a so-called “supply-chain management” process to streamline the buying procedures of national, provincial, local, and state-owned companies. As part of the Public Finance Management Act (PFMA) Regulations of 1999, procurement accountability has devolved to “accounting officers.” Depending on their level of responsibility, accounting officers may approve government purchases up to a certain amount.

  • Principles: The South African Constitution lays out basic, socio-economic principles for government procurement. Procurement by an organ of state or any other institution identified in national legislation must be “in accordance with a system which is fair, equitable, transparent, competitive and cost-effective,” while also allowing for categories of preference and the protection, or advancement, of persons disadvantaged by unfair discrimination, within a framework national legislation. South Africa also bases procurements on the principles of accountability and just-in-time (JIT) delivery.
  • Competition: Procurements are generally conducted through competitive tenders for project, supply, and other contracts. While bidders are typically not required to pre-qualify, the government assesses each bidder’s capacity to deliver the required goods or services. Foreign firms can bid through a local agent. The due date for a bid is usually at least twenty-one days from the publication of the notice. As a general practice, however, the contracting party allows a lead-time of thirty to forty-five days. Bids for government tenders must be on a basis of all costs included to the specified delivery point.

Local Content Requirements

CSDP Since 2011, the South African Government has increased its local content requirements. The Department of Public Enterprises (DPE) has formulated the Competitive Supplier Development Program (CSDP), aimed at building up the local supply base. This is becoming increasingly important in the bidding process, particularly for foreign firms.

NIPP: Previously, state-owned enterprises (SOEs) participated in the National Industrial Participation Program (NIPP), an import-offset program for government agency expenditure managed by the Department of Trade, Industry and Competition (DTIC). Under the NIPP program, all imports of more than $10 million required the supplier to work with DTIC to invest the equivalent of 30 percent of the value of the purchase in a non-related industry. However, under CSDP, companies now have more discretion to meet government requirements in this area.

Foreign prospective suppliers need to look closely at localization requirements, which are complex, evolving, and vary by sector.

Broad-Based Black Economic Empowerment (B-BBEE)

Criteria A pivotal consideration with the government and parastatal procurement process is that manufacturers or suppliers to government get varying levels of procurement preferences if they qualify as a Black Economic Empowerment (BEE) partner. The criteria to become a BBE partner aims to quantify the contribution by these partnerships to empower previously disadvantaged individuals according to a varying mix of the following parameters:

  • Black Ownership
  • Black Management Control
  • Employment Equity
  • Percentage of Black Skilled Personnel
  • Preferential Procurement from Black/BEE Suppliers
  • Skills Development Initiatives
  • Enterprise Development Initiatives for Black Businesses

Expansion: The South African Government is expanding BEE requirements on an ongoing basis. Recently amended regulations entered into force in 2022 and 2025 and vary by industry sector charter. In BEE legislation, the term “Black” is used generically to refer to South African citizens of the following racial/ethnic groups: Black (those whose ancestry is exclusively/almost exclusively African), “Colored” (those of mixed European/African or European/Asian origin), or Indian (those whose ancestry originates in the Indian sub-continent). A 2008 court decision expanded the BEE program to include South Africans of Chinese descent.

Guidelines: The Broad-Based Black Economic Empowerment Act of 2003, the legislation enacting the BEE strategy, directs the Minister of Trade, Industry and Competition to develop a national strategy for BEE, issue BEE implementing guidelines in the form of Codes of Good Practice, encourage the development of industry-specific charters and establish a National BEE Advisory Council to review progress in achieving BEE objectives. While firms are not legally required to meet BEE criteria, in practice they have a very limited chance of competing for government or parastatal procurements if they do not. Entities gain credits if they include in their up- and downstream supply chain partnering with other entities that qualify as being compliant on employment equity and other criteria.

BEE: Codes of Good Practice: https://www.bbbeecommission.co.za/b-bbee-codes-of-good-practice/
Employment Equity (EE) Regulations: https://www.labour.gov.za/DocumentCenter/Pages/Employment-Equity-(EE)-Regulations-.aspx

Public Private Partnerships (PPP)

The South African Government and its government-owned entities or state-owned entities (SOE) pay close attention to public-private partnerships (PPPs). This mode of outsourcing operational responsibility is an alternative to direct government procurement. While it allows a variety of leasing options, it can also include buying a service from a private entity. This mode of business implies less risk for government, due to a significantly reduced capital investment requirement, and a predictable expenditure model (linked to the fee structure payable to the service provider) while at the same time allowing entities to benefit from traditional government operations. The more complex PPP tender bidding process has in some cases also led to longer adjudication and awarding timelines.

Some organized labor parties criticize the PPP process as leading to greater privatization and deregulation. The South African Ministry of Finance (National Treasury) administers the government procurement process. For more information, see:

South African National Treasury
PPP Unit
Tel: +27 (0)12 315 5741
Fax: +27(0)12 315 5477

Offsets and Countertrade

Stipulations South Africa’s National Industrial Participation Program (NIPP) mandates a countertrade/offset package for state and parastatal purchases of goods, services, and lease contracts over $10 million. Under the program, all bidders on government and parastatal contracts who exceed the imported content threshold must also submit an Industrial Participation package worth 30 percent of the imported content value. All government and parastatal tenders’ issue NIPP requirements with the tender documentation and are overseen by the Industrial Participation Secretariat of the Department of Trade and Industry.

The Department of Trade and Industry administers the NIPP. 

Parastatals

Parastatals (more commonly known as state-owned enterprises, or SOEs), local authorities, and major private buyers, such as mining companies, must follow practices like those of the central government. Government procurement is guided by and bound to the schedule of local content preference. Local government purchases are increasingly significant and may involve overseas bidding. With decentralized procurement by the nine separate provincial governments in South Africa, the prospects for additional government procurement below the central government level are significant, even though strict budgetary restraints are in place and many agencies face a lack of capacity in rolling out and managing projects.

The National Treasury oversees SOE compliance with the Public Finance Management Act (PFMA) that manages fair and transparent procurement processes. However, by its own admission, National Treasury has increasingly allowed non-competitive bids under exceptional circumstances for the sake of service delivery. Deviation and expansion rules allow SOEs to use existing contracts without requesting new bids from suppliers.

SOEs play a significant role in the South African economy. In key sectors such as electricity, transport (air, rail, freight and pipelines), and telecommunications, SOEs play a lead role, often defined by law, although limited competition is allowed in some sectors (i.e., telecommunications and air). The government’s interest in these sectors often competes with and discourages foreign investment. DPE has oversight responsibility in full or in part for six of the approximately 700 SOEs that exist at the national, provincial, and local levels: Alexkor (diamonds); Denel (military equipment); Eskom (electricity generation); South African, Express and Mango Airways; South African Forestry Company (SAFCOL) (forestry) and Transnet (transportation). These six SOEs employ approximately 105,000 people. South Africa’s overall fixed investment lies approximately between 14-15.7 percent of GDP. The SOEs’ share of that investment is 11 percent, while private enterprise contributes approximately 70 percent, with government spending making up the remainder.

Transnet National Port Authority SOE 

Transnet National Port Authority (TNPA) is a division of Transnet, a state-owned company that manages the country’s port, rail, and pipeline networks. It (TNPA) reportedly charges amongst the highest shipping fees in the world. High tariffs on containers subsidize bulk shipments of coal and iron ore, thereby favoring the export of raw materials over finished ones. According to the South African Ports Regulator, raw materials exporters paid as much as one quarter less than exporters of finished products. Transnet is in its first phase of its Market Driven Strategy (MDS), a R366 billion ($25 billion) investment program to modernize its port and rail infrastructure. 

The benefits of this strategy include job creation, skills development, localization, empowerment and transformation with the expectation to create and sustain 584,000 jobs. It will also focus on shifting from road to rail to reduce cost of doing business and also reduce carbon emissions. The majority of investment would therefore be in general freight and freight rail. In 2016, Transnet announced plans to invest R124 billion ($9.2 billion) in the next four years in rail, ports, and pipeline infrastructure. This began with Transnet’s selection of four OEMs to manufacture 1,064 locomotives. The four OEMs were China South Rail (CSR), Zhuzhou Electric Locomotive, Bombardier Transportation (Canada) and General Electric South Africa Technologies. CSR and Zhuzhou Electric Locomotive would supply 359 electric locomotives valued at R14.6 billion (USD 839 million) excluding hedging and escalation costs. Bombardier Transportation would supply 233 electric locomotives at R7.1 billion (USD 408 million). General Electric South Africa would supply 232 diesel locomotives at R7.8 billion (USD 448 million). 

This CAPEX spend was to be 2/3 funded by operating profits with the remainder from the international capital markets. This was the first phase of the Market Demand Strategy. It was meant to last 4-5 years. However, the second phase (due to start in 2020) has been delayed in large part because of the State Capture inquiry of which Transnet has been severely impacted. This is evidenced by the fact that the awarding of the tender to the four OEMS has come under investigation following an irregular tender process, and the Transnet executives who oversaw the process are currently facing fraud and corruption charges.

The second phase of this strategy will see Transnet introduce initiatives to increase private sector involvement, by encouraging private sector provision of rolling stock and leasing arrangements. It will also seek to implement efficiency improvements and productivity measures to support volume increases. The overarching goal is to stabilize and improve Transnet’s performance by fostering competition, attracting investment, and enhancing efficiency to significantly increase the volume of goods moved by rail and through ports. 

Telecommunications 

While government efforts to liberalize the telecommunications sector and encourage competition have improved, regulatory uncertainty and fragmented competition have hampered growth. Key challenges include strengthening the capacity of the sector regulator, the Independent Communications Authority of South Africa (ICASA). The South African government completed its high-demand spectrum auction in March 2022, with the goal of transforming the communication sector, allowing more competitors in the business, lowering communication prices, and expanding rural connection. The government aimed to complete the transition from analog to digital TV by March 31, 2023; however, this deadline was not met. A court order subsequently put the March 31, 2025, switch-off date on hold. As a result, South Africa’s digital migration has been delayed once again, with no clear timeline for completion.

South Africa’s Minister of Communications and Digital Technologies was recently charged with determining and publishing the analogue switch-off date for South Africa in the Government Gazette. South Africa failed to meet the 2015 International telecommunications Union (ITU) deadline for switching off analogue TV signals as part of the digital migration. In August 2024, The Independent Communications Authority of South Africa, through the Independent Communication Authority of South Africa, gave notice of its intention to conduct an Inquiry into. The licensing framework for Satellite Services. The initiative aims to enhance satellite service regulation in South Africa, aligning with international best practices while ensuring broader connectivity and competition.

The South African Government plans to bridge the digital divide with SA Connect, a project to deliver widespread broadband access to 100 percent of the population by 2030. SA Connect is overseen by the Department of Communications and Digital Technology in collaboration with the State IT Agency (SITA) that manages procurements. South Africa Connect and SA Broadband Infraco (an SOE) have plans to increase the connectivity speed from 10Mbps to 100 Mbps (depending on available budget). This connectivity project aims to close connectivity gaps and meet the technology goals of the National Development Plan to have an inclusive digital society. 

In May 2014, the government of South Africa signed the Special Economic Zones (SEZ) Act into law aimed at supporting balanced industrial development, manufacturing capabilities, and the development of more competitive free port-centric regional economies.

Prior to the SEZ Act, the Department of Trade, Industry and Competition (DTIC) initiated the Industrial Development Zone (IDZ) program under the Manufacturing Development Act of 2000. The focus of the current SEZ program is to attract foreign direct investment, increase the exportation of value-added manufactured products, and to create linkages between domestic- and zone-based industries. Bulk ore handling, chemicals, automotive manufacture, and related industries benefit from this initiative. Seven SEZs (Coega, East London, Richards Bay, Dube/King Shaka IA (KSIA), OR Tambo IA, Maluti Pafung/Harrismith, and Saldanha Bay) are operational with plans to create seven more. The largest SEZ, Coega, has attracted investments worth approximately R30 billion ($2.27 billion).  

Advocacy 

U.S. companies bidding on Government tenders may also qualify for U.S. Government advocacy. A unit of the U.S. Commerce Department’s International Trade Administration, the Advocacy Center coordinates U.S. Government interagency advocacy efforts on behalf of U.S. exporters bidding on public sector contracts with international governments and government agencies. The Advocacy Center works closely with our network of the U.S. Commercial Service worldwide and inter-agency partners to ensure that exporters of U.S. products and services have the best possible chance of winning government contracts. Advocacy assistance can take many forms but often involves the U.S. Embassy or other U.S. Government agencies expressing support for the U.S. bidders directly to the foreign government. Consult Advocacy Center for Foreign Government Contracts and for additional information.

Financing of Projects

MDBs Many governments finance public works projects through borrowing from the Multilateral Development Banks (MDB). A helpful guide for working with the MDBs is the Guide to Doing Business with the Multilateral Development Banks. The Commercial Service maintains Commercial Liaison Offices in each of the main Multilateral Development Banks, including the European Bank for Reconstruction and Development, the African Development Bank, the Asian Development Bank, and the World Bank. These institutions lend billions of dollars to developing countries on projects aimed at accelerating economic growth and social development by reducing poverty and inequality, improving health and education, and advancing infrastructure development. The U.S. Commercial Service Liaison Offices in these banks help American businesses learn how to get involved in bank-funded projects and advocate on their behalf to win bids. Learn more by contacting the Advocacy Liaison for World Bank or the Advocacy Liaison for African Development Bank.

Resources

World Bank
African Development Bank (AfDB)

For more information contact:
Ashley Ndir, Senior Commercial Liaison to the African Development Bank
Email: Ashley.Ndir@trade.gov 

U.S. International Development Finance Corporation (DFC)

U.S. International Development Finance Corporation (DFC) is a modern, consolidated agency that brings together the capabilities of OPIC and USAID’s Development Credit Authority, while introducing new and innovative financial products to better bring private capital to the developing world.

Scope DFC partners with the private sector to finance solutions to the most critical challenges facing the developing world today. DFC invests across sectors including energy, healthcare, critical infrastructure, and technology. DFC also provides financing for small businesses and women entrepreneurs to create jobs in emerging markets. DFC investments adhere to high standards and respect the environment, human rights, and worker rights.

For more information contact: 
Vibhuti Jain, DFC Regional Director for Africa
Email: vibhuti.jain@dfc.gov  
website: www.dfc.gov 

U.S. Trade and Development Agency (USTDA)

The U.S. Trade and Development Agency promotes economic development in developing countries by funding feasibility studies, consultants, training programs, and other project planning services. USTDA is a source of funding for pre-financial close project preparation. In Africa, USTDA assists U.S. firms by identifying major development projects that offer large export potential and by funding U.S. private sector involvement in project planning. This, in turn, helps position U.S. firms for follow-on activities during the implementation phase of the project.

For more information contact: 
Jillian Foerster 
Regional Manager, Sub-Saharan Africa
U.S. Trade and Development Agency
Email: jfoerster@ustda.gov 
website: https://ustda.gov/   

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