As a major supplier of goods and services to the South African government, Siemens is bound as a signatory to the National Industrial Participation Programme (NIPP). The NIPP is a Department of Trade and Industry (DTI) initiative launched in September 1996 that aims to fast-track investment, exports and the technology development of South African industry by leveraging government procurement to achieve these aims.
Aiming to generate new or additional business activities that contribute to sustainable economic growth and development in South Africa, the NIPP is an offset programme. The way this works is that 30% of the total value of the imported component of a contract awarded by government to a supplier must be offset within a seven-year period by an equivalent amount of NIPP credits. These are based on criteria that include investment, export opportunities, job creation, increased local sales, SMME and BEE promotion and technology transfer.
All government and parastatal purchases or contracts with an imported content equal to or exceeding the equivalent of US $10-million are subject to an NIPP obligation. An Industrial Participation business concept or proposal must be submitted by the supplier before the award of a tender or contract.
When Siemens, for example, incurs an NIPP obligation, the company is required to participate in the local economy by helping to meet the government's objectives of sustainable economic growth, foreign investment, exports of South African value-added goods, job creation, SMME support, skills development, technology transfer, and advancing the cause of black economic empowerment.
Lucky Masilela, responsible for managing the NIPP at Siemens Southern Africa, says since the company became a signatory to the NIPP on 14 November 1997, Siemens has performed extremely well in terms of its obligations, and is currently almost three years ahead of its seven-year obligations.
"As an organisation, we strive to proactively generate credits in lieu of personal obligations, and focus on offset projects that are closer to our core business as well as projects in the technology sector," he says. "As we focus on the core competencies, we are continuously identifying second technology solutions to ensure growth in the SMME sector, an area that will generate additional credits."
Masilela says that considering the government's intention to spend R375-billion on infrastructure projects in the next three years, any business secured by Siemens will attract an NIPP obligation that needs to be offset.
"The Telkom Transmission and Switching contracts as well as the recent Eskom Open Cycle Gas Turbines are cases in point of direct business that can be attributed to the NIPP," he says. "In light of this, we are constantly identifying projects to offset future possible obligations as an NIPP obligation is treated as a business risk and therefore requires a plan to counter this, the point/credit generation plan."
Masilela says that while Siemens currently earns around US $40-million in NIPP credits a year, this figure should ideally be closer to US $100-million. He believes this figure is possible provided the NIPP process is accurately reported within the Siemens organisation through the company's IPP committee that monitors and identifies new business opportunities.
To qualify for credits, all NIPP proposals submitted to the DTI must reflect incremental or new business through investment in a new facility or the expansion of an existing one; export proposals must be for new products or new markets; the project must be economically and operationally sustainable, even after the seven-year discharge period; and the proposals must result directly from the purchase contract.
"Projects worth mentioning that have attracted significant NIPP credits include software development, the MDF91/20 connector blocks, as well as the SAS automotive contract for BMW in Rosslyn," he concludes.
For more information contact Keshin Govender, Siemens Southern Africa, +27 (0)11 652 2412, [email protected], www.siemens.co.za
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