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PUBLIC PROCUREMENT: A DRIVE FOR INNOVATIVE MANUFACTURING

By Kawana Tatenda Banda and Kasonde Chituta

Public procurement accounts for a large proportion of overall demand for goods and services.

According to a 2009 study done by Uyarra and Flanagan in a paper titled understanding the innovation impacts of public procurement, they argued that public procurement is an attractive and feasible instrument for furthering the goals of innovation policy. Before further discussions, public procurement refers to the acquisition of goods and services by government or public sector organisations.

In line with the Bank of Zambia guidelines, public procurement is taken to involve planning, sourcing and acquiring of goods, works, consulting and non-consulting services through the Government’s established system. Public Procurement in Zambia is governed by the Public Procurement Act No. 8 of 2020 and is undertaken by the Zambia Public Procurement Authority (ZPPA).

As mentioned by Guerzoni in a study titled the impact of market size and users’ sophistication on innovation published in 2007, public procurement can influence innovation directly or indirectly.

The direct impact on innovation is through government creating demand for a good or service that may not be already on the market. The government may be willing to pay a premium cost or bear some efficiency losses if it wants to encourage the production and provision of certain goods and services especially those that meet societal needs 

On the other hand, public procurement can have an effect on innovation indirectly by influencing the size and structure of the market by setting standards and by increasing or reducing competition. Government being the biggest end user has the power to enlarge the market for certain goods and services thus providing an incentive to invest in innovation.

Public procurement can also influence innovation indirectly by changing the structure of competition both in the short and long term. In the short-term public procurement can affect competition on particular tenders of much interest by government.

Therefore, increased competition should arguably result in lower prices and greater quality of goods and services hence innovation. On the other hand, in the long term, effects can also translate into changes in the incentives provided to suppliers to invest and innovate through terms of reference on certain tenders.

The Zambian Government has earmarked the manufacturing sector as a key sector for economic growth and development, therefore the need for innovation in the sector but also support from the government in procurement of local goods remains cardinal. Participation of local manufacturers in the public procurement process will consequently encourage competition which will ultimately result in innovation in order to produce goods of high quality but affordable goods which meet the Governments specifications.

The Public Procurement Act No. 8 of 2020 came into effect on 16th April 2021. Part 2, Section 91 of the Public Procurement Act No. 8 of 2020 holds a special reservation scheme for goods manufactured in Zambia or a particular region or goods manufactured by citizens or persons from a particular region in Zambia.

Despite the reservation scheme covering the manufacturing sector, manufacturers are eager to see how the implementation of the new Public Procurement Act with regard to Part 2, Section 91 of the Act.

The Electronic Government Procurement (E-GP) system was launched in 2016 and has been a game changer in public procurement in Zambia. The E-GP system has also been a leap forward to promote a paperless economy and paperless trade. Despite this great tool to simplify the public procurement process, lack of know-how on submitting bids and navigating the system have posed a change to manufacturers.

In addressing the mentioned issues and ensuring that public procurement is efficiently used as an instrument for innovation, Government should allocate a larger proportion of its procurement to local manufacturers. Local procurement will encourage more manufacturers to add value to their products and be innovative to produce the best quality possible.

In addition, Government can roll out tenders of goods that may not be already on the existing market to promote local manufacturers to be innovative and delve into new products that meet societal needs.

To help manufacturing bidders successfully use the E-GP system, ZAM will partner with ZPPA to hold periodical trainings on how to successfully navigate the E-GP system and submit bids. These trainings can also be an important dissemination tool for the Public Procurement Act No. 8 2020 which is enacted to promote local sourcing of goods, amongst many reasons.

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