Govt ‘order’ to prioritize local MSME businesses, companies in public procurement

Government has directed that its ministries, departments and agencies must prioritize local Micro, Small and Medium Enterprises (‘MSMEs’) and marginalized groups (the youth, women and people living with disabilities) in public procurement of goods, works, and services in Malawi to economically empower Malawians to do businesses and participate in public procurement.

“I refer to the National Address by His Excellency the President, Dr. Lazarus McCarthy Chakwera, on 28th March 2021, and the directive given on public procurement to support local suppliers in compliance with the Micro, Small and Medium Enterprises Order 2020 (‘MSME Order’) issued by the Public Procurement and Disposal of Public Assets Authority (‘PPDA’).

“The MSME Order prescribes preferences and reservations for Micro, Small and Medium Enterprises (‘MSMEs’) and marginalized groups (the youth, women and people living with disabilities) involved in public procurement of goods, works, and services in Malawi.

“The focus, therefore, is on Malawian local suppliers and companies, MSMEs and locally made products,” says a government circular dated 17th August, 2021 signed by the Secretary Zanga-Zanga Chikhosi, addressed to all Principal Secretaries, Heads of Departments, Heads of Independent and Constitutional bodies, Heads of parastatals, all District Commissioners, and Chief Executives of City Councils, and copied to the Director General, Public Procurement and Disposal of Assets (PPDA), Principal Secretary for Government Contracting Unit, and the Auditor General.

Chikhosi “directs” all Controlling Officers to prioritize procurement of locally made goods, services and works in the spirit of the Buy Malawi Strategy. He says this includes all goods, services and works covered by the MSME Order such as furniture, and uniforms, although they do not appear on the list of eligible goods in the MSME Order.

“For works procurements (including civil and building construction), which fall within the International Competitive Bidding category, any foreign construction firm, which incorporates a local firm in a joint venture shall have competitive advantage over those that do not have similar arrangements.

“Similarly, where foreign firms have competitive advantage and have won a tender or a contract, kindly, ensure that there are sub-contracting arrangements between the foreign firms and local companies. All these should be in line with joint venture and sub-contracting regulations under the National Construction Industry (NCI) Act,” reads the circular.

In order to achieve full participation in public procurement by local firms, and promote procurement of locally made products, the government will, through the Ministry of Industry ensure the formation of cooperatives where necessary and appropriate.

The government will provide technical support to local suppliers through the Ministry of Trade and all relevant government agencies; encourage MSMEs to register with Malawi Revenue Authority (MRA), Ministry of Trade (per the MSME Order), the PPDA, the Malawi Investment and Trade Centre (MITC); and all relevant agencies.

The government will also ensure provision of skills development by the Technical, Entrepreneurial and Vocational Education and Training Authority (‘TEVET’), Small and Medium Enterprises Development Institute (‘SMEDI’) and the National Construction Industry Council (‘NCIC’) and other agencies, and encouraging local suppliers to attend these trainings; and engaging the Malawi Bureau of Standards (MBS) for both mandatory and voluntary standards.

“Suppliers should ensure that their products are in compliance with relevant Malawi Standards. Procuring entities should ensure that the goods and services that they are procuring meet requirements of relevant Malawi standards.

The circular says PPDA, the Government Contracting Unit (‘GCU’) and the National Audit Office (‘NAO’) will also ensure that order is adhered to as they discharge their respective mandates in procurement.

“I expect your absolute commitment and indulgence in the implementation of this circular to buy locally made products and also procure from Malawian companies in order to empower Malawian businesses falling under the MSME Order and those that can benefit from the NCI Act and its regulations. You will be expected to produce monthly reports on all procurements made in compliance of this circular.

“The PPDA and GCU will also have to submit monthly progress reports. Failure to implement the MSME Order, the regulations for joint ventures and sub-contracting under the NCI Act, and the instructions of this Circular will attract punitive sanctions against any offending institutions and public officers concerned. In this regard, you are all requested to obtain and thoroughly read the NCI Act including the regulations; and the MSME Order, and familiarize yourselves with them.

“I will be grateful if the contents of this Circular are made available to all members of staff involved in procurement and all Procurement and Disposal Units (PDUs) in your respective institutions,” concludes the circular.

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