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1 year ago

Opportunity Issue 96

  • Text
  • Investors
  • Trade
  • Africa
  • Investment
  • Developments
  • Business
  • Industry
  • Sustainability
  • Sustainable
  • Supplier
  • Suppliers
  • Prices
  • Solutions
  • Economic
  • African
  • Procurement
  • Mining
Opportunity, endorsed by the South African Chamber of Commerce and Industry (SACCI) is the mouthpiece for business in Southern Africa. The aim of the publication is to inform potential investors both nationally and internationally of the most relevant business news: trade, investment, financial, market-related information for each business sector, as well as to inform of the latest developments in business legislation from both the public and private sector.

MINING PROCUREMENT

MINING PROCUREMENT LOCALISATION: SOUTH AFRICA’S GOLD The government has challenged the mining industry to play a central role in helping the country achieve its socio-economic objectives. Policy and regulatory changes, such as the Mining Charter III, compel industry players to prioritise the national agenda. Forward-thinking mining companies will commit to a transformation with inclusive growth. To preserve the social licence to operate by balancing approval from local communities and the management of legislative pressures, South Africa’s mining companies often invest in social impact initiatives at national and site levels, including charitable giving or risk mitigation programmes. However, many of these programmes yield immaterial organisational spend. Although these initiatives may create social benefits, they generate minimal levels of sustainable socio-economic value. Local supplier bases become saturated, and organisations waste significant amounts of money on programmes that eventually fail. As a result, the industry is missing out on potential advantages. Capturing and sustaining a competitive advantage will require embracing a shared-value agenda: one that benefits not only the mining companies but also the communities in which they operate. What’s needed is a strategy that addresses the national priorities of inclusive growth and transformation. Procurement can be the driver and enabler for this transformation. ASSESS LOCALISATION PRIORITIES In South Africa, where the landscape is changing and social issues are becoming more prevalent, organisations must strategically position themselves to capture benefits from these changes and build a sustainable competitive advantage. For mining companies, this translates into emphasising strategic areas that align with the societal context and developing viable, local supplier bases. 18 | www.opportunityonline.co.za

MINING www.kearney.com Developing economies face a variety of countryspecific challenges in their supply chains, restricting the achievement of procurement objectives. For example, the supply chain has a shortage of local suppliers and insufficient core capabilities and resources. These characteristics have instigated change in the operating environment, including new legal requirements, as outlined in South Africa’s Mining Charter III, as well as social requirements to operate within a community. The procurement function can react to these changes and ensure long-term operational efficiency by shifting the fundamental approach to supplier engagement and management. By developing an understanding of local issues and collaborating to develop mechanisms that address these issues, procurement teams can develop practices that facilitate the creation of shared value. In an emerging economy, procurement plays an instrumental role in not only developing existing suppliers but also establishing new suppliers. To generate shared value, the procurement team must be committed to resolving core social issues tailored to deliver a substantial, sustainable impact. Context-specific initiatives as well as a localised approach are essential to delivering shared value and achieving procurement objectives alongside sustainable social development in the community. When assessing the procurement strategy for localisation, four areas should be considered (see Consider four factors when localising procurement, below). Done right, localisation creates numerous benefits for the organisation, including shorter lead times, higher-quality products and services, lower costs, more efficient procurement, and even attracting investors and improving related industries. Opportunity identification. Creating an effective strategy begins by identifying the potential opportunities across the value chain – looking beyond the conventional low-cost, lowcomplexity categories to capture the full economic impact. A good starting point is to review the spend baselines, evaluate the spend patterns, and assess the suitability of categories for conversion to the local supply. This should be matched with an analysis of the local supply potential to identify opportunities that build up supplier capabilities in strategic categories. Opportunity prioritisation. Given the complexity of converting to local suppliers, a focused approach to implementation is needed to map the _____________ ________ _ _ In an emerging economy, procurement plays an instrumental role in not only developing existing suppliers but also establishing new suppliers ___ __ ___ __ _ _ _ _ _ _ _____ opportunities against a prioritisation matrix. This process helps identify which categories to prioritise in the short term and which need more time to localise, allowing organisations to consider their immediate options along with the long-term, strategic plays. Once the priorities are agreed upon, the next step is to tailor to the unique needs of each targeted locality. Consider four factors when localising procurement Localisation elements Employment equity Supplier development Community development Skills development ___ __ Delivering value through procurement processes requires three elements: team excellence, category Ensure that hiring policies and programs encourage fair representation of local minorities groups excellence and supplier management excellence. Invest in building a local competitive supplier base with initiatives that seek to improve supplier capabilities and capacity. Support the supplier base through the company and its tier 1 suppliers by buying locally. Launch initiatives to bridge the service delivery gaps within the local community and improve socioeconomic conditions (for example, invest in basic infrastructure, such as roads, water and sanitation) Invest in initiatives that seek to improve the skills of the workforce to improve productivity and competitiveness, including investing in the upskilling of community residents to make them more employable www.opportunityonline.co.za | 19

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