Pro­cure­ment helps com­mu­nity growth

Finweek English Edition - - Finweek -

LIKE MOST SOUTH AFRICAN min­ing com­pa­nies, De Beers is mak­ing a con­certed ef­fort to buy the goods and ser­vices they need for their mines from com­pa­nies owned or op­er­ated by his­tor­i­cally dis­ad­van­taged South Africans – and that pro­gramme is al­ready show­ing sig­nif­i­cant re­sults.

De Beers Con­sol­i­dated Mines (DBCM) has al­ready ex­ceeded its tar­get of sourc­ing from his­tor­i­cally dis­ad­van­taged sup­pli­ers by 7% to more that 50% and is now fo­cus­ing on in­creas­ing the goods and ser­vices it buys from com­pa­nies near its op­er­a­tions, busi­ness worth around R2,4bn/year.

Gary Joseph, a sup­ply chain man­ager at DBCM, says it’s had what’s called a “pre­ferred pro­cure­ment drive” in place for a num­ber of years to pro­mote the buy­ing of goods from com­pa­nies con­trolled and op­er­ated by his­tor­i­cally dis­ad­van­taged South Africans. That’s all part of ef­forts in many ar­eas of so­ci­ety to try and trans­form own­er­ship in the econ­omy to re­flect SA’s de­mo­graph­ics.

“Cur­rently, we’ve pro­cured 51,6% by value of our goods and ser­vices from black em­pow­ered, black-owned en­ter­prises and we’re tar­get­ing a fig­ure of R1,5bn this year,” says Joseph. Over the years Joseph and his col­leagues at the mines have em­ployed a num­ber of tac­tics in or­der to achieve that.

“We’ve driven that process through di­rect en­gage­ment with sup­pli­ers about trans­for­ma­tion and have en­cour­aged them through dif­fer­ent in­cen­tives to bring black South Africans into their busi­nesses and man­age­ment struc­tures,” says Joseph.

In some in­stances – due to some or­gan­i­sa­tions’ com­plex struc­tures – DBCM has en­cour­aged com­pa­nies to set up spe­cial com­pa­nies and units that will serve DBCM’s mines specif­i­cally and em­ploy lo­cal black en­trepreneurs in man­age­ment.

DBCM is now work­ing harder to en­cour­age lo­cal pro­cure­ment with larger com­pa­nies be­ing asked to es­tab­lish units around its mines. “In­stead of trans­act­ing di­rectly with the Jo­han­nes­burg of­fice, we’re en­cour­ag­ing the trans­ac­tion and ser­vic­ing base more with lo­cal agents so they have bet­ter ca­pac­ity to ser­vice not only our mines but the broader pub­lic,” says Joseph.

DBCM has been work­ing with lo­cal de­vel­op­ment or­gan­i­sa­tions near some of its mines to sup­port lo­cal en­ter­prises as they work to be­come com­pet­i­tive sup­pli­ers in ar­eas that are re­mote and have lim­ited in­fra­struc­ture. By in­creas­ing the size of the mar­ket such com­pa­nies can of­fer their goods and ser­vices at more com­pet­i­tive prices.

“We want to iden­tify the role of de­vel­op­ment or­gan­i­sa­tions to help sup­port those com­pa­nies. In Lim­popo there’s the Lim­popo De­vel­op­ment Cor­po­ra­tion and we’re en­gag­ing small to medium sized en­ter­prises,” says Joseph.

DBCM has fi­nalised an En­ter­prise Link­ages Ini­tia­tive co-op­er­a­tion agree­ment with SA’s Na­tional Busi­ness Ini­tia­tive; it will fo­cus on SMEs and black sup­plier pro­grammes.

De Beers has also es­tab­lished its Mat­lafalang Busi­ness De­vel­op­ment Fund, a spe­cial pur­pose ve­hi­cle to pro­mote the de­vel­op­ment of SMEs. “We’re looking at es­tab­lish­ing de­vel­op­ment hubs near our Vene­tia mine west of Musina and in Kim­ber­ley and one on the Na­maqua­land coast,” says Joseph.

KZN Oils is an ex­am­ple of a busi­ness that’s grown as a re­sult of be­com­ing a DBCM sup­plier. It started in the Nineties sup­ply­ing fuel and lu­bri­cants to Gov­ern­ment and pub­lic cor­po­ra­tions, such as Trans­net. It was suc­cess­ful in winning a 10-year con­tract to sup­ply all fuel re­quire­ments at DBCM’s new Voor­spoed mine. DBCM is KZN Oils’ first pri­vate sec­tor client.

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