Insight
Mining Charter III: huge impact on service providers
Attention should be paid to the significant impact Mining Charter III will have on service providers, writes Chimae Goncalves, director of Supply Chain Partner.
Despite mining rights holders only reporting compliance of 63 % with the procurement requirements under the 2010 Charter in 2016, the latest amendments under the 2017 Charter increase the procurement compliance target by 10 % – from 70 % to 80 % – with mining companies obliged to increase their procurement from black-owned companies from the date that the 2017 Charter takes effect.
Mining rights holders must now ensure that at least 80 % of their total spend on services is sourced from South African companies, of which a minimum of 65 % of total spend must be sourced from black‐owned companies with a minimum of 50 % + 1 vote being held by black people, 10 % from black‐owned companies with a minimum of 50 % + 1 vote of its share capital owned and controlled by black women, and 5 % from black-owned companies with a minimum of 50 % + 1 vote of its share capital held by youth.
It is unclear whether there are sufficient service providers in the market who would satisfy the detailed procurement requirements. The level of detail on suppliers is not always available in the system to indicate ownership percentages of black women and youth. This makes supplier tracking and enterprise development extremely important.
Procurement departments often lack resources, technology and leadership, yet they are expected to deliver such a vital function that is central to everything. When it comes to mining, getting ore out of the ground gets all the budget. Production is the focus. However, saving costs is also a key way to make money. There is a need to look at back‐office efficiencies and systems and to streamline processes across the entire system of suppliers, buyers and users to harness the value in procurement.”
South Africa is behind in the procurement space. Cloud procurement is still foreign to most South African companies. Collaborating with suppliers is unheard of as they are not treated like valuable partners. This needs to change for companies in the sector to comply. Supply Chain Partner focuses on introducing efficiency within the supply chain side of local companies, with special expertise in implementing the SAP Ariba Suite, including the strategy development, change management and supplier onboarding that goes with the adoption of a new tool. SAP Ariba is driving rapid innovations to simplify procurement, fulfilment, and financial supply chain management processes. Mines can have up to 3 000 suppliers to manage with complex risks in the commodities that these suppliers provide – consider explosives versus stationery. The start is having the right information – and maintaining it.
According to Goncalves, giving buyers and suppliers cloud-based tools to manage everything from source to settlement – all in one place – makes a huge difference to the frequently manual processes and multiple excel sheets prevalent in procurement departments that make tracking, reporting and governance challenging.
About the author Chimae Goncalves is a director of Supply Chain Partner, a supply chain solutions business with extensive mining experience.
[ 40 ] MINING MIRROR JANUARY 2018