Empowerment through preferential procurement

Key features

  • 2014 Mining Charter targets exceeded on procurement of capital and consumable goods.
  • Shanduka Black Umbrellas business incubation centre opened.
  • 4 billion spent with BEE suppliers.

Context

The procurement clause of the Broad Based Socio-Economic Empowerment Charter for the South African Mining Industry (The Mining Charter) seeks to accelerate the participation of historically disadvantaged South Africans (HDSAs) in the mainstream economy, in line with the Broad Based Black Economic Empowerment Act 53 of 2003 and the Preferential Procurement Policy Framework Act 5 of 2000.The Charter contains targets for expenditure with HDSA-owned* suppliers in the procurement categories of services, consumable goods and capital goods, which mining companies are required to meet by 2014. These targets are 70%, 50% and 40% respectively.

Approach

We pursue our Preferential Procurement Strategy as a Group priority, with a focus on maximising expenditure with locally-based suppliers and using our procurement criteria to support our environmental, safety, health and community programmes.

  • *HDSA-owned suppliers were redefined in the revision to the Mining Charter published in 2010, as suppliers with a minimum of 25% + 1 vote HDSA ownership under a flow-through principle, instead of companies that are owned or controlled by HDSAs as had previously been the case.

The priority we placed on capital procurement this year has delivered excellent results, and we have now already met and exceeded the 2014 requirements in this regard, spending 64%RA of discretionary expenditure on capital goods with BEE suppliers in 2013. We spent 58%RA and 55%RA of discretionary expenditure respectively on consumable goods and services.

We were also pleased to award a contract for the supply of fuel to a new supplier, AfricOil, a 100% black-owned and -managed South African oil company.

Preferential procurement of capital goods (%) [graph]
Preferential procurement of services (%) [graph]
Preferential procurement of consumable goods (%) [graph]
  • *In our 2009 Sustainable Development Report, we reported the percentage of our procurement with HDSA suppliers as an overall percentage (66.6%). We began reporting on the percentages of discretionary expenditure spent on capital goods, consumables and services specifically, from 2010 onwards.
GRI
EC6
Policy, practices, and proportion of spending on locally-based suppliers at significant locations of operation.

Procurement with locally based suppliers

The total value spent on local procurement was R3.2 billion, (42% of total discretionary expenditure). R337 million (5.0% of total discretionary expenditure) of this was spent with suppliers based within the Greater Lonmin Community (GLC) around our Marikana operations. We have 101 suppliers registered as vendors which are from the GLC.

Increasing expenditure with 50% black-owned and 30% black female-owned companies

There is growing direction from the DMR to increase discretionary expenditure with companies with a higher proportion of black ownership and especially black female ownership.

Our focus on controlling the addition of new vendors into our database resulted in 36% of the quantity and 46% of the value of our 2013 discretionary expenditure being with black-owned businesses.

Total spend with new vendors created 2013
Vendors R million
Black-owned 34.4
Non-BEE 40.4
Other 7.5
Total 82.3

This will become a new strategic focus area, and some benchmarking with other mines in the area is currently being planned.