Solving the Local Procurement Challenge

Local procurement and sustainable supply chains

"SOLVING THE LOCAL PROCUREMENT CHALLENGE"

Procuring goods and services from local suppliers is nothing new for mining companies. Seeking to cut operational costs and assist communities with their economic development should be straightforward. Local procurement is direct economic activity transforming the local economy by creating robust and sustainable businesses. Except, for many mining companies, it’s anything but straightforward, with multiple challenges being faced.?

Common Challenges:

• Low community capacity
• Lack of labour skills/networks
• Goods/Supply non-existent??
• Mining companies forced to build local business capacity from the ground up
• Vague regulation language surrounding ‘local talent’ resulting in a guessing game of who & what is local

“In sourcing and procurement, knowledge of quality control and assurance and of the IFC Framework is more common among suppliers and contractors with a higher level of development and capacity. Suppliers (i.e., local small businesses), in less developed areas and with less access to management and technical knowledge, will rarely meet the above criteria”. (P3plus toolkit)

However, with outstanding procurement practices, there is the unmatched opportunity for mining companies to have significant return on their investment with the development of a prosperous community, during and importantly, long after the closure of a mine.?

Even in the face of ambiguous regulations, requirements and legislation, mining companies have been pursuing difficult local procurement as part of their corporate responsibility standards. In many cases companies have gone above and beyond legal requirements in difficult settings, especially with small local enterprises. SEF has the skills and experience to equip mining companies to see sustainable, data-driven results for all.

SOLVING CHALLENGES?

Helping to start businesses through procurement opportunities is a tempting framework but stability and sustainability must be incorporated from the genesis. The core strategy should also include preparing enterprises for running post mine closure creating a truly sustainable program.?

Tackling a lack of skills, literacy and experience is paramount for all involved. A lack of these elements can be obstacles to a community taking advantage of the positive opportunities that come with mining companies operating in their region.?

Many companies have seen Joint Venture relationships with small companies/entrepreneurs as an answer. However these relationships can easily result in unbalanced donor-recipient processes, with communities depending on mining companies, preventing the growth of responsibility and capacity for local businesses.?

?CONCLUSION AND RECOMMENDATIONS

SEF has led many mining companies through building up high quality, sustainable local enterprises for procurement success. From experience SEF encourages Capacity Building and Technology Transfer as an ideal setting for establishing trusting relationships with local entrepreneurs.? SEF Entrepreneurial Development Participation Plan is a value‐adding activity requiring collaborative efforts involving multiple functions, internal mining practices, community stakeholders, entrepreneurs, businesses, and institutions. This activity goes above and beyond requiring a procurement professional to simply choose from the existing supplier base.

The goal must be the improvement of the suppliers’ capacity to meet company needs required for mining, during and after active operation. SEF’s ED Participation Plan Program does just that. Putting in place a set program that gives local entrepreneurs the experience and expertise allowing them to provide better products or services to mining companies, as well as assisting enterprises pursuing business with other companies, helping them to diversify.

SEF’s program is about the win-win. By assisting the entrepreneurs to become strong and sustainable in the procurement practices, it makes it possible for Procurement Managers to achieve not only their own supply objectives but potentially transforming the relationship with the entire community.

SEF has found third parties can significantly help with trust building, communication and expertise. SEF’s Entrepreneurial Development program for community capacity building, recognizes that individuals have passionate business ideas but lack the knowledge to make their ideas ‘take off’.?

With SEF, knowledge can be found and ED Facilitators become valuable assets in the pursuit of skill development of communication and management training. These acquired tools result in strong procurement opportunities that are sustainable.

Over 300 communities have been introduced to this methodology and thrived. The survival rate among these newly created businesses supported by the ED program have sustainability rates above 80% after 5 years.?

While having a business fail is damaging to all parties, the economy, as well as disruptive to the mining company, getting it right has the widespread potential to transform the entire local community into a long-term partner in sustained local development. The positive consequences mean businesses can support mining activities and direct job creation for the industry but also generate economic activity in the ‘non mining sector’.??

Partner with SEF today to realize sustainable, data-driven results for your company and the local community.