Partnering for Successful Implementation of the SA Local Accord

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1 Partnering for Successful Implementation of the SA Local Accord SmartProcurementWorld Conference 11 September 2013 Kamogelo Mampane COO (SOEPF) Presented by: Gary Joseph CEO (SASDC)

2 About SOEPF Element What When was it Formed Members Authority Detail SOEPF was formed in June 2004 A voluntary forum of Procurement/Supply Chain Management heads of the State Owned Enterprises Share best practices in Supply Chain Management within the SOEs Professionalise the industry Founder Members :Denel, Telkom, PetroSA, SAPO, Eskom Additional Members:Transnet, SAA, SITA, SARS, IDC, CIDB, National Treasury, Metrorail, CSIR, NERSA, NECSA, Rand Water, USA (Universal Service Agency), Land Bank, NEFCORP, SABC, South African Rail Commuter Corporation (SARCC) City Power; Umgeni, Armscor & NEF, ATNS, IDT, SASDA, The Dti, SEDA, Gautrain, DBSA, SAFCOL, ACSA, SA Airlink, Gauteng Legislature. Guest Status; SMME Forum; SMME desk under BUSA; Consensus Decision-making Each entity reserves the right to approve or reject any proposal made by the forum or approve a proposal on such terms and conditions as it deems fit SASDA provides administrative support Located at the Dti campus Agree on Frameworks and Principles 2

3 About SASDC - Founded in January Corporate-led and -driven member organization, with Members commitment to: Adopting supplier diversity as a strategic business objective Setting targets & proactively open up procurement opportunities for black suppliers Investing in black suppliers for competitiveness and better positioned to do business Leveraging resources, lessons and experiences Members are:

4 Procurement Trends Average BEE spend reported by Top 50 is 44% of discretionary procurement at an average value of R1.83 billion Only 9% for small business (QSE & EME) 6% for Black-Owned and 1% for Black Women Owned. Shows a bias towards larger business in procurement practices. Also points to a lack of access to small black business Similarly, global procurement strategies reflect a similar bias 2.8 M SMME s contribute between 52% - 57% of GDP and about 61% of employment 5 out 0f 7 small business started in SA fail in the first year

5 Context of Local Procurement Accord New Growth Path Main Challenge: Mass Joblessness, poverty & inequality Vision: Create 5 million more jobs by 2020 Five Accords Basic Education National Skills Local Procurement Green Economy Youth Employment Key Actions: - Identify employment creation opportunities (job drivers) - Use macro and micro policies to create an environment & support labour absorbing activities - Have state actions and policies that are steady, consistent and focussed - Enable social dialogue - Re-industrialize - Deepen domestic & regional markets, and widen market for SA goods and services through exports

6 Local Procurement Accord 3 of the New Growth Path 5 Million Jobs, 75% Local Content I urge business to find ways to also support localisation which aims to support and rebuild our manufacturing sectors. (President Jacob Zuma, 2011) The Local Procurement Accord (LPA) aims to mobilise business, unions, communities & government in a partnership to promote local procurement as a platform for creating five million new jobs by The NGP and IPAP identified the need to leverage public procurement, in combination with other policy instruments, to support local manufacturing, especially in value added, tradable and labour intensive industries. Several job drivers and micro economic programmes in the NGP cite procurement as an important lever e.g. infrastructure etc. The LPA was signed on 31 October 2011 in consultation with all social partners where a set of commitments were made The New Growth Path sets out a vision of five million new jobs by It identifies twin goals: increasing the economy s labour-absorbing capacity and decreasing its carbon-emission intensity. These goals are central to our development as a country. (Ebrahim Patel, 2011)

7 Focal Areas Agriculture Mining Manufacturing Tourism Services the Green Economy Infrastructure development: Energy, Transport, Communication & Housing. 7

8 What is Local Procurement? Local procurement refers to the purchase of goods and services from local businesses Typically, this occurs in emerging markets and in developed markets where local communities have expectations about participating in new opportunities. Also known as business linkages, local supplier development, local content or local sourcing, local procurement is increasingly favored as a strategic business tool by international companies in the extractive industries. There are three main reasons: To mitigate risk to company operations In response to government regulations or investment agreements stipulating local content levels To provide benefits to the local community by creating sustainable business opportunities with local enterprises

9 What can Business do? Implement Local Procurement Best Practice Framework Keys for Success Critical Elements Potential benefits Driven by business needs Has a business case that everyone in the company understands Has the support of senior management Has a dedicated team Start early. Building the capacity of local businesses takes time the earlier the program starts, the greater the opportunities. 1. DEVELOP A LOCAL PROCUREMENT STRATEGY AND EXECUTION PLAN 2. BUILD INTERNAL CAPACITY TO DELIVER ON THE LOCAL PROCUREMENT STRATEGY AND PLAN 3. IDENTIFY OPPORTUNITIES 4. ESTABLISH AND MANAGE THE CONTRACTS 5. GROW LOCAL SME CAPACITY 6. MONITOR THE IMPACT AND EVALUATE THE STRATEGY Reduced costs/increased supply chain efficiencies Reduced risk Access to resource/social license Compliance Increased revenue Contributionto local job creation

10 Can Government Procurement enable LP? Constitution PFMA PPPF Act and Preferential Procurement Regulations B-BBEE Act (ICT Charter) Other prescripts Standard for Uniformity Legislative Framework National Treasury guidelines Uniform Procurement directives to three spheres of government What about? Local Accords IPAP NGP CSDP NIPP Supply Chain Management Guidelines Standard Bidding Documents Practice Notes Supply Chain Professional 10 Body and Skills Development

11 Yes Positively Leverage Government Policy Government s 5 Pillars of Procurement 1. Value for Money 2. Open and Effective Competition 3. Ethics and Fair Dealing 4. Accountability and Reporting 5. Equity The government has implemented the Preferential Procurement Policy Framework Act as the foundation on which all procurement activities are to be based. Its aim is to: a) advance the development of SMMEs and HDIs; b) promote women and physically handicapped people; c) create new jobs; d)promote local enterprises in specific provinces, in a particular region, in a specific local authority, or in rural areas; and e) support the local product. No public procurement system should be operated if it is not founded on this pillar.

12 What can WE do? GOVERNMENT SERVICE MANDATE Governments can signal private enterprise to intensify commitment to development by compensating for risks or by creating attractive business opportunities. Demand RETURN ON INVESTMENT Public & Private Sector partnering! Public and private enterprises have separate comparative advantages and roles to play in smoothing the way for development. There is, however, a potential for synergy between them that can be triggered by cooperation Profit motivation need not exclude business activity from contributing to positive development outcomes if it is pursued within a carefully designed system supporting development-friendly business activities. Government and private enterprise cooperatively engaged in development efforts. Joint Focus on the Local Procurement & BBBEE Areas: Preferential Procurement Supplier Development Enterprise Development Skills Transfer Socio-economic upliftment HOW CAN THIS BE DONE EFFECTIVELY?? PRIVATE SECTOR PROFIT MOTIVE Private sector responds to these inducements by restructuring business driven projects to complement public ones without compromising its objective. Supply RETURN ON INVESTMENT

13 Procurement Strategy to Manage Local Procurement WE can Follow a Basic Three Step process: 1. Prioritise B-BBEE & Local Procurement ( place ) 2. P&SCM as business imperative 3. Classify forward demand in terms of local supplier capabilities, capacity and competitiveness 4. Select right mix of procurement-driven solutions: packaging of work extent of client control contract terms contractor selection process

14 A First Step in the Right Direction. Partnership between SOEPF & SASDC Formalized through a MoU MoUprovides the framework for communicating, collaborating and complementing each other s efforts on sustainable supplier diversity development issues by: Exploring synergies for supporting a procurement leadership role and response, Strengthening the capacity of the procurement discipline to achieve the goals of sustainable supplier diversity development, and Fostering constructive relationships with government and other stakeholders in the achievement of these goals.

15 What can YOU do? Build you own capability and skill set Network and collaborate more effectively and productively with your peers Plan better and proactively communicate these Ask more questions, the right questions and pose these at the right time Build relationships with your suppliers Share information that better supports the cause Develop for SA and not Private vspublic Be the change you need to be!!

16 Questions??