The 2018 Mining Charter has increased the black-ownership target for suppliers and service providers to 50% +1%, compared with the 26% of the past few years, says supply chain and enterprise and supplier development (ESD) advisory company TK Global Experts CEO Kamogelo Mampane.
Subsequently, many mining operation licence holders find themselves noncompliant with the new requirements, he notes. Therefore, South African mines have to drastically change their operating models and ensure that they align with global and national transformation strategies, driven at management level, he adds.
Mampane says South African mining operations should review their transformation journey by refocusing on procurement, and ESD. “New key performance indicators must be developed to ensure that short-, medium- and long-term strategies objectives are achieved.”
He mentions that the following strategies will be key in assisting local mines to achieve Mining Charter 2018 targets.
Firstly, suppliers and service providers must be seen as transformation partners in assisting mining operations to achieve these targets. “The focus should not be on compliance but on doing what is right, going beyond compliance.”
Secondly, setting aside ringfencing strategies is important in ensuring new entrants into the mining industry. In the past, contracts that were set aside for black-owned companies in mining host communities were noncore, such as cleaning, painting and gardening.
The challenge for mines is to ringfence core mining products and services that promote meaningful economic participation in the mines’ supply chain by their host communities. Inclusive participation in key mining contracts will have a multiplier effect in the economy of host communities and to ensure that there is increased competition, competitive pricing and increased efficiencies are needed.
Shifting expenditure from noncompliant suppliers to black-owned suppliers operating in mining communities is key in making mining operations and its communities sustainable. Mampane mentions that a “deep-dive spend analysis” is, however, required to ensure that the shift is driven by available opportunities that might be contracted.
Moreover, he indicates that, with regard to mines and suppliers building a successful relationship and managing their performance, South African mines must review their supplier segmentation principles and remove any strategies that seek to restrict their supply chains to black-economic- empowerment-exempted microenterprises and qualifying small enterprises.
There is the argument that many black-owned small businesses are unable to access opportunities in the mining sector, which can be rectified if segmentation models are built around transformation objectives, community integration, small business support and black industrialisation, says Mampane.
“Different strategies are required for noncompliant suppliers that account for 60% to 80% of the procurement discretionary spend. These strategies include but are not limited to commitment to increase black ownership; ESD commitments; supporting mining community projects and inclusion of black-owned small and medium-sized enterprises throughout their value chains.”
He adds that some of the original-equipment manufacturers that TK Global Experts have engaged with are willing to partner with local mines and communities to build sustainable ESD programmes, run and managed by entrepreneurs in the mining communities.
These entrepreneurs must be supported with long-term contracts from the mines that include strategies on how to support them and gain entry into other local markets.
Though key measurements seek to support local entrepreneurs, foreign investment and partnerships are allowed to a limited extent. The principle of local content is introduced, which seeks to protect local manufacturers against unfair competition and dumping by foreign companies. It must be noted, however, that the current designation published by the Department of Trade and Industry allows foreign direct investment as some commodities or products are not 100% designated – some level of importing is allowed. If applied correctly, designation can be used to bring foreign direct investment both at a supplier and product level, Mampane concludes.