A timely event: procurement is a core Supplier Development enabler | by Molebatsi Moagi

molebatsi 100419Over the past ten years or so, South African companies have come to realise and accept the intrinsic values of supplier development and localisation. From a legislative perspective, a significant milestone was achieved when the B-BBEE Charter and Codes of Good Practice (Codes) were amended in 2013 to integrate the enterprise development and preferential procurement factors into the Enterprise and Supplier Development (ESD) element, comprised of three categories.

This followed a thorough consultative process and consensus by all stakeholders that indeed preferential procurement is the key driver and enabler of supplier development in particular, and enterprise development in general. The fact that ESD has been classified as a priority element further emphasises that fact.

Within this context, the theme of the upcoming 9th annual Supplier Development Summit 2019 is aptly phrased “Procurement as the core enabler of supplier development and localisation”.

Bunfight in the mining sector
The latest developments have seen the Mining Charter also being amended to align it in this area with the Codes through the Procurement, Supplier and Enterprise Development elements. However, the latest challenges by the Mining Council to the Mining Charter has created confusion with the mining industry split into those companies who want to challenge the entire Mining Charter 2018, and those who are opposed to specific or various aspects of the amendments.

This has created further confusion around what the actual compliance standards and requirements ought to be. However, there are certain provisions of the Mining Charter which can be adopted and successfully applied to complement and strengthen the codes.

No quick wins
The introduction of the ESD element in line with the amended Codes had a similar, if not worse effect in other sectors. Over the past five years we have seen a proliferation of new consultants and ESD practitioners who offered interesting solutions to companies that were mainly unprepared for the new paradigm shift; these ranged from one-day programmes to DIY puzzles and games which were punted as either quick-win solutions or, cynically, as the panacea to ESD.

Thankfully reality has set in, and there has been a consolidation of approaches and alignment around the ESD space. Some companies have fully embraced ESD, and are well on the way towards practising the spirit and the letter of supplier development and localisation.

However, there is still the challenge of developing the skills and tools required to empower and guide the newly established departments and staff who have been tasked with ESD implementation and compliance, within those companies who have gone to the extent of developing their internal capacity to prioritise and tackle the ESD.
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Local is lekker
Localisation addresses the deeper challenges related to the country’s capacity and manufacturing capabilities, to meet the demand for locally produced goods and services including the percentage of the local inputs – such as the raw materials and labour used in the process.

The biggest challenge, however, is not only how to rebuild the technical expertise and rekindle the entrepreneurial spirit, but also – importantly – how to create an enabling environment and support to achieve this ideal.

Procurement plays a critical and central role as a key enabler and champion of localisation and supplier development. To that end, a closer working relationship and alignment with the ESD department and local enterprises is required. This obviously brings a new set of challenges to the procurement function as a whole and the procurement staff in particular.

Gone are the days when procurement used to operate under a cloud of secrecy and mystery without any interaction with the general public and newly established businesses. Local communities and enterprises are demanding transparency and direct engagement with the procurement department to ensure access to preferential procurement and localisation opportunities. Additionally, the ESD department cannot afford to be embroiled in procurement processes and decisions which may be easily questioned and challenged.

The simple answer could be an amalgamation of the ESD function into the procurement function, but that may be easier said than done. So the question remains “how are we going to ensure that the procurement function is not only empowered, but is fully capacitated to drive and support localisation and supplier development? There is no short answer, as this is a space on contention and exploration on both sides of the ESD coin.

Editor’s note: This critical question is one of the themes our experts will be exploring in the upcoming 9th annual Supplier Develoopment Summit 2019 (www.supplier-development.co.za). What is your take or your experience? Get in touch!
Molebatsi Moagi is CEO of the Centre for Supplier Development - www.bespoke.co.za

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Posted on April 10, 2019