Sustainable mining economy

LEGAL & FINANCE

SUSTAINABLE mining economy

Having a sustainable mining industry means that local mining must play a strong role in the local economy. In South Africa’s case, this extends to building a better national scenario. By François Ribeiro dos Santos* There is a need for coordination between mining and manufacturing. This can unlock value within the ecosystem and, for these advantages to be realised, there must be cooperative buying from These characteristics have instigated change in the operating environment, including new legal requirements, as outlined in South Africa’s Mining Charter III, as well as social requirements to operate within a community. The players in both sectors. For this to happen, local Mining procurement function can react to these changes and ensure Charter targets should be 70% mining budgets spent on long-term operational efficiency by shifting the fundamental locally manufactured goods and 80% of services sourced from approach to supplier engagement and management. South African companies. By developing an understanding of local issues and

While the Mining Charter falls short in boosting business collaborating to develop mechanisms that address these confidence within the sector, its goals have the potential issues, procurement teams can develop practices that to integrate complementary local sectors of the economy facilitate the creation of shared value. In a developing within mining. A key focus of the charter is to promote economy, procurement can play an instrumental role in not local content through inclusive procurement, supplier and only developing existing suppliers but also establishing enterprise development. new suppliers. Challenges with sustainable mining economies be committed to resolving core social issues with tailored In South Africa, where the landscape is changing and social solutions that deliver a substantial, issues are becoming more prevalent, organisations must sustainable impact. strategically position themselves to capture benefits from Context-specific initiatives, as well as a localised approach, these changes and build a sustainable competitive advantage. are essential to delivering shared value and achieving For mining companies, this translates into emphasising procurement objectives alongside sustainable social strategic areas that align with the societal context and development in the community. developing viable, local supplier bases. To generate shared value, the procurement team must

Developing economies face a variety of country-specific A sustainable mining economy challenges in their supply chains, restricting the achievement Done right, localisation can be a win-win: making a significant of procurement objectives. For example, the supply chain has socio-economic impact throughout the community while a shortage of local suppliers and insufficient core capabilities also creating numerous benefits for the organisation, and resources. including shorter lead times, higher-quality products and

Four archetypes of suppliers reveal that sub-strategies that consider local characteristics are required when defining a localisation programme

LEGAL & FINANCE

When assessing the procurement strategy for localisation, four areas should be considered:

services, lower costs, more efficient procurement, and even attracting investors and improving related industries.

Opportunity identification:

Creating an effective localisation strategy begins by identifying the potential opportunities across the value chain – looking beyond the conventional low-cost, low-complexity categories to capture the full economic impact. A good starting point is to review the spend baselines, evaluate the spend patterns, and assess the suitability of categories for François Santos believes that a sustainable mining economy could help South Africa build The interface between mining and manufacturing conversion to the local supply. This should be a better economy (Credit: Minerals Council South Africa) matched with an analysis of the local supply potential and existing capabilities to identify opportunities to build up supplier capabilities in strategic categories. Opportunity prioritisation: Given the complexity of converting to local suppliers, a focused approach to implementation is needed to map the opportunities against a prioritisation matrix. This process helps identify which categories to prioritise in the short term and which need more time to localise, allowing organizations to or supply chain consider their immediate options along with the long-term, disruptions. Without strategic plays. decisive actions, Adapt to unique local needs: After assessing the localisation mining companies priorities, the procurement function must be able to identify will be facing an and map the right suppliers across the category strategies. increasing pressure Do the right thing: In South Africa, this means considering to meet ad-hoc BBBEE economic policy as well as the sector-level demands from requirements in the Mining Charter. A sustainable localisation well-coordinated strategy requires a portfolio of local suppliers with all four pressure groups. archetypes. It is important to bear in mind some principles In the long run, for customisation. First, when dealing with unions, focus on plan to ensure local protecting people, not jobs. In other words, prepare people economic viability for current and future jobs (if current ones are doomed to even after site closure. Once a local portfolio of potential disappear). Job protection in itself is not sustainable, as the suppliers has been defined, the next step is to align the company will bear unnecessary costs. procurement organisation for successful execution.

Focus on sharing gains not giving handouts, which have an ephemeral impact. With the ubiquitous presence of *François Ribeiro dos Santos is a partner at global social media, individuals can quickly coordinate flash strikes management consultancy Kearney.