Good practice partnership for local procurement
A guest article by SRK Consulting, Johannesburg, South Africa
According to Lisl Fair, principal consultant (sustainability) at SRK Consulting, the collaboration with Canada-based initiative Mining Shared Value will further enhance SRK’s expertise and tools to support companies to increase local procurement levels.
“Working with mines to maximise their positive socio-economic impacts in host countries and host communities has been a growing part of our work,” said Fair. “While the Mining Charter emphasises local procurement practices in South Africa, there are more and more African countries who also want to see greater local economic benefit from mine procurement.”
An initiative of Engineers Without Borders Canada, Mining Shared Value has been working internationally on local procurement issues since 2012. Aiming to improve the social and economic benefits of mining by increasing local procurement, it launched the Mining Local Procurement Reporting Mechanism (LPRM) in 2017 with the support of the German development agency GIZ.
“There is huge scope for mining companies to reduce both their procurement costs and their social licence risk by sourcing more goods and services locally,” said Jeff Geipel, managing director of Mining Shared Value. “It’s a complex issue, though, so the LPRM provides a helpful structure and benchmarking for mining companies to map and chart their progress. With its hands-on knowledge of the mining sector in Africa, SRK is well-placed to support mines in applying this framework.”
Fair highlighted the vital importance of environmental, social and governance (ESG) issues in mine feasibility and sustainability. Building capacity in the local economy and resilience in host communities is now imperative for mines wanting to secure and maintain their social licence to operate. A valuable focus for this work was the power of the mine’s procurement value chain.
“Our involvement with mining clients throughout their project cycle – from exploration to closure – puts us in a good position to add value to their supply chain strategies,” she said. “A systematic approach is most effective, with timeous planning and good integration into the broader business strategy.”
She said that using a reporting mechanism like the LPRM would help mines build this priority into their strategic planning and monitoring. For new projects, local procurement strategies should be developed right from the pre-feasibility stage.
“The supply chain disruption that we have witnessed during the Covid-19 pandemic has also been a wake-up call for procurement in the mining sector,” she said. “The lockdowns have created real mine-level risks that need to be addressed, and local sourcing of goods and services will be part of the answer.”
Among the challenges facing mines that wish to source more within their host countries has often been the lack of local production capacity and expertise, said Geipel. Even where mines see the opportunity for the creation of local supply, the short-term cost of developing suppliers is high.
“However, the recent interruption in global supply chains – especially border closures – might cause a mine to start looking afresh at options to avoid importing,” he said. “This also creates an opportunity for governments in mining countries to gather stakeholders to look at supporting certain key sectors. The local production of a range of personal protective equipment, for instance, would suit mining as well as other industries.”
There has for decades been a call for more local beneficiation in the minerals sector around Africa, said Fair. The focus on beneficiating the minerals themselves, however, has blurred the potential for the in-country production of upstream products – often a more realistic option with plenty of immediate multiplier effects.
“An essential socio-economic focus for mines today is to facilitate social transitioning in the host communities for the day when they must inevitably close,” she said. “The more diversified a local economy can become, the less reliant it will be on the mine – and the better it will transition to a post-mining phase of economic life.”
A far-sighted local procurement strategy will serve the mines operational needs while helping to diversify the local economy and to create resilience in the event of closure, she said.
Axora launches global challenge for digital technology
Axora is launching the world’s first international competition to discover new cost-saving digital technology for industrial companies, which can produce rapid benefits within a year.
The Metals & Mining and Oil & Gas sectors have recently experienced budget cuts of 20% on average, driven by a variety of factors including the global pandemic, slump in demand and price wars. The Axora Cost-Saving Technology Challenge aims to transform these industries by discovering innovative, digital solutions that reduce cost fast and pay for themselves, whilst achieving the same or improved productivity, health and safety and sustainability standards.
“While digital solutions can help to get work done quicker and more cost-effectively, they typically require a three-year ROI, and if there’s no flexibility in the budget, a full budget planning cycle is needed to get things moving”, said Dr. Nick Mayhew, Chief Commercial Officer, Axora.
“Yet, extra financial cost is often incurred in delaying digital projects, so customers have asked us to highlight solutions that can have an ‘in year payback’ whereby the cost spent on the solution and deployment will be more than recovered within the budget year - this accelerates the timeline and drives positive business impact, quickly.”
The Axora Cost-Saving Technology Challenge
Axora is keen to learn of any digital cost-saving innovation which: meets the 12-month payback timeframe; can be deployed in any part of the value chain including upstream, downstream or midstream oil and gas, metals processing or mining; and is ready for market. The Axora Cost-Saving Technology Challenge is open to entrepreneurs, start-ups, academics and sector leaders across the world. The competition will be judged by a panel of leading industry experts.
“We’re passionate about supporting our industries and customers through all forms of digital transformation and the cost-saving solutions we are searching for could also provide a lifeline to many mining and metals and oil and gas companies in the current economic climate,” added Dr. Mayhew.
Improving productivity, safety and sustainability
Up to ten finalists will be chosen to pitch their solutions at a digital pitch day later this year, after which Axora will validate the ROI models and vet the solutions. The winner will receive the ‘Axora Market Accelerator’ sales and marketing package worth £10,000. This includes a two-hour workshop, promotion through Axora’s thought leadership content and inclusion into its digital demand engines, providing the opportunity for the winning solution to benefit thousands of industrial companies. Entries are open until May 31. Full details of the competition including terms and conditions can be found here.
To learn more about the Axora B2B digital solutions marketplace read our feature in the latest issue of Mining Global magazine.