South Africa's £26bn boost

4 June 2008
More news

05 June 2008

Buyers at the 2008 IPSA and CIPS Pan-African conference heard about how South Africa is developing its suppliers. Paul Snell reports from Johannesburg.

At last year's Institute of Purchasing and Supply South Africa (IPSA) and CIPS pan-African conference, minister of public enterprises Alec Erwin explained the importance of creating a healthy and competitive supply market.

"When buyers focus on obtaining value for money they encourage investment in local industry and the development of more competitive suppliers, which in turn are foundations for economic growth and development," said Erwin.

So what progress has there been in the past year? Is South Africa any closer to developing and sustaining the supply base it needs?

Last year Erwin exhorted purchasers to improve their demand planning, product specification and supplier relationships. And he urged buyers to consider their potential power as investors, as well as how procurement can influence competition and competitiveness in the supply base.

A Competitive Supplier Development Programme (CSDP) was launched, involving state-owned enterprises analysing supply markets to see where development of suppliers was needed (News focus, 7 June 2007).

IPSA president Karen van Vuuren, also CPO and general manager for strategic supply management at Transnet, took up the theme at this year's event. "I speak to you today as a 'prosumer'. More and more we will be both producers and consumers of goods and services."

State-owned enterprises in South Africa are investing R400 billion (£26.16 billion) in infrastructure, a programme she calls a "tsunami of capital expenditure not seen in 20 years".

This investment, if used wisely, can boost development. "This will have an impact on what is manufactured. It will affect how robustly the economy will grow. And it will influence the role South Africa and Africa will play in the global economy."

And Transnet is piloting the next phase of the CSDP programme with two large procurements for port equipment and rolling stock, which includes the purchase of 212 trains.

While the company will still have to award business to overseas tier one suppliers, because of time and capacity constraints, local firms will have a chance further down the supply chain as tier two or three vendors. Overseas suppliers will have to commit to give work to and develop suppliers in South Africa.

The benefits to Transnet are the creation of a healthy, competitive supply base, improved cost, quality and efficiency of products, and increased profitability for the state-owned enterprises thanks to lower total cost of ownership.

But the development of a competitive supply base is also going to need improved procurement skills. "Transnet needs super-duper procurement people. The reality is the skills aren't there and we need to be the best of the best."

The company is training through an online academy, as well as immediate intensive camps for those dealing with high-risk, high value procurements.

It is also hoped making suppliers more attractive to domestic firms will make them more appealing internationally. But the domestic investment and development needs remain critical. "We don't have time to make a mistake," said van Vuuren. "The tsunami is here."


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