Indirect & other economic benefits

Home > Safety & Sustainable Development > Indirect & other economic benefits

Procurement

In 2008, the Group's discretionary procurement spend was broken down as follows:

● Capital R10.5 billion
● Services R11.6 billion
● Consumables R6.7 billion
● Other R0,6 billion
     

Breakdown of the Group's 2008 total discretionary spend with HDSA vendors


  2009 2008 2008 2008
  targets targets actual actual
Procurement spend % % % R million
HDSA-empowered companies 21.0 20 25.8 7,597
Capital goods 23.5 23 27.9 2,932
Consumables 25.5 25 46.7 3,148
Services 14.5 14 16.4 1,905
HDSA-owned companies 9.0 8.6 7.7 2,284
Capital goods 5.0 4.7 7.6 0.794
Consumables 6.0 4.5 3.1 0.207
Services 16.0 15.0 10.8 1,260
Provincial companies – 11.0 10.8 3,186
Local – 5.5 7.6 2,053

Anglo Platinum is committed to supporting and developing black economic empowerment (BEE) suppliers in South Africa and considers BEE, through the inclusion of historically disadvantaged South Africans (HDSAs), to be essential for the successful transformation of South African society. The Group is committed to support and develop HDSA vendors in line with mining charter requirements. A focus area for 2008 was on increasing procurement firstly with HDSA suppliers situated within a 50 km radius of the procuring operation and secondly with HDSA suppliers situated in the same province as the procuring operation.

Our spend with HDSA vendors has grown steadily and significantly over recent years:

  • 2003 = R730 million
  • 2004 = R980 million
  • 2005 = R1.9 billion
  • 2006 = R4.8 billion
  • 2007 = R7.4 billion
  • 2008 = R9.8 billion

HDSA procurement feedback 2008

It has been five years since the split in the transformation environment in Anglo Platinum, with the supply chain accepting the responsibility for business issues and the social economic department taking on all social issues. The motivation in doing this was to ensure that the commitments made in the social and labour plans are achieved, and to bring the HDSA procurement function closer to day-to-day operations, where the actual purchasing takes place.

The following was put in place in order to achieve the Group's commitment to the mining charter:

  • Plans and targets over a five- and 10-year period, up to and including 2012.
  • Identification of spend into the buckets of services, commodities and capital.
  • Accurate and auditable reporting systems.
  • Management of continuous improvement.
  • Verification/accreditation process.

The process was started by implementing HDSA procurement policies and procedures. Targets were clearly laid out up to 2012 for each operation and went down to the level of services, capital and commodities. The strategy and process is strongly supported by senior management.

In essence, the principles that support the HDSA procurement strategy are as follows:

  • Transparency, based on sound business principles and practices, and subject to internal audit. Under no circumstances will fronting or window dressing be tolerated. Any such practice will mean instant disqualification.
  • Sound commercial principles, to underlie all transactions, with no compromise on quality, price, delivery and service, safety, health and environment, or any other commercial or technical requirement.
  • All potential suppliers will compete through the same process and on equal platforms.
  • The HDSA supplier assessment methodology will not only encompass shareholding, but will also extend into active participation the transfer of skills and people development.
  • Anglo Platinum will only conduct business with enterprises that comply with legal and fundamental business requirements.
  • In order to promote HDSA company participation in the procurement processes, a central database has been created.
  • In the process of assessing tenders, preferential procurement status is given to HDSA suppliers who meet all tender requirements.

All the above include the procurement areas of resident buying, strategic commodity management and capital procurement and are supported by operational processes including the following:

  • The development of new HDSA suppliers and the maintenance and extension of the use of existing HDSA suppliers.
  • Promoting linkages between HDSA suppliers and non-HDSA suppliers in order to form partnerships, with the aim of expanding the HDSA procurement spend, skills transfer, employment opportunities and the elimination of poverty within the footprint of our operation.
  • During 2008, the primary focus was very much on procuring from local HDSA suppliers (within a 50 km radius of the procuring operation) and regional HDSA suppliers (same province as in the procuring operation). In the process, procurement spend was promoted among HDSA suppliers who fall within the small and medium enterprise definition. In order to advance and assist with this identified HDSA procurement objective, three extensions to the HDSA procurement policy were implemented. Their aim was specifically to benefit the local/regional HDSA suppliers through preference and identification of opportunities. The extensions related to:
    • the weighting system;
    • mass tender; and
    • ring fencing.

Anglo Platinum has shown exceptional growth in HDSA procurement spend since 2003 when an initial figure of R730 million was achieved (10% of total discretionary procurement spend). In 2008, HDSA procurement spend rose to just over R9,8 billion.

SUSTAINABLE DEVELOPMENT IN THE SUPPLY CHAIN

Anglo Platinum's supply chain function is in the process of being amalgamated with Anglo American's supply chain to benefit from economies of scale, and our global suppliers will now be managed via a centralised group-procurement process. In 2008, the AAplc Group launched its policy of sustainable development in the supply chain, which outlines our commitments in this area as well as the expectations we have of our suppliers. Linked to this is our supplier sustainable development code, which has been made available, along with the policy, to our suppliers chain. As part of this new approach, we encourage our entire supply chain to embrace and share our commitment to sustainable development.

The policy applies to all our suppliers as well as our staff members, and is intended as a journey of continuous improvement. To support this, the Group is committed to developing and refining common, consistent standards that are both effective and efficient.

In further commitment to the project, a global supply-chain sustainable development leader has been appointed, and will soon appoint regional supply-chain sustainable development managers. Internal training on the policy and its associated implementation has begun, and relevant performance indicators have been incorporated into the performance contracts of the supply-chain staff.

In July, a three-day conference that brought together people from across the global supply-chain and sustainable development disciplines, and various other internal and external experts, was held to discuss a number of supply-chain sustainable development topics. Approximately 150 suppliers attended. The conference focused on safety, on our values, on our approach to supply-chain and sustainable development and on enterprise development.

In line with our engagement approach throughout 2009, we will continue to inform, assess, verify, and support our prioritised suppliers in terms of social and environmental performance.

BLACK ECONOMIC EMPOWERMENT

Anglo Platinum is proud of the contribution it has made to empowerment, having facilitated numerous transactions that have resulted in the significant and meaningful empowerment of historically disadvantaged South Africans (HDSAs) in various operations and projects; and in the conversion of its old-order mineral rights in April 2008. These include:

  • the August 2000 purchase of 22.5% of Northam Platinum by Mvelaphanda Resources;
  • the establishment in July 2002 of a 50:50 joint venture with Royal Bafokeng Resources, the Bafokeng-Rasimone Platinum Mine, including the Styldrift project area;
  • the formation in August 2001 of the Modikwa Platinum project, a 50:50 joint venture with a consortium led by ARM Mining Consortium;
  • the formation, in August 2002, with Lonmin Platinum, of the Pandora Joint Venture, which includes the participation of the Bapo-Ba-Mogale community and Mvelaphanda Resources (on behalf of Northam) as empowerment partners each having a 7.5% interest in the joint venture;
  • a joint-venture agreement in 2004 with Pelawan Investments to develop the Ga-Phasha PGM project. Pelawan subsequently entered into agreements for a reverse take-over of Anooraq Resources Corporation (Anooraq);
  • agreement of the principles of the Booysendal Joint Venture with Khumama (Proprietary) Limited, an HDSA consortium that will exploit the PGM resources on certain portions of the farms in the Der Brochen area. Khumama subsequently on-sold its interest in the Booysendal Joint Venture to Mvelaphanda Resources;
  • Anglo Platinum signing an agreement with Eland Platinum Mines (Proprietary) Limited in October 2005 for the disposal of its mineral and surface rights on the property Elandsfontein 440JQ for a cash consideration. The Ngazana consortium, led by Dr Penuell Maduna, and incorporating prominent businesswomen among a broad base of HDSAs, held an unencumbered 26% interest in Eland Mines;
  • the Anglo Platinum transaction with Siyanda Chrome Investments (Proprietary) Limited in July 2006 to develop a ground-breaking new chromite recovery plant at its Union Mine;
  • Anglo Platinum completing the transaction with the Bakgatla-Ba-Kgafela (Bakgatla), which is the traditional community at Union Mine, in December 2006, giving the Bakgatla a 15% stake in Union Mine as well as a 26% stake in the Magazynskraal project and a 55% stake in the Rooderand project;
  • On 4 September 2007, the joint announcement by Anglo Platinum, Anooraq and Mvelaphanda Resources of transactions that, when successfully concluded, will result in the creation of two major historically disadvantaged South African (HDSA) managed and controlled South African platinum group metal producers, which will have critical mass and significant growth potential. The key terms of the transactions announced were as follows:
    • Anooraq Resources transaction: the Anglo Platinum Group will sell an effective 51% of the Lebowa Platinum Mine (Lebowa) and an additional 1% of the Ga-Phasha, Boikgantsho and Kwanda Joint Venture (50:50) projects. Following this transaction, Anooraq, the current owner of 50% of Ga-Phasha, Boikgantsho and Kwanda, will own an effective 51% of Lebowa, Ga-Phasha, Boikgantsho and Kwanda through a newly created entity.
    • Mvelaphanda Resources transaction: the Anglo Platinum Group will dispose of its 50% interest in the Booysendal project and its remaining 22.4% direct interest in Northam to Mvelaphanda Resources for a total consideration of R4 billion. Mvelaphanda Resources currently owns the other 50% interest in Booysendal. Northam will acquire 100% of Booysendal from Northam in exchange for shares.
    • The suite of definitive legal agreements for both transactions were entered into in March and April 2008. Several conditions precedent to the conclusion of the transactions have since been met. The sale of 22.4% of Northam to Mvelaphanda Resources closed on 20 August 2008. There is only one condition outstanding on the Booysendal sale to Mvelaphanda Resosurces which is envisaged to be met early in 2009. It was envisaged to conclude the Anooraq transaction on 30 November 2008 following the Competition Commission and South African Reserve Bank approval of the transaction in August 2008, but the significant deterioration of the global debt and equity markets during the second half of 2008 has resulted in Anglo Platinum and Anooraq reviewing the Lebowa mine plan and project pipeline, including the Middelpunt Hill UG2 expansion project. Anglo Platinum and Anooraq remain committed to concluding the transaction and have extended the date for the fulfilment of conditions precedent until 30 April 2009.
    • In October 2008, Anglo Platinum and Royal Bafokeng Holdings (RBH), the investment arm of the Royal Bafokeng Nation, announced an agreement to restructure the BRPM Joint Venture. The restructuring will result in the creation of an HDSA-controlled PGM producer, NewCo Platinum (NewCo), a company which will hold a 67% interest in the BRPM Joint Venture. NewCo will be controlled by RBH and independently managed, and RBH and Anglo Platinum have agreed to list NewCo within the next three years. Prior to listing, Anglo Platinum will retain an effective 50% interest in the BRPM Joint Venture. In order to facilitate the listing of NewCo, Anglo Platinum will sell down its holding to an effective 43% interest in the BRPM Joint Venture.
    • During the course of 2008, RPM elected to dispose of its interest in the Western Bushveld Joint Venture (WBJV) to Wesizwe Platinum Limited (Wesizwe), an HDSA company and the sole shareholder of Africa Wide Mineral Prospecting and Exploration (Proprietary) Limited, the current 26% HDSA partner in the WBJV. The salient terms of the transaction are that RPM will sell its interest in the WBJV to Wesizwe in exchange for 211.9 million shares in Wesizwe. The sale by RPM enables a reorganisation of the assets held by both Platinum Group Metal RSA (Proprietary) Limited and Wesizwe, which will result in Wesizwe having a 100% interest in its core project while retaining a 26% interest in the remaining WBJV projects. The sale of RPM's interest in the WBJV has therefore further enhanced the ownership of mining assets by HDSA companies. The agreements were signed on 8 December 2008 and the parties are busy fulfilling various suspensive conditions.
    • Anglo Platinum entering into a number of joint-venture exploration agreements that allow for HDSA participation, including the Boikgantsho and Kwanda joint ventures.

In addition to these empowerment transactions, Anglo Platinum is in partnership with Aquarius Platinum (SA) (Pty) Ltd (with a 20% shareholding by BEE company Savannah Consortium) at the Kroondal and Marikana mines; and with the Xstrata Kagiso Platinum Partnership (with a 26% shareholding by the BEE company, Kagiso Platinum Ventures) at Mototolo.