Other parts of this series:
- South Africa’s mining sector – charting the way on local content targets in 2021
- South Africa’s mining sector – 70 percent by 2023? The ‘why’ of local content targets
- South Africa’s mining sector – 35 percent by 2021? The local content issue.
- The local content targets in South Africa’s mining sector – and why industry is struggling
- A framework to meet local content targets in South Africa’s mining sector – Accenture case study
A case study illustrates value. Mines need to start now.
The 2018 Mining Charter gives mining rights holders in South Africa five years to transition to 70 percent local content spend on mining goods procurement. It’s a tough ask given industry challenges. Accenture’s Local Content Framework was developed to directly address these issues, effectively roadmapping a journey to compliance for local mines.
In this series of posts on meeting the Mining Charter’s local content targets, I have provided an overview and, together with my team, helped set the context, looked at progress to date, discussed content definitions and enumerated sector hurdles. In this post, I describe Accenture’s best practice solution and look at a client case study that illustrates the value of using this framework.
Taking action: developing a local content framework
As described in the last post, Accenture is finding a number of recurring themes among its clients with respect to local content assessment. Key challenges include ecosystem complexity; lack of awareness around local content requirements and verification; and a lack of standardisation across the sector in terms of describing goods and services, and capturing data for local content reporting.
To address sector challenges and support our mining clients on their local content journey, we have developed a Local Content Framework.
This framework is built on five core elements—creating a supplier baseline, doing a local content assessment, reporting, building an intelligent data hub to optimise outcomes, and creating a localisation strategy.
- Baseline: This includes a purchase order and invoice spend assessment, profiling the mining rights holder’s supplier database, categorising mining goods (where applicable), and reviewing existing local content levels.
- Local content assessment: An assessment of local content levels for mining goods is identified both internally and for core mining contractors. The assessment is done via engagement with suppliers.
- Reporting: Our framework assists mining clients to report and track local content levels to meet DMRE reporting requirements.
- Intelligent hub: We help our mining clients build an intelligent tracking and reporting capability, leveraging advanced technology platforms to optimise local content tracking and reporting.
- Localisation strategy: We drive transformational change to achieve DMRE’s local content targets at speed and scale, with certainty.
The journey to compliance for most mining clients commences with developing a baseline view of their local content levels. Our support in this journey could be to help clients meet individual milestones or to navigate the entire local content procurement journey.
The value we are providing through our Local Content Framework is significant.
A baseline assessment shapes strategic interventions
Our baseline assessment of a mining client’s top 25 mining goods suppliers, using 2019 calendar year spend, provided visibility into the local content levels achieved across the mining house’s two mining rights (sites). The following plot provides a headline view of the local content procurement levels at a supplier level:
Key insights from the study included:
- Mining goods were sourced from three non-compliant suppliers (from an ownership perspective), with one of the suppliers providing mining goods with 100 percent local content levels. As the ownership requirement was not met, local content procurement spend with this supplier could not be considered as local spend.
- The majority of the spend came from BEE-compliant companies. However, most of this spend was on non-local items.
- The women-owned companies provided mining goods that were mostly imported. Only one woman-owned company provided mining goods that had high local content levels.
- Only one youth-owned company provided mining goods with high local content levels, however spend with this company was relatively low.
- The majority of the HDP-owned companies had low local content percentages for the mining goods they provided.
Based on these insights, strategic interventions were developed to transition suppliers into the “impact quadrant”. This included increasing the local content levels for compliant companies and increasing spend with suppliers already in the quadrant. The detailed local content assessment outcomes of the mining goods provided by each supplier assisted in understanding which items have high potential for localisation. Transitioning ownership levels of non-compliant suppliers with high local content percentages (they were just below the compliant ownership thresholds) was also a lever considered when developing the intervention strategies.
The way forward—start now, be strategic
The intended positive impact of local content compliance on the mining sector is clear with regards to enhancing local participation in the mining value chain as well as encouraging greater participation by companies owned by previously disadvantaged persons. This impact is however moderated by the prevailing capability and capacity for local content manufacturing in the country. 1
I believe that three considerations and actions will provide advantage:
- Mining houses that start engaging with their suppliers early on to understand issues and opportunities, supporting them to strengthen their capabilities, will lead the way in terms of local content compliance.
- Technology will play critical role in achieving successful local content procurement requirements. In the mining supply chain, digital supply chains, intelligent operations and digital supplier development platforms are themes that are gaining traction.
- The use of intelligent data hubs to categorise, track and report on local content levels will become vital to dynamically track local content movements at a mining goods level, as well as to track suppliers’ local content levels. It will certainly make DMRE reporting cycles easier. And, by dovetailing into the supplier development platforms and intelligent operations, intelligent hubs can provide real time insights on opportunities to improve local content. The rollout of a standardised DTI taxonomy by the DTI, easily incorporated into an intelligent hub, will further improve their effectiveness.
In terms of managing risk, this strategy of expanding and deepening the local mining goods content delivery capability is a smart one. Recent events—like the Covid-19 pandemic that has affected global supply chains, the impacts of volatile global trade and political manoeuvres (as between China and the USA) that affect trade, and natural disasters—all suggest that future supply chains will be regional, not global. Complex global supply chains are risky; simplified, regional and diversified supply chains hedge against these risks.
For mining rights holders, the time to get started is now. Investigating intelligent solutions that are able to create solid foundations for, and accelerate reporting progress will position mining rights holders well to lead the way, achieving compliance and related benefits, such as improved competitiveness.
If you would like to discuss your challenges and how Accenture’s Local Content Framework may be able to assist you to meet the Mining Charter’s local content targets, do get in touch.
In the meantime, for more on Accenture’s mining capabilities and offerings, click through to Leading with digital in South Africa Mining, our Applied Intelligence Studio in South Africa for Mining and our Metals & Mining newsroom for the latest releases.
Until next time,
Managing Director, Accenture Africa Supply Chain and Operations
- Claybrick, Interpreting the 2018 Mining Charter, Accessed online June 2021; https://claybrick.org/news/interpreting-2018-mining-charter