Growing demands for mines to procure goods and services in-country – further emphasised by supply chain disruptions caused by the Covid-19 pandemic – have brought a recent strategic partnership to foster local procurement formed by SRK Consulting into sharp focus.
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.