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Social capital and licence to operate
Enterprise development and procurement

Our enterprise development department implements a business assistance programme, to support local and black-owned businesses

Encouraging enterprise development

Our investment in developing small and medium-sized enterprises, and encouraging entrepreneurship, forms an important part of our contribution to the longer-term viability of our neighbouring communities. Our enterprise development (ED) programmes in South Africa are designed to build resilience within host communities and a more robust and competitive supply chain for the Group, with a particular focus on local and black-owned businesses. We work closely with the Royal Bafokeng Enterprise Development unit in Rustenburg, and the Marula Community structures in Burgersfort. All our initiatives are evaluated to ensure that they are fulfilling expectations.

As outlined below, in our South Africa operations this year we continued to provide some support to 20 small to medium local black businesses through two key initiatives. Regrettably, however, both of these initiatives were halted as a result of the five-month strike.

• Supplier development programme: This programme was launched in 2013 with the aim of assisting 10 local small, medium and micro enterprises (SMMEs) and black-owned businesses that were already part of the Implats supply chain, to become more competitive. The 24-month university-accredited training and mentoring programme includes business-specific training with bi-weekly on-site meetings with the owner/manager. Since its inception in January 2013, eight out of the 10 participating companies have increased their turnover, with an average turnover growth rate of more than 400%. A total of 33 jobs have been created equating to a 13% job creation rate. The programme was regrettably halted in January 2014, due to the platinum sector industrial action. R1.1 million was invested in the programme in 2014, of a total R1.8 million to date. The programme will continue in the new financial year.
• Business advisory and development service: This programme aims to help local black entrepreneurs to grow and sustain their businesses and become part of the Implats supply chain. The objective is to develop business skills that will lead to increased efficiencies, turnover and profit. Ten companies were selected in January 2013 and assisted by an external service provider over a 12-month period. The 10 businesses experienced turnover growth of 20% and employment growth of 61% (from 33 to 53). These start-ups ranged from garden service providers to construction companies. In 2014, Implats invested R1.2 million in the initiative, or a total R2.2 million investment to date. The programme was halted during the five-month strike and will continue in the year ahead.

Our ED department implements a business assistance programme, to support local and black-owned businesses that are experiencing difficulties in meeting their contractual obligations. The department conducts a diagnostic analysis to determine intervention or development needs as required. We then assist these companies to implement corrective action, provide mentoring and practical training where required. External expertise or specialised services are sourced in when the need arises under the guidance of the ED team.

In addition our ED office within the supply chain department functions as a walk-in centre to give guidance in business registration, preparing business plans, funding and complying with regulatory and Impala procurement requirements for start-up entrepreneurs.

At our Zimbabwe operations, a local ED programme entails working with seven SMMEs within the local community in Mashonaland West province. The enterprises supply Zimplats with goods and services such as protective clothing, construction materials and ore transportation. To date, $5 million has been expended with these enterprises and this is estimated to grow significantly over the period 2014 to 2024. The suppliers have submitted a five-year plan and Zimplats is providing guidance on how to achieve planned targets.

Promoting transformation through procurement

• Compliance to procurement procedures and commercial terms and agreements
• Transformation targets and performance
• Supplier compliance and conduct to operational agreed terms and conditions.

• Continuously seeking, identifying, supporting and promoting suitable historically disadvantaged suppliers through sustainable procurement practices
• Creating opportunities for economic growth through preferential procurement from local communities
• Leveraging our existing supplier base to unlock opportunities for local employment, mentorship and investment in the greater value chain of Implats
• Nurturing an environment through the ED department for partnerships and joint ventures between our existing supplier base and local entrepreneurs
• Sustainably improving year-on-year BEE spend performance relative to the requirements of the Mining Charter and reporting in parallel on B-BBEE performance as per the DTI Codes of Good Practice.

Our performance

The strike action that ensued in Rustenburg this year had a major impact on our procurement expenditure. The economic impact on BEE expenditure was estimated at R1.7 billion lost revenue to suppliers. The immediate focus for procurement will be to support the operation to regain stability post the strike and to normalise daily operations.

Efforts to promote BEE procurement have been significant and we have seen a decreasing trend in non-compliant operating expense suppliers and an increase in black empowered suppliers, particularly in the >25% to 50% category.

Suppliers' B-BBEE certificates and systems are in place to remind suppliers 90 days in advance of their expiry dates. Annual increases are not granted when B-BBEE certificates have expired or transformation commitments have not been met. During the year we did not terminate the services of any suppliers (2013: 21). Although two companies were accused of fronting, upon investigation it was discovered that they had expired BEE certificates and were requested to obtain certification. We endeavour to prevent suppliers who are ‘fronting' from being included in our supply chain.

Included in the cost of sales is total discretionary spend of R5.5 billion, of which 72% was spent with suppliers having BEE ownership of greater than 25% in the consumables category, and 72% on services (2013: R6.4 billion, 64% on consumables and 60% on services).

The total South African operations' discretionary procurement for 2014 was R7.9 billion of which 65%, or R5.1 billion, was from companies in which BEE ownership was greater than 25% (2013: R5.5 billion or 55%).

Overall there was acceptable performance in the key Mining Charter elements of capital goods, consumables and services against the 2014 targets (see table below).

Percentage HDSA/BEE procurement (>25%) of category's discretionary procurement (SA operations) 

Note:
Capital goods have been reported based on IFRS and Implats' accounting policies recognition criteria for capital expenditure. Suppliers with a valid broad-based black economic empowerment (B-BBEE) certificate at one point in the financial year under review, contributed to BEE spend. At Rustenburg operations the economic impact on BEE expenditure was estimated at R1.7 billion due to the five-month strike.