SOCIAL CAPITAL AND LICENCE TO OPERATE
Investing in community development – South Africa

Promoting development through local procurement

Enhancing procurement opportunities specifically in neighbouring communities is an important contribution towards creating sustainable communities, improving community relations, and advancing local economic development.

Tier 1 suppliers are not only limited to the proximity of the mining operations, but also where local community individuals have shareholding in companies outside of the tier 1 geographic area. This year, we spent R2.6 billion on procurement from local tiered suppliers (all >25% BEE), constituting 34% of the total discretionary procurement spend (2014: R2.0 billion or 26%). Local suppliers are classified as tier 1, 2 or 3 based on their proximity to the operations (see table below).

Local tiered areas classified as tiers 1, 2 and 3

Category	Tier 1	Tier 2	Tier 3
Impala Rustenburg	Mine lease area (Bafokeng Village)	Rustenburg municipality	Bojanala district
Marula Platinum	Mine lease area (four farms)	Greater Tubatse municipality	Greater Sekhukhune district

Local (tiers 1, 2 and 3) HDSA procurement (>25%) as a percentage of total discretionary procurement

Category	2015		2014		2013		2012		2011
	R billion	%	R billion	%	R billion	%	R billion	%	R billion	%
Impala Rustenburg	2 424	42	1 816	30	2 197	27	1 911	25	1 557	22
Marula Platinum	129	18	199	26	156	22	130	21	103	13

Our efforts in stimulating sustainable local procurement have been enhanced by the positive working relationship that we enjoy with Royal Bafokeng Enterprise Development, who have assisted us in identifying local community suppliers that are ready to conduct business. This year, we procured R498 million from 113 local community suppliers (tier 1), up from 102 in 2014.

In addition to our direct procurement activities, we have encouraged some of our existing large contractors to support small tier 1 contractors, for example by appointing them as sub-contractors. We also encourage them to identify opportunities to fill any vacancies with youth members from the local community. As part of our drive to support local job creation, we have been successful this year in encouraging a number of our suppliers to commit to moving part of their manufacturing process closer to the mine lease area.

During this year some significant localisation initiatives were concluded. This resulted in:

• The establishment of joint venture agreements with local entrepreneurs from the local community areas holding significant amounts of shares in the newly incorporated companies.
• Existing large contractors to support small tier 1 contractors, appointing them as sub-contractors.
• Existing contractors committing to fill vacancies with youth members from the local communities.
• Suppliers committing to moving part of their manufacturing processes closer to the mine lease area.

Our preferential procurement, enterprise and supplier development (ESD) focus for 2016 and beyond

Enterprise and supplier development are an integral part and an enabler for preferential procurement. Investment in the development of SMMEs and black entrepreneurs form part of our organisation’s contribution to long-term transformation of the mining industry and the viability of the economy. For this reason, Implats will undertake the following to align itself with the revised codes of good practice:

• Parallel to our existing ED activities, Implats will align the ESD strategy with the existing preferential procurement policy to address the requirements of the revised codes of good practice, aiming for implementation across the South African operations.
• Increased focus on developing a localised supplier base to positively impact employment and economic activity at our various South African operations while satisfying B-BBEE and Mining Charter requirements.
• Make an impact on black-owned and black women-owned spend through broadening the supply base and spend shift strategy.

Through focusing on the above objectives, Implats will proactively implement the revised codes and be well positioned to conform to the anticipated DMR Mining Charter alignment with the revised codes.