Impact of Collaboration between State Owned Enterprises (SOE’S)

Presentation to

CIPS Pan African Conference

Fantas Mobu

Chairperson of SOEPF & ESKOM GM: Tactical Procurement

Objectives of this discussion

Give the CIPS Conference an

overview of the activities of the

Forum

1

To recap the key strategic

objectives of the Forum

2

To demonstrate how SOEPF can

advance support government

initiatives such as Supplier

Development, B-BBEE, Job

creation, New Growth Path, Fraud

and Corruption

3

Provide recommendations and

way forward

4

• To generate a

conversation for

action

• To align on &

recommend ways

to Strengthen the

SOE by being

efficient and

effective for the

betterment of SA

Agenda

• Background & Overview of SOEPF

• Challenges

• Areas of possible collaboration

Recommendations/actions

• Benefits of SOEPF

.

Element Detail

Founder Members :Denel, Telkom, PetroSA, SAPO, Eskom

Additional Members:Transnet, SAA, SITA, Eskom, IDC, SARS,

National Treasury, Metrorail, CSIR, Transwerk, Rand Water, USA

(Universal Service Agency), National Ports Authority (NPA), South African

Rail Commuter Corporation (SARCC) City Power; Umsobomvu Youth

Fund, Armscor & NEF, ATNS, IDT, SASDA (also SOEPF Admin Rep)

Guest Status;SMME Forum; The DTI; SMME desk under BUSA;

What When

was it

Formed

SOEPF was formed in June 2004

A voluntary forum of Procurement/Supply Chain Management heads of

the State Owned Enterprises

Share best practices in Supply Chain Management within the SOEs

Members

Authority

Consensus Decision-making

Decision made by Forum cannot bind SOEs

Each entity reserves the right to approve or reject any proposal made by

the forum or approve a proposal on such terms and conditions as it

deems fit

SASDA provides administrative support

Background to SOEPF

Authority

• The forum shall have no powers to take decisions that

will bind the individual entities

• The forum shall be empowered to make proposals, to be

unanimously agreed upon, for adoption by individual

entities

• Each entity reserves the right to approve or reject any

proposal made by the forum or approve a proposal on

such terms and conditions as it deems fit

1. identify synergies and exploit to benefit SOEs

- Tenders – includes sharing of tender specifications

- Vetting / Due Diligence Audits on Suppliers

- Fronting and other transgressing / circumventing activities

- Procurement system engines

- Supplier Development Opportunities

- Black Economic Empowerment

2. determine a joint procurement strategy which will assist

SOEs with the formulation and alignment of entity

specific preferential procurement policies, procedures

and processes

What do we hope to achieve?

3. Facilitate the creation of sustainable suppliers through

Supplier and Enterprise Development Initiatives

4. To share information on global best practices in the

procurement of goods and services

5. Lobby government in order to influence policy with

respect to BBBEE and Enterprise Development policies

in the procurement of goods and services

What do we hope to achieve?

Continued …

6. To actively promote and adhere to the Prevention of

Corrupt Activities Act by recommending the blacklisting

of suppliers who engage in irregular activities in

procurement

7. To establish and participate in the management of a

central SOE database aimed at creating and/or

developing sustainable suppliers

8. To create a conducive environment for supplier

development and link joint supplier development

programs to contracts

What do we hope to achieve?

Continued…

9. To advise SOEs with the reviewing, controlling,

regulating, governing and managing the implementation

of procurement policies and procedures

10. To promote Procurement as an integral function and

profession

11. To ensure quality and continuous improvement of

processes and procedures in SOE procurement areas

What do we hope to achieve?

Continued…

12. To leverage on economies of scale by joint

participation in tenders and other joint purchasing

activities. In all instances, this will be subject to the

rules and governance structures of each individual

participating entity

13. To provide guidance and assistance with respect to the

adequacy, efficiency and economical use of SOE

resources in the acquisition of goods and services

whilst ensuring compliance with policies, standards,

procedures and applicable laws and regulations

14. Promoting local value-add and manufacturing

What do we hope to achieve?

Continued…

Element Detail

Role of

SOEPF

(Strategic

Objectives)

Identify Synergies

Determine a joint procurement strategy

Promote adherence to the Prevention of Corrupt Activities Act

Establish a central SOE Database

Link joint supplier development programs to contracts

Lobby government in order to influence policy

To share information on procurement

Advise SOEs on procurement policies and procedures

With SASDA & others work to create of sustainable suppliers

Continuous improvement of SOE procurement, through

collaboration

To Leverage on SOE economies of scale

Provide guidance in the acquisition of goods and services

Promoting of local value-add and manufacturing

Promote Procurement as a profession

Summary of role of SOEPF

Agenda

• Background & Overview of SOEPF

• Challenges

• Areas of possible collaboration

recommendation / actions

• Benefits of SOEPF

Challenges for SOEPF

• Challenges

– Duplication of administrative

activities (e.g. contracts, standard

tender documentation etc.)

– Lack of intelligence gathering tools

– No central database of local/BEE

suppliers

– No central advertising platform

– Skills shortage and lack of proper

co-ordination

– No common approach to Supplier

Development

• Challenges

– Procurement not used effectively

to create jobs

– No common approach to reporting

– Poor monitoring of BEE targets

and contradictions among SOEs

on BEE issues

– Poor utilization of state resources

among SOEs

– Poor co-ordination of legislative

issues (as a result procurement

legislation is seen as a financial

control as opposed to an

economic imperative.

The procurement survey compared each SOE’s current capability maturity to

Accenture’s High Performance Procurement research based on six dimensions of

procurement mastery

High Performance Mastery

Dimensions

Procurement strategy

1

Sourcing and category

management

2

Technology

6

Requisition to pay

3

Supplier relationship

management

4

Workforce and organization

5

Vision, mission, core values

Operating model

Performance

management

Category strategic

planning Strategic sourcing

Category policy setting

Category management

framework

Compliance monitoring

Transaction processing

Assisted buying

Master data management

Fulfillment

Supplier performance mgt

Contract management

Supplier development

and integration

Having the right network of

competent people Working in an organization that

facilitates working together

Technology that delivers the

right information Systems cover all functions:

strategy to operations

The top three procurement challenges across the SOEs surveyed were: Lack of resources /talent;

organisational barriers and lack of accountability

Capability Findings Overview:

Summary

40 % of the R372 billion in state investments would go directly to public enterprises

SOE spending on Infrastructure

War Against Corruption –

Economic, Social Crime

• Corruption is a complex social, political and economic phenomenon

that affects all countries.

• Corruption undermines democratic institutions, slows economic

development and contributes to governmental instability.

• Corruption attacks the foundation of democratic institutions by

distorting electoral processes, perverting the rule of law and creating

bureaucratic quagmires whose only reason for existing is the soliciting

of bribes.

• Economic development is stunted because foreign direct investment is

discouraged and small businesses within the country often find it

impossible to overcome the "start-up costs" required because of

corruption.

17

33%

26%

39%

44%

54%

47%

28%

57%

60%

71%

30%

31%

39%

41%

43%

52%

53%

59%

61%

80%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Military

NGOs (non governmental organisations)

Education system

Media

Judiciary

Business/private sector

Religious bodies

Police

Parliament/legislature

Political parties

% of people reporting the sector/institution to be corrupt or extremely corrupt

2010 2004

Perception

Contributing Factors

SOCIAL

• The hardest hit by corruption: The Poor

Diverts resources and holds back development

Compromises public service delivery

Affects access to basic public services

• Further erodes already declining social values

Fraud and Corruption –

The Impact…

Is This Problem Big Enough to

Act

Agenda

• Background & Overview of SOEPF

• Challenges

• Areas of possible collaboration &

recommendations / actions

• Benefits of SOEPF

• Alignment with Government objectives• Value Proposition

SOEPF will benefit the country

• Impacts on New Growth Path and

Industrial Policy Action Plan

• Impacts Economic Development

• Job Creation

• Impacts SMME Development

• Broad Based Black Economic

Empowerment

• Foreign Investor attraction - through

procurement opportunities

• Local Manufacture/value add

• Huge cost savings (economies of

scale, optimisation of resources,

admin costs through removal of

duplication etc.)

• Focused, and clear Supplier

Development Programme (SDP)

• Job creation – spin off from SDP

programme

• Contribute in GDP growth beyond

• Focused skills development

• Transformation through increased

B-BBEE expenditure

• Professionalize procurement

environment

• Increased influence of legislative

issues affecting procurement

• Security of supply

Agenda

• Background & Overview of SOEPF

• Challenges

• Areas of possible collaboration &

recommendations/actions

• Benefits of SOEPF

Proposed key interventions by SOEPF

Clustering of SOE’s

– SoE’s should be clustered according to goods, services and works. Easy to track the priorities

– Reduction in clashes in priorities between departments

Board Representatives

– CPO to be part of the Board so that they should be driving the Supply Chain objectives and strategy

Executive Representative

– Elevate the Supply Chain Head positions to be part of Executive for proper accountability ,aptitude and dexterity

Authority

– Empower the clusters to advance the said common objectives and commit to stated Procurement strategy & the uniform implementation thereof by SOEs

Centralisation of Procurement

– Economies of scale, reduction in costs of duplication, standardisation

►Skilling the Procurement Practitioners in a mass

►Should we decide centralise Procurement? if yes how should the structure of centralised be?

►How do we resolve the change management issues that are likely to come in the way of Centralisation

►What process change should we make to get value out of centralisation without affecting the government business

►Commit to change procurement policies & procedures among others to allow for Supplier Development Product & procurement without tender from other SOEs approved Suppliers

Strategic Challenges

26

Thank you

© Copyright SOEPF 2005

Action Planning

Thank You

Questions