Portfolio Committee CPT Parliament10 May 2007
Mmbulaheni MashanyuSASDA CEO
“In the event of a loss of cabin pressure, the oxygen masks will drop from above your head. Pull the mask over your mouth and nose and continue to breathe normally. Please ensure your own mask is secured first before you assist other passengers, including children.”
SASDA PRESENTATION
Introduction & BackgroundThe Department of Minerals and Energy (DME) requested PetroSA to lead the development of HDSA suppliers through a Supplier Development Programme for the Energy sector. PetroSA’s in-house Supplier Development Programme is largely informed by the study commissioned by DME to develop suppliers for the liquid fuels industry;The pilot was expected to achieve eight broad objectives:
Platform for cost and operational efficiency,Mayor industry players will understand DME requirements,Demonstrate the feasibility of Concept,Valuable lessons will be learnt,Development of Operational Framework,Will serve as a training ground for the industry,Creation of an implementation model,Creates an industry wide awareness.
Pilot Project ResultsNumber of companies 5Investment made by PetroSA R14millionRevenue made R72,3millionFulltime Employees 90 +38 newMarket Expansion/ reach refinery, Saldanha, Milnerton, FA platform and OrcaSuccessful project 2006 ShutdownObservation 5 companies in 1year, today we could have established 25Women -Average Education level Standard 8( Grade 10)Achievement All entities held their annual general meetings successfully
Note: these are Z suppliers, and prove that rural development can work properly supported
Industry’s Need for ChangeThe inability of HDSA suppliers to diversify their customer base (i.e. to supply more than one oil company);
Lack of timely access to information about procurement opportunities;
Limited availability of skills critical to core industry operations;
Lack of access to financial resources, especially for capitalisation purposes;
The domination of large incumbent suppliers;
Long-standing relationships between incumbent suppliers and the industry;
fronting;
inefficiencies due to duplication of some BEE procurement processes, and
misgivings by the oil companies about the potential for ‘free-rider ship’, i.e. the potential for competitors to have access to suppliers in whose development they did not invest.
SASDA’s Mandate
Vision
To be a leader in developing globally competitive Black South African suppliers in
the petroleum and liquid fuels industry.
Mission
To accelerate progress in the empowerment of historically-disadvantaged South
Africans through increased access to industry procurement opportunities by:– Accrediting suppliers to evaluate their BEE status; – Developing black suppliers skills to meet industry’s required
standards;– Capacity building through direct support and partnership with
developmental agencies.
SASDA’s Strategic ObjectivesTo consolidate existing industry supplier development efforts, by:
harmonising suppliers’ accreditation;
Fully utilising the common industry database;
To implement and manage supplier development programme;
To actively source suppliers according to industry’s requirements;
To preferentially develop suppliers from designated* groups
To increase access to information by HDSA’s;
To facilitate HDSA supplier participation in global procurement;
To provide a mechanism for monitoring and auditing of compliance and
measure successes, through:
good corporate governance of the Agency
regular feedback between the Agency and industry
SASDA’s Functions
The refinement of BEE criteria, targets and measurements as well as the development of accreditation standards;The management and further development of the empowerment supplier database (including broadening the database to also include information about procurement opportunities and service providers);The establishment of enabling relationships between suppliers and service providers Market research, industry and supplier monitoring and reporting;Clarification, on request (focusing on resolving issues to do with unsuccessful bids or non-performance);Alignment of strategies and actions of SASDA with other complementary initiatives and processes, e.g. those of the DTI, Department of Finance and SETAs; andReporting against agreed KPI’s (e.g. number of new accredited suppliers, number of new jobs created, average life-span of newly created suppliers, etc.).
SASDA Business Model
SASDA’s Business Model
SASDA
SupplierDatabase
Suppliers Buyers
Capacity
Finance
Update supplier info Update opportunities info
Access to supplier infoInforms of opportunities
EnablesMaintains
Awards communicated
Rate and Accredits
Facilitates
Enables
Stake holder
BOARD
GovernReports
Equipment
TrainingTender processand contracts
SupplyTenderplans
Audits, monitors
Learnerships
Mentorsretirees
Facilitates
ProcurementE
Manage
Contracts communicated
SHEQ
Partners
Technical
Accredited Listed
SASDA Implementation
Common
database
Progressive institutionalframework
Broadening of empowerment
Emergence of globally
competitive suppliers
High
Low
End stateBeginning state
Impa
ct
Time
Size of Impact
Common
database
Progressive institutionalframework
Broadening of empowerment
Emergence of globally
competitive suppliers
High
Low
End stateBeginning state
Impa
ct
Time
Size of Impact
SASDA establishment SASDA interventions
SASDA Implementation
Short-term Medium-term Long-term Year One Year Two Year Three Year Four Year Five > Year Five
Consolidation of existing
supplier development
initiatives
Facilitation of HDSAs’
participation in crude
procurement
Facilitation of the transformation of existing
suppliers. Areas of focus will be electrical & instrumental maintenance, transportation
and professional services
Development of suppliers to provide services beyond South Africa's borders
Development and implementation of
interventions based on ‘demand information’, e.g. tender plans. Areas of focus
will be as above.
Development and implementation of interventions based on ‘demand information’,
e.g. tender plans
Confirmation and implementation of ‘quick win’ development initiatives. Areas
of focus will be as above
Development of strategies
for transforming
global procurement
Facilitating HDSA-supplier participation in global procurement
Supplier Classification
Class P – a Black supplier that has the capacity and competencies to deliver
almost immediately on its offers to the industry,
Class R – a Black supplier that requires either a bit of coaching or assistance with
capital raising or partnering with other suppliers of the same good or service,
Class Z - a Black supplier that requires extensive input in either skills
upgrading or capacity building before it is ready to deliver goods and services
it wants to deliver to the industry.
Key Performance Indicators
Total number of supplier staff trained
Number of new suppliers accredited
Total number of jobs created
Number and value of contracts acquired under SASDA guidance
Number and value of projects funded and undertaken
Number of supplier loaded onto database
Value and number of contracts recorded on the database
Tender /bid success rate of SASDA-affiliated HDSA suppliers
Number and value of white companies transformed
Percentage value increase to total procurement spent as a result of SASDA
interventions
“demand driven development”
SASDA’s Value Chain (Metrics Source)
Oil Co.Procurement
SpentStatus
Procurementplan
MatchProcurementOpportunitiesto suppliers
database
IndividualOil companyDevelopment
plansIntervention Tender
Process
Inputs:Audit
DME reportZBEE Report
Outputs:Audit reportProcurement
short fallreport
Metrics:StatisticsBEE % spentBEE spent perCategory% No of BEE toTotal suppliersP,R,ZWomenYouthDisabledCommunityBEE suppliers per value chain% spent per buyer
Inputs36 month
rolling forecastprocurement
plan
InputsProcurement
short fallreport
Outputs:36 month
rolling forecastprocurement
plan
Metrics:StatisticsNo of matching OpportunitiesNo of unmatchingOpportunities% P suppliers%R suppliers% Z suppliersSole suppliersInternational SuppliersWhite businessesMatch per categoryUnmatched per category
Metrics:StatisticsNo Tender plan ReceivedDuration of tender planPlan Total value% R value per valueChain% R value perCategory% BEE penetrationPer category% BEE penetrationPer value chain
Inputs:No matches(Supplier Shortfall Report)
Outputs:Confirmed
matches andNo matches
reports
Metrics:Statistics% sent requiredNo BEE requiredPer categoryNo BEE requiredPer value chainNo R suppliersNo Z suppliersMergersJV’sWhite Companies to be transformedImport replacementR value set asideFor women, youth
Inputs:Signed off
Oil companytargets
Outputs:Project scope
Industry sign off
ProjectScoping
Metrics:StatisticsCost/budgetInterventionsRequiredResources limitR value requiredSuppliers of serviceProject timelineSHEQStandardsContract Minimum requirements gapsPartners contractedType of supplier:P,R,Z
InputsApproved
project plan“Intervention
toolbox”
Outputs:Industry sign off”
Metrics:No project plan signed offR value of Projects% projects to TargetNo projectsIn core businessNo projects in Global spent% non financeResource deployedOn site training provided
Outputs:“OutcomeReport”
Metrics:No tendersIssuedTendersMatchingUnmatchingNo suppliersNotifiedResponses ReceivedBEE short listed
Followup
InputsContract
details fromdatabaseMeetings
Visits
Outputs:ReportsPerformanceContractrenewals
Metrics:Statistics
OIL COMPANY SEGMENT
InputsTenders.
Notification to matchingSuppliers.
Outputs:Signed offTargets perOil company
ProjectPlan
Funding
Inputs:Industrysign off
Inputs:Board
ApprovedPlan
Outputs: Project planApplication
Outputs:Release
of funds byOil co.
Metrics:No signed offR value signedOffProject DurationCategory of spent% contribution toOil Company target,% contribution to value chain% contribution toTotal spentNumber of jobsNumber trained% contribution toIndustry target
Metrics:Total R value paidProject fundingOps fundingNon financeContribution% fund to total Procurement% fund to EBITDA
SASDA’s Value Chain (Metrics Source)
Identifybusiness
opportunities AwarenessPrograms
ID ofProspective
Supplier
Assessmentand “gap
Closure ID”
ProjectProposal
PlanCertification
TenderProcess
Outputs:Awarenessreport
Inputs:DME report
AuditContract renew.
Oil companyTender plans
Forecast reports
Outputs:OpportunityGap report% spentreport
Inputs“Opportunitygap report”
InputsAwareness report Oil co. dataOwn data
Outputs:“Prospect list”EnrollmentApplications
InputsEnrollmentapplication
Credit checkOrg. Health
Audit
Outputs:Assessment/“Gap closure
report”P, R, Z
InputsAssessment
&“Gap closure
report”(project spec.)
Outputs:Project scope
BudgetApplication
Industry sign off
Intervention
InputsProject scope
Budget“Intervention
toolbox”
Outputs:Developedsuppliers“Sign off”
Referral form
Outputs:Audit reportBEE ScoreAccreditation
InputsReferral form
Audit
Outputs:“OutcomeReport”
Followup
Inputs“OutcomeReport”
MeetingsVisits etc.Feed back
Outputs:PerformanceReportContractrenewals
HDSA SUPPLIER SEGMENT
InputsAcc. Suppliers
Tenders.Notification to matchingSuppliers.
Metrics:No tenders receivedNo quotes received% procurement spentNo of BEE suppliers as % of totalSuppliers% procurement spentOf total procurementBy individual Oil CoAmount spent on Supplier development5Spent per category For Industry and Individual Oil Co
Metrics:Number of advertsAmount spentNo of suppliers Contacted per categoryValue of opportunityType of mediumUsedProject leader ResponsibleDuration of programResponse volume bySupplier calcification
Metrics:No applicationsSupplier PSupplier RSupplier ZCategories AdvertisedYouth owned busWomen owned busPeople with disabilityCommunity enterpriseSupplier by region/province
Metrics:P supplier gapsR supplier gapsZ supplier gapsTechnicalBusinessStandardsSHEQFinanceMaterialsEquipmentFacilitiesLogisticstransport
Metrics:No projects SuccessfulProject valueFinance raisedProjects doneProject receivedProjects approvedProjects rejectedProjects signed offProject % per Category of spend% spent per category
Metrics:No of Co developed;Amount spentNo trainedQualification typeIntervention typeStandards obtainedJVs formedMergers doneAcquisitions doneFinance raised
Metrics:No accreditedNumber of 50,1%Number of 25,1%Number registeredNumber Cos per CategoryRevenue madeNo of applicationsReceived; processes
Metrics:Number of Contracts wonValue of ContractsJobs created50,1% and 25,1%BEE spent as %of total proc
Metrics:No of renewalsIncreased contract ValueIncreasedJobs createdQuality of serviceConducive Environment CreatedDiversification
Income Statements - 28 February 2007 Un-audited Audited
REVENUE 28-Feb-07 28-Feb-06 Contributions from members 5,250,000 5,263,160
Donations received - 140,000
Verification income 112,019 -
Income - Insurance receipt 184,979 -
Total Revenue 5,546,998 5,403,160
EXPENSES
Salaries 1,736,905 151,773
Office supplies & communication 332,156 136,216
Marketing 377,943 56,328
Consulting 889,268 871,770
Office property and equipment rentals 431,911 264,835
Audit & other admin expenses 311,695 97,397
Travel & Accommodation 464,645 204,727
Total expenses before depreciation 4,544,523 1,783,046 NET PROFIT BEFORE DEPRECIATION 1,002,475 3,620,114 Net Finance Income 80,665 52,365 Depreciation (181,409) (83,943) NET PROFIT BEFORE TAX 901,731 3,588,536 Taxation (261,502) (1,000,075) NET PROFIT FOR THE YEAR 640,229 2,588,461
Balance Sheet - 28 February 2007 Un-audited Audited
28-Feb-07 28-Feb-06
ASSETS
Non Current Assets 1,293,859 695,728
Furniture & fittings 168,901 199,871
Office equipment 135,689 135,818
IT Equipment 859,202 218,368
Leasehold improvements 130,068 141,671
Current assets 4,726,603 3,542,564
Trade and Other receivables 1,052,837 347,450
Cash and cash equivalents 3,673,766 3,195,114
Total Assets 6,020,461 4,238,292
EQUITY AND LIABILITIES
Equity 3,228,690 2,588,461
Accumulated funds 3,228,690 2,588,461
Current liabilities 2,791,771 1,649,831
Trade and other payables 1,530,194 649,756
Current taxation payable 1,261,577 1,000,075
EMPLOYMENT OF CAPITAL 6,020,461 4,238,292
SASDA Governance & Processes
(i) Board Charter – set out duties, rules & processes for Board of directors
(ii) Board Committees Audit, Finance & RiskHuman Resources & RemunerationStrategy & Planning
(iii) Verification process – verification of suppliers BEE status, technical & commercial competence
(iv) Intervention process – process to develop suppliers to be technically & commercially competent
(v) Business Development Charter - Developed by SASDA to operationalise SASDA’s business plan
(vi) Policies & Procedures – Developed and implemented
Partnerships
Financial support –Standard Bank, Absa, Nedbank, IDC, ,Khula
Technical & SHEQ – Engineering consultants to assist in analyzing technical specifications from the industry
Mergers & Acquisitions advisors – database of law firms and corporate/financial advisors mainly for transforming non BEE suppliers,i.e. Law firms, Sizwe Ntsaluba, WDB Investment Holdings, Wip Capital, Nations Capital, Ngubane &Co,
Training institutions (business schools) – UCT, Wits, USB, Kwazulu Natal, Cida Campus.
Investment groups and BEE Advisory consultants
SASDA Supplier Database System
Gathers supplier general information and information related to BEE.
Gathers buyers contracts information per category and sub- category.
Analyse and interpret submitted information to generate preliminary BBBEE score
pending verification.
Determines supplier BEE Procurement Recognition Level.
Generates industry indicator progress reports.
Generate consolidated progress reports.
Auto match tenders to potential suppliers using categories and sub-categories.
The system sends notification to matching suppliers.
When there is no match, then the opportunity for intervention is identified.
Enables buyers to search for suppliers using categories and sub categories to filter.
“demand driven development”
KPI per Charter Progress1. CALL SUPPLIERS TO REGISTER ON
SASDA DATABASEWE MANAGED TO CALL 10935(9675 FROM PETRO-SA AND 1260 FROM CALTEX) SUPPLIERS TO REGISTER ON OUR DATABASE.
FAX FORMS TO SUPPLIERS 1141
E-MAIL FORMS TO SUPPLIERS 1596
POST FORMS TO SUPPLIERS 12
SUPPLIERS TO REGISTER ONLINE 551
SUPPLIERS ALREADY RECEIVED FORMS (REPEATED NUMBERS)
962
SUPPLIER ALREADY REGISTERED 1131
NOT EXIST 1595
MUNICIPALITY 85
SCHOOLS/UNIVERSITY 183
DOCTORS/MEDICAL INS 59
PRIVATE HOUSE 89
NO ANSWER 563
NOT INTERESTED 234
WRONG NUMBERS 285
NUMBER ALWAYS BUSY 80
NUMBER INCOMPLETE 139
NO NUMBER 259
OTHER (BANKS,CLUBS ect.) 76
Database Consolidation Project
PRELIMINARY BEE CONTRIBUTION LEVELS OF REGISTERED SUPPLIERS
Contributor Level Number of Suppliers % to total registered
Contribution Level 8 60 5.08%
Contribution Level 7 49 4.15%
Contribution Level 6 75 6.35%
Contribution Level 5 65 5.50%
Contribution Level 4 40 3.38%
Contribution Level 3 38 3.21%
Contribution Level 2 28 2.37%
Contribution Level 1 42 3.55%
Non Compliant 784 66.33%
Totals 1182 100%
Suppliers Registered to date
FinaliseRating
Verification & Processing
Gather data,Interpret &Review
DataGathering
IssueService Enquiry and Form
Forms to client
Complete Forms
Submitcompleted form
Review form for completeness
Conduct verificationInterviews & site visits
Index andFile Documentation
Draft a rating report& forward to client
SASDA and the clientengage each other
on the contents
Finalize the ratingreport
Issue final verification report
and certificate
Client
Admin Staff
Jnr Evaluator
Snr Evaluator
White Font =Control/Quality/integrity
Step
BBBEE Verification FrameworkBBBEE Verification Framework
FormsForms
Verification Methodology
Issue BBBEE verification
Measurement Pack
Both parties sign terms of verification
engagement
Develop a Verification plan & Preliminary Report
Client send back forms &
supporting docs
Review forms & docs
for completeness
Verification Manager sign off
VerificationManager
** See detailed process
InterventionsRoad shows requesting opportunities held with all oil companies in October 2005 The Board Strategy session held on 15/02/06, agreed on the following activities for 2006. Internal projects were done BUT NO external projects were undertaken.
We only received one opportunity from Total to develop Inkwali Engineering.
Internal projects External projects(development area)
- Database set up & management
- Electrical & Instrumental maintenance
- Business assessment tool - Transportation
- Procurement spend categories - Professional Services
- Interventions processes & methodologies
ChallengesDifferent expectations from industry & DME( mandate);
Some oil companies continue to do their own supplier development, thus duplicating SASDA;
Establishment of satellite offices;
Establishment of the verification entity;
Information on procurement opportunities from oil companies;
Transfer of oil companies database to SASDA;
SASDA operations highly depends on the buyers;
Not all oil companies utilize SASDA’s services;
Recruitment of staff ;
Funding structure for SASDA; operational and projects, late payment;
Budget and Business Plan still not approved;
Crude oil procurements;
Different expectations from industry & DME( mandate);
Satellite offices being disputed by Industry;
Stakeholder board versus professional independent board.
Way forwardDME and Oil companies to provide direction regarding SASDA’s mandate;Full utilization of SASDA services and resourcing;Clear targets set for the individual Oil companies in view of 2010 industry charter deadline;Agreement on regional satellite offices to support rural entrepreneurs and enable on job training;Transfer of supplier database by oil companies to SASDA;Develop common specification framework for Industry;Restructuring of SASDA to be a multisectoral development agency;Monitoring and evaluation of performance of individual companies by the regulator;SLA between Oil companies, DME and SASDA prioritised;Review of charter to have clearly defined and measurable deliverables;Clarity on crude, jet fuel etc a part of value chain to be prioritised;Funding model for SASDA outlined by the regulator;Regulations to be developed to define SASDA’s role in enterprise development;Quarterly reviews of performance should be considered;Regulator should consider compliance to empowerment as a prerequisite to licensing.
ECONOMY IS PUMPING BUT... ( Rallying Cry)“Companies don’t feel under the microscope on other things in the
same way as they do on equity issues, and this is one of the things I am very sore about.
You do everything to put procurement-development programmes in place, but the companies are not interested and undermine it.
“This is what is happening, for instance, with the oil companies.A formal supply-development programme was put in place with
some resources and some personnel, but the oil companies will find every reason not to make this programme work,” she said.
Business Times www.sundaytimes.co.zaApril 15 2007
“demand driven development”
Thank you
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