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