Inefficient procurement cost Africa $31.5-billion – KPMG survey

Ineffective procurement, expressed as value leakage, is estimated to have cost the African continent $31.5-billion, revealed KPMG in a recent report. Sub-Saharan Africa contributed $24.9-billion to that amount.

While the report noted that the role of procurement in organisations was becoming increasingly strategic, 73% of C-level executives polled during KPMG’s Power of Procurement 2.0 Survey did not believe that procurement added real value.

Companies appeared to remain focused on traditional cost-optimisation initiatives, rather than value-add, said KPMG associate director and regional country leader for supply chain and procurement practices Dinesh Kumar.

“For today’s procurement functions, a single-minded focus on reducing input costs is not enough and evidence shows that investing in mature procurement facilities really pays off in terms of top-line growth,” noted Kumar.

Furthermore, he suggested that procurement organisations in Africa struggle with basic issues such as a low use of technology, inadequate skills and non-compliance.

“These issues are more evident in the public sector, though they still exist to different degrees in the private sector,” Kumar noted.

While procurement technologies had evolved significantly in the last 20 years, a lack of executive support and insufficient training drive a resistance by African organisations to adopt technology and achieve operational efficiency.

“For instance, 56% of organisations do not use tracking tools and some 66% do not track supplier performance.”

This is further compounded by a lack of appropriate procurement skills in Africa. Key skills, such as analytics, were not adequately incorporated into educational programmes and 51% of organisations believed their lack of qualified personnel posed a moderate to severe risk.

“One of the reasons for this is that procurement is not seen as the career of choice,” Kumar asserted.