Pan African Procurement - A view from the Flight Tower

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"Many large companies consider the continent of Africa  (excluding South Africa) as an enigma.  Historically, these organisations have resigned to the fact that operating in Africa will be relatively inefficient in terms of their procurement, and sometimes other activities." Greg Buckley of Volition tells Smart Procurement that "The justification for this has traditionally been the combination of small market share, challenging logistics, uncertain politics, inconsistent trade protocol, fragile currencies and unsophisticated administration."

"Today, many multi-nationals have become leaner in their procurement operations at home and in 'first-world' or 'higher-scale' markets, through stronger administrative control, and Strategic Sourcing competence and tenacity. In order to continue to strip cost from their global supply chains, these companies are looking to Africa for further opportunities,  " he says.

Some Individual African countries have the required scale

"Though some individual African countries have provided the scale in market for specific intervention in the past, most multi-nationals are taking a regional view of Africa in order to both justify their attention and to unlock value.
Generally, the following factors are perceived to hold potential opportunity:

  • The general lack of any previous Strategic Sourcing activity.
  • The ability to find scale/leverage by consolidating the view of commodities across countries in the region.
  • The propensity to interest non-traditional suppliers, who are also looking for new markets.
  • The propensity to collaborate between countries and suppliers, to enhance supply chain efficiency."
"Faced with this view, most companies then seek ways to execute specific interventions. Often, these initiatives end up being run from a 'control tower' in South Africa. This is due to several realities:
  • Often South Africa represents the biggest African footprint for the multi-national.
  • South Africa is normally the most sophisticated country in terms of administration and management.
  • Multi-nationals draw on resources from South Africa because the required skills are more prevalent there and are perceived to be better.
  • South Africa has the most stable infrastructure (although I wrote part of this in Johannesburg in the dark - Go Eskom!).
  • African Head Office is often located in South Africa."
Pan African Procurement opportunities abound

For better or for worse, there exists a great opportunity for South African Procurement professionals to participate in some large scale procurement projects stretching from the Cape of Good Hope to the Mediterranean. Participation could be within their organisations' operations in Africa, or in an advisory capacity as a service provider to industry.

At present, many of these interventions are savings-focused. In other words, the mandate to participants is to 'go and find savings that result in our company paying less for the same or more...' and often this is extended to include 'and while you are at it, make sure you leave a sourcing competency behind wherever you go.' These intentions are great, but success is not achieved simply by connecting to the first Chinese Business Website or by flying around and putting locals to sleep with sourcing training programs. The playing field is uneven and nothing can be taken for granted. Africa has many characteristics that demand customised approaches.

Buckley states that "Our growing experience in these initiatives has begun to populate a list of findings that recur on a regular basis-
  • Logistics is a great leveller in Africa. One can buy products elsewhere and often pay a fraction of the price (look at that Chinese website). However, given the geographic reality in Africa, the costs of logistics often keep local suppliers competitive.
  • Procurement skills in Africa are generally not advanced. This is an opportunity, but is also a hindrance.
  • Data is difficult to secure. If not on the back of a cigarette box it is normally simplistic and does not go below category level in the GL.
  • Product rationalisation is often an immediate opportunity given the previous autonomy of African operations.
  • Trade agreements often exist between regional neighbours. These can present opportunities for savings, but are often overlooked or are not common knowledge.
  • After-sales support is often lacking.
  • A lack of after-sales support is often assumed, but this is not always the case.
  • Corruption is rife. This is not a clich√©, nor is it unique to Africa. It is a fact and must be acknowledged. However, this does not mean that it cannot be overcome. It simply means that it can add to the total cost of ownership and must be dealt with.
  • Incentives often exist within individual countries to encourage local content spending.
  • Many multi-nationals intend to promote local economies and local suppliers in developing countries, even if it results in paying a slight premium."
Role the South Africa should play

Given its geographical position in Africa and relative  in terms of skills and infrastructure, South Africa should play a role in promoting and improving Sourcing and Procurement management in Africa. It can benefit commercially through this activity but must seek to create sustainable improvements. The 'control tower' approach may suffice to realise short-term gains. However, participation in activities by resources within countries will promote sustainability. This is not only about doing 'the right thing'. These countries are, or can become, significant trade partners and customers of South Africa, and it is therefore in our interest to assist in their enhancement.

The Author of this article,
Greg Buckley of  Volition Consulting Services
can be contacted at gbuckley@volition.co.za


February 2008

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