Black-economic-empowerment- (BEE-) compliant companies, the private sector and government should discuss ways in which the mining industry can ensure it creates business opportunities for reliable and effective BEE-compliant companies, says local mining pumps engineering company Turbo Tech Pumps.
Company operations manager Kyle Erasmus tells Mining Weekly that the new Broad-Based Black Economic Empowerment (BBBEE) Act will make it increasingly difficult for mining companies to comply with Mining Charter requirements, and mainly leaves two avenues for compliance to be achieved, one of them being procurement through highly BEE-compliant supply chain partners.
Therefore, it is important that, as the industry increases its focus on this priority, BEE companies are developed into sustainable manufacturing companies to become reliable and effective supply chain partners.
Turbo Tech Pumps has found it difficult to break into the supply chain markets of large companies in the country and is calling for the establishment of a multiparty forum to discuss how industry can best work with highly BEE-compliant companies that seek to supply industry with products and services, and wish to be part of our country’s solutions and not its problems.
Erasmus points out that 66.6% women- and black-owned Turbo Tech Pumps is an original-equipment manufacturer (OEM), which supplies pumping solutions to the mining industry, with mining companies such as Anglo American and Exxaro among its existing clients. He states that these companies have made initial contributions to the process of BEE company development; however, there is still a long way to go.
He notes that Turbo Tech has manufactured a flagship mine dewatering sump pump that has proven to be highly effective at two mining sites; however, the company has been struggling to secure opportunities to showcase this pump and other products to other miners.
“The miners tell us that they have too many vendors and that they do not know us or whether they can trust the business. . . in my opinion, the only way to know a vendor is to work with it and let its work ethic, product and service help you decide whether to keep using it, based on a proper evaluation model,” Erasmus elaborates.
He states that, amid the current difficult economic situation worldwide, not a single company can afford to say it has enough vendors or that it is happy to pay an ‘exorbitant’ price for products and services that might not even be the best on the market. The status quo is being tested worldwide and South African companies should be doing the same.
“This economic situation calls for unlimited options and service offerings. Excluding highly BEE-compliant companies from a company’s pool of vendors is not ensuring that the company gets the best possible service at the best possible price, and that the country as a whole benefits.”
Erasmus further highlights that having a bigger pool of vendors that can offer competitive prices and services will ensure that mining companies get value for money, instead of paying inflated prices to a better established company that might not be BEE-compliant.
He reiterates that his call for the formation of a forum to discuss BEE business development with the private sector and government stems from the company’s suspicion that it is not the only highly BEE-compliant small and medium-sized enterprise (SME) that encounters “resistance” from industry, which is unsustainable, as such companies form the base of job creation and economic development.
“We want to find out if there are other companies experiencing similar frustrations . . . we want mining companies to indicate to us if there is an attitude problem and, if so, what can be done to change it, and government to see how it can best facilitate the development of BEE companies as suppliers.
“Our call is not to stop companies from using other suppliers’ products and services so that they buy exclusively from us because we are BEE-compliant. All we are saying is that they should also allow us and other BEE-compliant companies to have a foot in the door and to give us the opportunity to prove that we’re capable of providing a service,” he elaborates.
Meanwhile, Erasmus admits that many companies have previously been disappointed by BEE-compliant suppliers: “We understand they’ve been bitten before, but that doesn’t mean you slam the door on everyone afterwards.”
He also points out that most of the BEE-compliant suppliers that could not deliver the products that they had been contracted to provide were traders and not OEMs.
“These companies were buying from manufacturing companies and selling to the mining companies, which really did not benefit anyone, as the traders had to sell the products at high prices to make a profit and the mining companies ended up paying more than they would have, had they bought from the manufacturer directly.”
As an OEM, Turbo Tech Pumps not only ensures that its clients receive high-quality products but also helps with job creation and developing other businesses, as many of the components or materials used for its products are locally sourced, or from countries that are party to the Brazil, Russia, India, China and South Africa, or Brics, grouping’s preferential trade agreement, Erasmus states.
He proposes that companies create and implement trial initiatives, where highly BEE-compliant companies are contracted on a trial basis and are included on a company’s vendor list only if their services and products are up to standard at the end of the trial contract.
The trial can be for the supply of a smaller number of products or service offerings for shorter periods, or any other similiar strategy that will enable the BEE supplier to prove its competence before a decision is made to add it to the miner’s vendor list.
Government’s Role
Erasmus tells Mining Weekly that the current government programmes that have been put in place to promote and help BEE suppliers have not made adequate inroads.
“Government needs to take a more strategic approach to BEE companies’ long-term growth as most BEE companies fail shortly after start-up. I believe this requires commitment at Ministerial level, with specific targets and execution strategies [included],” he adds.
Erasmus cites government’s determination that 70% of the content of water valves be locally manufactured as a way to help facilitate the growth of BEE suppliers.
However, he cautions that, owing to a limited OEM database in the valves industry, the determination has caused a lot of confusion; it has also caused delays because of limited supply and products being unavailable, mainly because there has been no development platform provided with the legislation.
“In this economy, where government constantly encourages the start of SME businesses to deal with unemployment and inequality, there needs to be greater commitment to creating an environment that enables local manufacture, and that can be achieved only through the creation of a market for locally manufactured products,” Erasmus concludes.