Procurement of local goods must be driven by industrialisation

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Edgar Brandt

Windhoek-The mining industry’s local procurement of goods and services increased by over 50 percent between 2014 and 2016, from over N$7 billion (34 percent of total industry revenue) in 2014 to more than N$11 billion (44 percent of total industry revenue) in 2016, representing an increase of close to N$4 billion. The Chamber of Mines is in the process of evaluating the local procurement figures for 2016 and hope to make these available by next month.

However, CEO of the chamber, Veston Malango, has emphasised that the level of procurement of local goods and services can increase significantly depending on the level of industrialisation of the country. “In our opinion at the chamber the local content is really a function of the level of industrialisation. In an economy like in South Africa they produce, to a great extent, even the mining equipment and many of the components required by miners. So there the foundry industry is well established. That upstream manufacturing component needs to be developed locally …You need to have industries that produce the goods the mining industry requires,” Malango said yesterday.

He added that local content in the industry can make a significant impact on the economy and pointed out that Namibia does indeed have legislation to encourage the procurement of local goods and services as much as possible. “If you look at the Minerals Act, one of the conditions for receiving a mining licence is that investors must procure local goods and services as much as possible and should also employ Namibians as much as possible,” Malango said.

A report launched this week by the Canadian International Resources and Development Institute (CIRDI) and the Mining Shared Value (MSV), in conjunction with the Namibia University of Science and Technology (NUST), on Local Procurement Regulations in the Mining Industry in Namibia and South Africa, recommends that building up the capacities of suppliers and focusing on introducing new manufactured goods at competitive prices need to be a priority. “In addition to capacity building targeted at suppliers, there are significant opportunities to coordinate across mining companies to aggregate orders in a way that allows domestic suppliers to utilise as the basis for expansion.”

The study further shows that there are many non-regulatory approaches and programs that can help mining companies purchase more local goods and services.
“Government creation of programs including supplier portals, capacity-building support for businesses, coordination of aggregate orders by industry and regional cooperation all offer opportunities that should not be ignored. In addition, the governments of both countries should engage with industry to better understand the non-regulatory incentives for local procurement that can be supported,” reads the report.

At the launch of the report on Tuesday, the NUST vice-chancellor Dr Tjama Tjivikua noted that a report providing insight into the impact of local procurement regulations could not have been released at a more opportune time. “Bearing in mind that local procurement promotes local participation in the mainstream economy and advances the socio-economic benefits that are derived from the mining industry, the current downturn in the mining industry has necessitated a re-look at our key policies, as well as calls for revision and interrogation of current practices within sub-Saharan Africa.

It is critical that we align them with international best practice. At the same time the other zones of the world also need to step up their regulations to increase the economic spin-offs that accrue to the local industries,” said Tjivikua in a speech read on his behalf by Prof Errol Tyobeka, special advisor to the VC.

“We have noted that this study on local procurement was conducted in South Africa as well. While the economic relationship between South Africa and Namibia is significant, the South African mining industry is relatively bigger than that of Namibia. Of importance is that our country can learn from the mistakes that other countries have made and build on the successes that we have registered to date. Therefore, we will have to draw relevant lessons from others on how best certain regulations can be crafted and modified in the interest of increasing local procurement. Greater impact will be achieved if the results and findings of the report are used to inform formulation of regulations on local procurement in the rest of sub-Saharan Africa,” said Tjivikua.

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