portfolio committee cpt parliament 10 may 2007 mmbulaheni mashanyu sasda ceo “in the event of a...

Portfolio Committee CPT Parliament10 May 2007

Mmbulaheni MashanyuSASDA CEO

“In the event of a loss of cabin pressure, the oxygen masks will drop from above your head. Pull the mask over your mouth and nose and continue to breathe normally. Please ensure your own mask is secured first before you assist other passengers, including children.”

SASDA PRESENTATION

Introduction & BackgroundThe Department of Minerals and Energy (DME) requested PetroSA to lead the development of HDSA suppliers through a Supplier Development Programme for the Energy sector. PetroSA’s in-house Supplier Development Programme is largely informed by the study commissioned by DME to develop suppliers for the liquid fuels industry;The pilot was expected to achieve eight broad objectives:

Platform for cost and operational efficiency,Mayor industry players will understand DME requirements,Demonstrate the feasibility of Concept,Valuable lessons will be learnt,Development of Operational Framework,Will serve as a training ground for the industry,Creation of an implementation model,Creates an industry wide awareness.

Pilot Project ResultsNumber of companies 5Investment made by PetroSA R14millionRevenue made R72,3millionFulltime Employees 90 +38 newMarket Expansion/ reach refinery, Saldanha, Milnerton, FA platform and OrcaSuccessful project 2006 ShutdownObservation 5 companies in 1year, today we could have established 25Women -Average Education level Standard 8( Grade 10)Achievement All entities held their annual general meetings successfully

Note: these are Z suppliers, and prove that rural development can work properly supported

Industry’s Need for ChangeThe inability of HDSA suppliers to diversify their customer base (i.e. to supply more than one oil company);

Lack of timely access to information about procurement opportunities;

Limited availability of skills critical to core industry operations;

Lack of access to financial resources, especially for capitalisation purposes;

The domination of large incumbent suppliers;

Long-standing relationships between incumbent suppliers and the industry;

fronting;

inefficiencies due to duplication of some BEE procurement processes, and

misgivings by the oil companies about the potential for ‘free-rider ship’, i.e. the potential for competitors to have access to suppliers in whose development they did not invest.

SASDA’s Mandate

Vision

To be a leader in developing globally competitive Black South African suppliers in

the petroleum and liquid fuels industry.

Mission

To accelerate progress in the empowerment of historically-disadvantaged South

Africans through increased access to industry procurement opportunities by:– Accrediting suppliers to evaluate their BEE status; – Developing black suppliers skills to meet industry’s required

standards;– Capacity building through direct support and partnership with

developmental agencies.

SASDA’s Strategic ObjectivesTo consolidate existing industry supplier development efforts, by:

harmonising suppliers’ accreditation;

Fully utilising the common industry database;

To implement and manage supplier development programme;

To actively source suppliers according to industry’s requirements;

To preferentially develop suppliers from designated* groups

To increase access to information by HDSA’s;

To facilitate HDSA supplier participation in global procurement;

To provide a mechanism for monitoring and auditing of compliance and

measure successes, through:

good corporate governance of the Agency

regular feedback between the Agency and industry

SASDA’s Functions

The refinement of BEE criteria, targets and measurements as well as the development of accreditation standards;The management and further development of the empowerment supplier database (including broadening the database to also include information about procurement opportunities and service providers);The establishment of enabling relationships between suppliers and service providers Market research, industry and supplier monitoring and reporting;Clarification, on request (focusing on resolving issues to do with unsuccessful bids or non-performance);Alignment of strategies and actions of SASDA with other complementary initiatives and processes, e.g. those of the DTI, Department of Finance and SETAs; andReporting against agreed KPI’s (e.g. number of new accredited suppliers, number of new jobs created, average life-span of newly created suppliers, etc.).

SASDA Business Model

SASDA’s Business Model

SASDA

SupplierDatabase

Suppliers Buyers

Capacity

Finance

Update supplier info Update opportunities info

Access to supplier infoInforms of opportunities

EnablesMaintains

Awards communicated

Rate and Accredits

Facilitates

Enables

Stake holder

BOARD

GovernReports

Equipment

TrainingTender processand contracts

SupplyTenderplans

Audits, monitors

Learnerships

Mentorsretirees

Facilitates

ProcurementE

Manage

Contracts communicated

SHEQ

Partners

Technical

Accredited Listed

SASDA Implementation

Common

database

Progressive institutionalframework

Broadening of empowerment

Emergence of globally

competitive suppliers

High

Low

End stateBeginning state

Impa

ct

Time

Size of Impact

Common

database

Progressive institutionalframework

Broadening of empowerment

Emergence of globally

competitive suppliers

High

Low

End stateBeginning state

Impa

ct

Time

Size of Impact

SASDA establishment SASDA interventions

SASDA Implementation

Short-term Medium-term Long-term Year One Year Two Year Three Year Four Year Five > Year Five

Consolidation of existing

supplier development

initiatives

Facilitation of HDSAs’

participation in crude

procurement

Facilitation of the transformation of existing

suppliers. Areas of focus will be electrical & instrumental maintenance, transportation

and professional services

Development of suppliers to provide services beyond South Africa's borders

Development and implementation of

interventions based on ‘demand information’, e.g. tender plans. Areas of focus

will be as above.

Development and implementation of interventions based on ‘demand information’,

e.g. tender plans

Confirmation and implementation of ‘quick win’ development initiatives. Areas

of focus will be as above

Development of strategies

for transforming

global procurement

Facilitating HDSA-supplier participation in global procurement

Supplier Classification

Class P – a Black supplier that has the capacity and competencies to deliver

almost immediately on its offers to the industry,

Class R – a Black supplier that requires either a bit of coaching or assistance with

capital raising or partnering with other suppliers of the same good or service,

Class Z - a Black supplier that requires extensive input in either skills

upgrading or capacity building before it is ready to deliver goods and services

it wants to deliver to the industry.

Key Performance Indicators

Total number of supplier staff trained

Number of new suppliers accredited

Total number of jobs created

Number and value of contracts acquired under SASDA guidance

Number and value of projects funded and undertaken

Number of supplier loaded onto database

Value and number of contracts recorded on the database

Tender /bid success rate of SASDA-affiliated HDSA suppliers

Number and value of white companies transformed

Percentage value increase to total procurement spent as a result of SASDA

interventions

“demand driven development”

SASDA’s Value Chain (Metrics Source)

Oil Co.Procurement

SpentStatus

Procurementplan

MatchProcurementOpportunitiesto suppliers

database

IndividualOil companyDevelopment

plansIntervention Tender

Process

Inputs:Audit

DME reportZBEE Report

Outputs:Audit reportProcurement

short fallreport

Metrics:StatisticsBEE % spentBEE spent perCategory% No of BEE toTotal suppliersP,R,ZWomenYouthDisabledCommunityBEE suppliers per value chain% spent per buyer

Inputs36 month

rolling forecastprocurement

plan

InputsProcurement

short fallreport

Outputs:36 month

rolling forecastprocurement

plan

Metrics:StatisticsNo of matching OpportunitiesNo of unmatchingOpportunities% P suppliers%R suppliers% Z suppliersSole suppliersInternational SuppliersWhite businessesMatch per categoryUnmatched per category

Metrics:StatisticsNo Tender plan ReceivedDuration of tender planPlan Total value% R value per valueChain% R value perCategory% BEE penetrationPer category% BEE penetrationPer value chain

Inputs:No matches(Supplier Shortfall Report)

Outputs:Confirmed

matches andNo matches

reports

Metrics:Statistics% sent requiredNo BEE requiredPer categoryNo BEE requiredPer value chainNo R suppliersNo Z suppliersMergersJV’sWhite Companies to be transformedImport replacementR value set asideFor women, youth

Inputs:Signed off

Oil companytargets

Outputs:Project scope

Industry sign off

ProjectScoping

Metrics:StatisticsCost/budgetInterventionsRequiredResources limitR value requiredSuppliers of serviceProject timelineSHEQStandardsContract Minimum requirements gapsPartners contractedType of supplier:P,R,Z

InputsApproved

project plan“Intervention

toolbox”

Outputs:Industry sign off”

Metrics:No project plan signed offR value of Projects% projects to TargetNo projectsIn core businessNo projects in Global spent% non financeResource deployedOn site training provided

Outputs:“OutcomeReport”

Metrics:No tendersIssuedTendersMatchingUnmatchingNo suppliersNotifiedResponses ReceivedBEE short listed

Followup

InputsContract

details fromdatabaseMeetings

Visits

Outputs:ReportsPerformanceContractrenewals

Metrics:Statistics

OIL COMPANY SEGMENT

InputsTenders.

Notification to matchingSuppliers.

Outputs:Signed offTargets perOil company

ProjectPlan

Funding

Inputs:Industrysign off

Inputs:Board

ApprovedPlan

Outputs: Project planApplication

Outputs:Release

of funds byOil co.

Metrics:No signed offR value signedOffProject DurationCategory of spent% contribution toOil Company target,% contribution to value chain% contribution toTotal spentNumber of jobsNumber trained% contribution toIndustry target

Metrics:Total R value paidProject fundingOps fundingNon financeContribution% fund to total Procurement% fund to EBITDA

SASDA’s Value Chain (Metrics Source)

Identifybusiness

opportunities AwarenessPrograms

ID ofProspective

Supplier

Assessmentand “gap

Closure ID”

ProjectProposal

PlanCertification

TenderProcess

Outputs:Awarenessreport

Inputs:DME report

AuditContract renew.

Oil companyTender plans

Forecast reports

Outputs:OpportunityGap report% spentreport

Inputs“Opportunitygap report”

InputsAwareness report Oil co. dataOwn data

Outputs:“Prospect list”EnrollmentApplications

InputsEnrollmentapplication

Credit checkOrg. Health

Audit

Outputs:Assessment/“Gap closure

report”P, R, Z

InputsAssessment

&“Gap closure

report”(project spec.)

Outputs:Project scope

BudgetApplication

Industry sign off

Intervention

InputsProject scope

Budget“Intervention

toolbox”

Outputs:Developedsuppliers“Sign off”

Referral form

Outputs:Audit reportBEE ScoreAccreditation

InputsReferral form

Audit

Outputs:“OutcomeReport”

Followup

Inputs“OutcomeReport”

MeetingsVisits etc.Feed back

Outputs:PerformanceReportContractrenewals

HDSA SUPPLIER SEGMENT

InputsAcc. Suppliers

Tenders.Notification to matchingSuppliers.

Metrics:No tenders receivedNo quotes received% procurement spentNo of BEE suppliers as % of totalSuppliers% procurement spentOf total procurementBy individual Oil CoAmount spent on Supplier development5Spent per category For Industry and Individual Oil Co

Metrics:Number of advertsAmount spentNo of suppliers Contacted per categoryValue of opportunityType of mediumUsedProject leader ResponsibleDuration of programResponse volume bySupplier calcification

Metrics:No applicationsSupplier PSupplier RSupplier ZCategories AdvertisedYouth owned busWomen owned busPeople with disabilityCommunity enterpriseSupplier by region/province

Metrics:P supplier gapsR supplier gapsZ supplier gapsTechnicalBusinessStandardsSHEQFinanceMaterialsEquipmentFacilitiesLogisticstransport

Metrics:No projects SuccessfulProject valueFinance raisedProjects doneProject receivedProjects approvedProjects rejectedProjects signed offProject % per Category of spend% spent per category

Metrics:No of Co developed;Amount spentNo trainedQualification typeIntervention typeStandards obtainedJVs formedMergers doneAcquisitions doneFinance raised

Metrics:No accreditedNumber of 50,1%Number of 25,1%Number registeredNumber Cos per CategoryRevenue madeNo of applicationsReceived; processes

Metrics:Number of Contracts wonValue of ContractsJobs created50,1% and 25,1%BEE spent as %of total proc

Metrics:No of renewalsIncreased contract ValueIncreasedJobs createdQuality of serviceConducive Environment CreatedDiversification

Income Statements - 28 February 2007 Un-audited Audited

REVENUE 28-Feb-07 28-Feb-06 Contributions from members 5,250,000 5,263,160

Donations received - 140,000

Verification income 112,019 -

Income - Insurance receipt 184,979 -

Total Revenue 5,546,998 5,403,160

EXPENSES

Salaries 1,736,905 151,773

Office supplies & communication 332,156 136,216

Marketing 377,943 56,328

Consulting 889,268 871,770

Office property and equipment rentals 431,911 264,835

Audit & other admin expenses 311,695 97,397

Travel & Accommodation 464,645 204,727

Total expenses before depreciation 4,544,523 1,783,046 NET PROFIT BEFORE DEPRECIATION 1,002,475 3,620,114 Net Finance Income 80,665 52,365 Depreciation (181,409) (83,943) NET PROFIT BEFORE TAX 901,731 3,588,536 Taxation (261,502) (1,000,075) NET PROFIT FOR THE YEAR 640,229 2,588,461

Balance Sheet - 28 February 2007 Un-audited Audited

28-Feb-07 28-Feb-06

ASSETS

Non Current Assets 1,293,859 695,728

Furniture & fittings 168,901 199,871

Office equipment 135,689 135,818

IT Equipment 859,202 218,368

Leasehold improvements 130,068 141,671

Current assets 4,726,603 3,542,564

Trade and Other receivables 1,052,837 347,450

Cash and cash equivalents 3,673,766 3,195,114

Total Assets 6,020,461 4,238,292

EQUITY AND LIABILITIES

Equity 3,228,690 2,588,461

Accumulated funds 3,228,690 2,588,461

Current liabilities 2,791,771 1,649,831

Trade and other payables 1,530,194 649,756

Current taxation payable 1,261,577 1,000,075

EMPLOYMENT OF CAPITAL 6,020,461 4,238,292

SASDA Governance & Processes

(i) Board Charter – set out duties, rules & processes for Board of directors

(ii) Board Committees Audit, Finance & RiskHuman Resources & RemunerationStrategy & Planning

(iii) Verification process – verification of suppliers BEE status, technical & commercial competence

(iv) Intervention process – process to develop suppliers to be technically & commercially competent

(v) Business Development Charter - Developed by SASDA to operationalise SASDA’s business plan

(vi) Policies & Procedures – Developed and implemented

Partnerships

Financial support –Standard Bank, Absa, Nedbank, IDC, ,Khula

Technical & SHEQ – Engineering consultants to assist in analyzing technical specifications from the industry

Mergers & Acquisitions advisors – database of law firms and corporate/financial advisors mainly for transforming non BEE suppliers,i.e. Law firms, Sizwe Ntsaluba, WDB Investment Holdings, Wip Capital, Nations Capital, Ngubane &Co,

Training institutions (business schools) – UCT, Wits, USB, Kwazulu Natal, Cida Campus.

Investment groups and BEE Advisory consultants

SASDA Supplier Database System

Gathers supplier general information and information related to BEE.

Gathers buyers contracts information per category and sub- category.

Analyse and interpret submitted information to generate preliminary BBBEE score

pending verification.

Determines supplier BEE Procurement Recognition Level.

Generates industry indicator progress reports.

Generate consolidated progress reports.

Auto match tenders to potential suppliers using categories and sub-categories.

The system sends notification to matching suppliers.

When there is no match, then the opportunity for intervention is identified.

Enables buyers to search for suppliers using categories and sub categories to filter.


KPI per Charter Progress1. CALL SUPPLIERS TO REGISTER ON

SASDA DATABASEWE MANAGED TO CALL 10935(9675 FROM PETRO-SA AND 1260 FROM CALTEX) SUPPLIERS TO REGISTER ON OUR DATABASE.

FAX FORMS TO SUPPLIERS 1141

E-MAIL FORMS TO SUPPLIERS 1596

POST FORMS TO SUPPLIERS 12

SUPPLIERS TO REGISTER ONLINE 551

SUPPLIERS ALREADY RECEIVED FORMS (REPEATED NUMBERS)

962

SUPPLIER ALREADY REGISTERED 1131

NOT EXIST 1595

MUNICIPALITY 85

SCHOOLS/UNIVERSITY 183

DOCTORS/MEDICAL INS 59

PRIVATE HOUSE 89

NO ANSWER 563

NOT INTERESTED 234

WRONG NUMBERS 285

NUMBER ALWAYS BUSY 80

NUMBER INCOMPLETE 139

NO NUMBER 259

OTHER (BANKS,CLUBS ect.) 76

Database Consolidation Project

PRELIMINARY BEE CONTRIBUTION LEVELS OF REGISTERED SUPPLIERS

Contributor Level Number of Suppliers % to total registered

Contribution Level 8 60 5.08%








Non Compliant 784 66.33%

Totals 1182 100%

Suppliers Registered to date

FinaliseRating

Verification & Processing

Gather data,Interpret &Review

DataGathering

IssueService Enquiry and Form

Forms to client

Complete Forms

Submitcompleted form

Review form for completeness

Conduct verificationInterviews & site visits

Index andFile Documentation

Draft a rating report& forward to client

SASDA and the clientengage each other

on the contents

Finalize the ratingreport

Issue final verification report

and certificate

Client

Admin Staff

Jnr Evaluator

Snr Evaluator

White Font =Control/Quality/integrity

Step

BBBEE Verification FrameworkBBBEE Verification Framework

FormsForms

Verification Methodology

Issue BBBEE verification

Measurement Pack

Both parties sign terms of verification

engagement

Develop a Verification plan & Preliminary Report

Client send back forms &

supporting docs

Review forms & docs

for completeness

Verification Manager sign off

VerificationManager

** See detailed process

InterventionsRoad shows requesting opportunities held with all oil companies in October 2005 The Board Strategy session held on 15/02/06, agreed on the following activities for 2006. Internal projects were done BUT NO external projects were undertaken.

We only received one opportunity from Total to develop Inkwali Engineering.

Internal projects External projects(development area)

- Database set up & management

- Electrical & Instrumental maintenance

- Business assessment tool - Transportation

- Procurement spend categories - Professional Services

- Interventions processes & methodologies

ChallengesDifferent expectations from industry & DME( mandate);

Some oil companies continue to do their own supplier development, thus duplicating SASDA;

Establishment of satellite offices;

Establishment of the verification entity;

Information on procurement opportunities from oil companies;

Transfer of oil companies database to SASDA;

SASDA operations highly depends on the buyers;

Not all oil companies utilize SASDA’s services;

Recruitment of staff ;

Funding structure for SASDA; operational and projects, late payment;

Budget and Business Plan still not approved;

Crude oil procurements;

Different expectations from industry & DME( mandate);

Satellite offices being disputed by Industry;

Stakeholder board versus professional independent board.

Way forwardDME and Oil companies to provide direction regarding SASDA’s mandate;Full utilization of SASDA services and resourcing;Clear targets set for the individual Oil companies in view of 2010 industry charter deadline;Agreement on regional satellite offices to support rural entrepreneurs and enable on job training;Transfer of supplier database by oil companies to SASDA;Develop common specification framework for Industry;Restructuring of SASDA to be a multisectoral development agency;Monitoring and evaluation of performance of individual companies by the regulator;SLA between Oil companies, DME and SASDA prioritised;Review of charter to have clearly defined and measurable deliverables;Clarity on crude, jet fuel etc a part of value chain to be prioritised;Funding model for SASDA outlined by the regulator;Regulations to be developed to define SASDA’s role in enterprise development;Quarterly reviews of performance should be considered;Regulator should consider compliance to empowerment as a prerequisite to licensing.

ECONOMY IS PUMPING BUT... ( Rallying Cry)“Companies don’t feel under the microscope on other things in the

same way as they do on equity issues, and this is one of the things I am very sore about.

You do everything to put procurement-development programmes in place, but the companies are not interested and undermine it.

“This is what is happening, for instance, with the oil companies.A formal supply-development programme was put in place with

some resources and some personnel, but the oil companies will find every reason not to make this programme work,” she said.

Business Times www.sundaytimes.co.zaApril 15 2007


Thank you

portfolio committee cpt parliament 10 may 2007 mmbulaheni mashanyu sasda ceo “in the event of a...

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