Today marks the first formal engagement I have been entrusted to address as the Deputy Minister of Public Enterprises. I have observed the work this portfolio does with keen interest. The work of this portfolio has become the centre of attention for many South Africans.
If our collective efforts are directed with developmental purpose, we have an opportunity put in place an economy that yields greater equity to all South Africans.
In my briefings with Minister Malusi Gigaba he has outlined a vision which seeks to increase employment, develop industrial capabilities and transform the ownership profile of our economy. This vision speaks to the fundamentals of liberation and transformation.
These are immense task and we will not achieve them with a tunnel vision approach of what the state is expected to do. This is precisely why I took at this opportunity to understand what methods state owned enterprises are pushing forward to increase innovation and creativity in achieving the national objectives of economic development.
Given the difficult global economic environment, it is critical for infrastructure development programs to be highly strategic in the manner in which investment plans are undertaken.
When private sector investment is frozen because of the sustained global economic uncertainty, our State Owned Companies (SOC) are in a unique position to build confidence in suppliers and additional infrastructure capacity. Consequently, it is critical that we optimise the impact from the procurements associated with our investment programs.
We need to ensure that we are procuring capacity that will build confidence and unlock investment from our customers. We need to focus on achieving the right balance between optimising the enterprise value from the equipment we procure with the impact of such procurements on capability building and investment in our supplier communities. Finally, the issue of transformation needs to be integrated into everything that we do.
It is important to appreciate that the quality and capability of our supplier industries mirror our buying practices. Short-term planning and contract duration by the SOC leads to short term planning and opportunistic investment by the supplier. We need to understand the cost structures and cost drivers of the various stages of the value chains of our supplier industries. We need to think about the quality and stability of our demand to enable investment in adequate economies of scale and learning by our national supplier industries.
All of this is pointing to the need to move towards long term strategic partnerships with key suppliers, who can become industrial champions focused on building world class capabilities. While I appreciate that this comes with risk, it is a global trend and has been a core instrument that has been, and continues to be used, by successful developmental states. Simply and straight forwardly, we need to learn how to manage these risks, because it will be extremely difficult to achieve our objectives based on a business as usual approach.
We need to entrench supplier development objectives into the DNA of our SOC. Supplier development concerns are not only the domain of the procurement function, but concern almost every component of the company. To achieve our supplier development goals, we cannot operate in silos.
We need to have empowered and integrated teams and an organisational culture that supports this integration. Supplier development starts with how we design our core investment plans and then how we translate these plans into specific organisational requirements that need to be procured.
We need to be aware that these specifications can either include or exclude national industry, they can either encourage our national industry to innovate or to remain stagnant. We need to be able to go to market in a manner that developmental outcomes are core to what we are procuring. And finally, we need to manage our suppliers in a way that continuously builds there capability and competitiveness. All of this requires an understanding of our national industry and a vision for what we want our industry to ultimately be able to do.
Despite all the above challenges, it needs to be recognised that the Competitive Supplier Development Programme is now beginning to mature. The Programme was launched in Eskom and Transnet in 2008. We now have the benefits of four years of learning, policy and process definition, skills development and change management. The flip side of the coin is that as the shareholder, we will no longer accept ad-hoc, short term procurements.
We will no longer accept supplier development concerns added onto procurement as an after-thought. We believe the program has reached the stage where we can reasonably expect to see a qualitative difference in the way SOC plan, structure and execute their important procurements.
This boot camp is extremely significant for a number of reasons:
- Firstly, a range of core strategic sourcing disciplines, ranging from demand planning, to bid design to supplier relationship management, lay the foundation for realising enterprise value, supplier development and transformation objectives. It is critical that we continuously and aggressively enhance SOC capabilities in these disciplines as if we are weak in any of these areas we will fail to deliver on our objectives. The core training component of this boot camp is a testimony to our commitment in this regard.
- Secondly, there is no text-book blueprint around how we can effectively leverage our procurements. There is no alternative to learning by doing. This means that we need to take risks and accept that we will make mistakes. However, what matters is that we systematically reflect on our experiences and ensure that we don’t make the same mistakes twice. This boot camp is an example of such systematic reflection and each of you is to be commended for your participation in this process.
- Thirdly, extracting commercial, developmental and transformational value from our procurements will require extremely high levels of integration and collaboration across the organisation. It is critical that people from a diverse array of disciplines who have traditionally not engaged with each other, learn to work effectively and respectfully together in multi-disciplinary teams. This boot camp is an example of such unusual collaboration.
- Finally, if we are to leverage the SOC procurements to build complex industrial capabilities, the SOC cannot do it alone. We need to coordinate our investment program with a range of government departments and agencies to provide systematic support to our supplier industries to upgrade. The boot camp represents the first time in our history, when all of these stakeholders have been in one room for an extended period of time to see how we can make this coordination a reality.
We want to encourage the culture of innovation and continuous learning at our State Owned Companies and we will continue to support initiatives that undertake to view major developmental goals from different perspectives.
And as we seek incentivise innovation and creativity we should also incentivise planning and implementation.
I thank you.
