Jon Samuel, Head of Social Performance at Anglo American, discussed how we can use local procurement to grow the economies where we operate You can find out more about Anglo American here: http://www.angloamerican.com/ http://www.facebook.com/angloamerican http://www.twitter.com/angloamerican http://www.youtube.com/angloamerican http://www.flickr.com/photos/angloamerican http://www.linkedin.com/company/anglo-american

1. Local Procurement
in Anglo American
Jon Samuel
Head of Social Performance, Anglo American
6 March 2012

2. LOCAL PROCUREMENT
ANGLO AMERICAN CONTEXT
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3. DEFINITIONS
Local Procurement: relationship between location of supplier and
location of recipient of goods/ services. Divided into 3 levels:
Supplier registered or based within
National
the same country as the operation
Supplier registered or based within
Provincial the same province / region / state /
territory as the operation.
X
Supplier registered or based within
Localised the same immediate area as the
operation.
Plus additional criteria depending on country

4. SUPPLY CHAIN CONTEXT
• Procurement budget of $10 billion+ per annum, about 75% in
emerging markets.
• Equivalent to about 100 x annual social investment budget
• Anglo American aims to be the industry leader and global
benchmark for Supply Chain value creation
• Procurement seen as a key business enabler:
– Cost efficiencies
– Value-in-use
– Strong focus on lifecycle costs and benefits of procurement
decisions, including non-financial variables
– Recognition of the broader developmental contribution of procurement
• Strong focus on responsible procurement
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5. LOCAL PROCUREMENT
ANGLO AMERICAN’S APPROACH
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6. 6

7. 7

8. BUSINESS CASE-LED APPROACH
Partner of Employer
Investment of choice
choice of choice
Assure our right Create supply Ensure reliable Reduce risks Attract and
to mine chain efficiencies access to critical associated with develop talent
supply closure
Exceed local
community Reduce logistical Pursue long term Minimise Contribute to
expectations to costs, such as the partnerships with community developing thriving
participate in local cost of transporting local suppliers critical dependency by and healthy
procurement people and to operations creating communities, and
equipment transferable attractive places to
Strengthen Continuously business skills live and work
relationships with Competitive labour improve the service which equip
local communities costs in service provided by entrepreneurs to
and government by contracts suppliers/ access other Be seen as employer
building company contractors to Anglo markets and of choice, by making
ambassadors diversifying the a real, lasting
Increase the
competitiveness of local economy difference to local
Excel at meeting communities and
government supplier markets
acting with integrity
objectives for local
content, supplier dev.
and GDP growth
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9. INTEGRATED APPROACH TO LOCAL PROCUREMENT
Objective Anglo American Lead
Supply-side Measures
Encouraging more suppliers to Localising Suppliers SC with support from
locate in mining areas (e.g. near-mine supplier parks) Social and ED
Build capability, capacity and Supplier Development Programmes SC with support from
size of suppliers (building capacity of existing suppliers) Social & ED
Creating formal Support for Small and Medium-size Business Start- Social with support
businesses ups (e.g. Emerge / Zimele) from SC & ED
Supporting the Social with
Alternative Livelihoods and Micro-credit Programmes
grass-roots ED
Set framework, show SC with support
Demand-side Measures
Policy: Local Procurement Strategy
leadership support from Social
Build Anglo American Resources:
Appropriate people and budget
SC and Social
capacity and incentivise
Operationalise SC Local Procurement Initiatives (eg SC with support
commitments Ring Fencing) from Social
Demonstrate Communication and Reporting: SC with support
commitment Targets and KPIs from Social
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Social = social and community development functions; ED = enterprise development; SC = supply chain (Group and BU)

10. SUPPLIER DEVELOPMENT PROGRAMMES
Supply
and
demand
side
analysis Matching
Monitoring of SMEs
and to Supply
evaluation Chain
demand
Business SME
linkages assess-
and ment and
tendering improve-
assistance ment plan
SME
Access to mentoring
finance and
training

11. SUPPLIER CLUSTERS
• Objective is to bring existing
suppliers, and the jobs they AA
Business
create, into our mining areas Unit
• Co-locate large and small
businesses. 5-10 larger suppliers
• Add in Anglo American’s to AA Business Unit
enterprise development expertise
20-30 SME suppliers
and support the creation of to AA Business Unit and it’s
partnerships between large and larger suppliers
small firms
Incubating business environment

12. ENTREPRENEUR
INTERNSHIP General
Zimele Population
PROGRAMME Entrepreneurs (Entrepreneurs
Talent) Attraction and
Filtration based Existing Selection
Anglo
on criteria American
Employees Entry Criteria
Selection Process
Training/learning programme (Internship)
Matching entrepreneurs and businesses
Exit out of Anglo
American
Supply Chain Partner Companies 12

13. MAKING OPPORTUNITIES AVAILABLE TO LOCAL ENTREPRENEURS
• Simplifying tender and contract
documents and processes
• Embed local procurement into
procurement processes and
daily operational activities
• “Supplier linkage” person
• Guidelines for implementing
preferential sourcing methodologies
e.g. ring-fencing, unbundling,
appropriate payment terms
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14. LOCAL PROCUREMENT
CONCLUSIONS
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15. CONCLUSIONS
• Local procurement needs strong buy-in from Supply Chain – they
make the purchases
• Supply Chain should be supported by multiple functions, including
social performance, enterprise development and communications
• No magic “silver bullet” to boost local procurement
– Optimising local procurement requires a range of initiatives
– Takes time to get it right
– Need a combination of supply-side and demand-side measures
• There should be a strong business case driving local procurement
to ensure it is sustainable over the economic cycle
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