Mining companies' non-compliance with procurement rules is touted as a hindrance to transformation in the sector.
"The level of compliance is not what it should be," mineral resources minister Susan Shabangu said during her annual departmental budget speech to Parliament, before launching into a litany of problems she said were being perpetrated by some companies in the mining sector. Problems in procurement were at the top of her list.
"Procurement is one of the critical pillars of the Mining Charter. In this regard, I am concerned about the manner in which the entire procurement value chain is being handled in the mining industry," Shabangu told members of Parliament in May 2012. Shabangu says a departmental audit has revealed "rampant use" of expired BEE verification certificates and fronting "especially by women who do it on behalf of men" as two of the major challenges to transformation in the industry."
Aside from complying with the Mining Charter on transformation aspects, mining companies must also navigate through numerous other sets of legislation, particularly around health and safety. Managing procurement lifecycles within the boundaries of the rules obliged on the industry is no mean feat. Mining companies have had to set up departments with dedicated resources just to deal with compliance.
Increasing pressure to ensure compliance
"Mining companies have an onerous task when it comes to compliance and managing procurement lifecycles. There are tender procedures, approval procedures, budgets to work within, equipment maintenance cycles to consider, and procedures for managing service agreements between mining companies and their suppliers.
"With the minerals ministry expressing concern over procurement practices in the industry, mining companies are going to be under increasing pressure to ensure compliance. Technology, through the automation of processes, segregation of duties and enforcement of approval protocols, is going to become increasingly important for mining concerns as an enabler of best practice and enforcement of compliance," says Jacques Wessels, the CEO of FlowCentric Technologies which develops agile business process management solutions geared for specific sectors, including mining.
He says that management of mining companies too often trust that their staff will act in accordance to rules and regulations set by the organisation to ensure compliance, but this doesn't always happen. Implementing a BPM-enabled procurement solution can assist mining companies in enforcing processes and a strict chain of command in line with business rules.
FlowCentric's procurement solution for the mining sector, offers many benefits including:
Empowering lower level management and staff without sacrificing control.
Enforcing compliance to business rules, policies and procedures.
Providing preventative rather than detective controls (build the control into the process).
Conformance to legislative requirements.
Enforcement of segregation of duties.
Documents and records are managed as part of the process.
Providing transparency in the processes with full audit trail.
Importantly, the solution caters for the tender process which can be initiated manually or triggered based on a business rule. The tender process allows for the registration of a tender.
Once a tender is registered and the relevant responses acquired, the responses are scheduled to be sent to an evaluation committee for review and approval or rejection of the relevant tender.
The solution also enables processes to be customised and built into it for evaluating and adding new vendors to the database for use within other processes. Automating this, helps to ensure that all relevant vendor registration forms are added and all relevant information is captured. The system enforces the relevant approval of the vendor prior to allowing users to, for example, purchase from a specific vendor. The system also automates and guides the management of contracts. This allows the organisation to keep the documentation and renewals up to date, and also have a central database for contracts.
"Procurement and purchasing is an area within a mining organisation that, once automated, helps ensure compliance and results are immediate, visible and measurable. An effective and tailored BPM solution integrates and extends the functionality of Enterprise Resource Planning (ERP) and other systems used by mining companies to ensure that rules are adhered to," he says.