[ Home ] [ Speeches & statements ]

25 August 2008

Almost three decades of underinvestment in network infrastructure, both in the energy and freight logistics sectors, has resulted in a loss of key capabilities and skills in supplier industries, which has become a constraint to the investment programmes currently being undertaken by state owned enterprises (SOE). This is an area requiring urgent intervention by all stakeholders, if we are to achieve higher and more sustainable economic growth and poverty reduction.

The launch of this association is therefore an important step, as it will enable Transnet to work with both local and multinational companies in their supply chain to develop the local companies in areas where there is consensus that development is required.

It is imperative for us to ensure that as Eskom and Transnet's massive investment programmes are rolled out, industrialisation of the input sectors related to them occurs.

This is precisely the aim of the Competitive Supplier Development Programme (CSDP). We introduced the CSDP last year in order to facilitate the development of South Africa's manufacturing sector in the supply chains related to SOEs infrastructure investment programmes, as well as to relieve supply constraints. This is intended to ensure the timeous and cost effective delivery of these capex programmes.

Over the past year we have made progress in implementing this programme, with both Eskom and Transnet submitting their Supplier Development Plans (SDP), which identify focus areas for developing the competitiveness of the local supply base, and identify the procurement mechanisms which the SOE are going to employ to achieve their targets in this regard.

The department has also entered into an agreement with the United Nations Industrial Development Organisation (UNIDO) to implement a supplier benchmarking and supplier development programme, targeting the focus areas identified in the supplier development plans. The supplier benchmarking initiative is the key supply side initiative in the CSDP. Supplier benchmarking is critical to the success of the CSDP for the following reasons.

* SOE needs to have information about the state of local industry and the strengths and weaknesses of local suppliers in order to inform their SDPs and their procurement strategies.
* First and second tier SOE suppliers also need to have information about potential local suppliers in order to be in a position to respond to the procurement preferences of SOE.
* Potential local suppliers need to have information about buyers requirements so that they can work towards being in a position to meet these requirements.
* SOE and Department of Public Enterprises need to have information about changes in supplier's capacity and capability, in order to be able to monitor the impact of the CSDP.
* The benchmarking initiative will serve as a platform for learning and collaboration between buyers, suppliers and supplier development agencies.

The Department of Trade and Industry, Department of Science and Technology, Industrial Development Corporation, and National Empowerment Fund have also partnered with us in this initiative.

Transnet is in the middle of implementing a massive internal procurement capacity building programme, and it has also started implementing the CSDP on some of its large procurements. Transnet's long term aim in applying the CSDP will be to localise the supply chain of imported manufactured goods or imported services to a reasonable level, while promoting local industries and South Africa as an off shore site of choice for Original Equipment Manufacturers (OEMs) and multi nationals procurement personnel.

A local supply chain of previously imported manufactured goods or services may not necessarily result in direct cost reduction, but it should result in lower transport costs, shortened lead times and better control of quality. It will also have a direct impact on job creation, economic development and heightened awareness of South African manufacturing capability.

UNIDO has already started to benchmark Transnet's main second tire suppliers. Details of how benchmarking will be rolled out to other firms in Transnet's supply chain are still being finalised.

The development of the manufacturing sector in these industries will require additional skilled workers such as artisans.

In this regard, the Department of Public Enterprises has established the Employment and Skills Development Agency (ESDA), with the objective of making a significant contribution to increasing the national pool of artisan skills. The ESDA will do this by facilitating Sector Education and Training Authority (SETA) funded workplace placements with SOE suppliers for Further Education and Training (FET) college graduates, to enable them to meet the requirements of an artisan trade test. Our ESDA has started to work with suppliers on Eskom's Medupi project in this regard, and we hope to extend this to other projects.

The work of getting things right on the supply side is by no means an easy task, as it is critical input for achieving government's objective of economic growth and employment creation.

Thank you.

Issued by: Department of Public Enterprises
25 August 2008
Source: Department of Public Enterprises (http://www.dpe.gov.za)