The Railways & Harbours – Supply Chain Association (R&HSCA)

Opening

“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 within their supply chain to develop the local companies in areas where there is consensus that development is required.

“It is imperative for the region to ensure that as Eskom and Transnet’s massive capital investment programmes are rolled out, while industrializing the related local input sectors. This is precisely the aim of the Competitive Supplier Development Programme (CSDP).”
Alec Erwin, Previous Minister of Public Enterprises

Background and objectives

  • CSDP – as used by the DPE – is a globally acceptable methodology for competitive supplier development; the development of the Korean nuclear power industry, being a case in point. So whilst the concept is not unique, it is new in terms of implementation in South Africa.
  • The underinvestment situation that SOE’s in South Africa find themselves in, is not unique – SOE’s, operators, Public Private Partnerships (PPP) and Concessions throughout Africa have a number of operational issues and are under immense pressure to become more efficient. Therefore it is imperative that the local supply chain is developed, so that it can assist the region, thereby impacting positively on the national and regional economy.
  • A critical success factor for CSDP is that the local supply base should be aware of the exact needs of SOE’s in terms of manufactured capital goods, as CSDP is based on the premise that SOE’s can create a cohesive picture of future spend, that will be the catalyst for local suppliers’ investment in their own capacity and capability to meet the SOE’s future requirements.
  • SOE’s participating in the CSDP are therefore required to share its future capex procurement requirements with local industry. Due to rigorous public procurement requirements such sharing however still have to adhere to the Constitution’s requirements of being “fair, transparent, open, competitive and cost effective”.
  • As such a neutral body (such as the RHSCA) was seen as the best vehicle for participating SOE’s to engage with the local supply base in terms of industry communication.
  • The macro level of supplier development is necessary to fully develop the competitive aspects of CSDP and the issues that influence the global competitiveness of suppliers. Africa itself has become more attractive as a place for Foreign Direct Investment (FDI).
  • The Railways & Harbours Supply Chain Association is a voluntary industry initiative, set up to drive CSDP in the aforementioned industries in South Africa and throughout the region.

The ultimate goals of CSDP are:

  • To contribute to the Accelerated and Shared Growth Initiative of South Africa (ASGISA) by increasing economic growth, employment creation, skills development and Broad Based Black Economic Empowerment (BBBEE).
  • To develop local industries to supply participating SOE’s with high quality, globally competitive goods and services.
  • To improve the quality, efficiency and cost effectiveness of the services provided by participating SOEs, as a result of their obtaining more competitive goods and services from local suppliers.
  • To improve the competitiveness of participating SOE’s, as a result of procurement savings from engaging innovative, responsive and more competitive suppliers.
  • The aim of CSDP is to identify localisation interventions that will leverage participating SOE’s expenditure on imported goods and services in those priority areas identified in SOE’s signed off Supplier Development Plans and that will address the market inadequacies, so as to create an environment conducive to investment in new and/or upgraded local manufacturing capacity.
  • SOE’s Areas of Focus for localisation of manufacturing – as per SOE’s published Supplier Development Plans, signed off by the Ministers of DPE and DTI – will be:
  • Goods and services with the most potential for competitive local manufacture with the ability to export spare capacity;
  • Goods and services for which regional industries have current capability to produce or with some element of development expenditure/effort can produce;
  • Goods and services where foreign investors such as Original Equipment Manufacturers (OEM’s) are willing to support local supplier development.

The African Region:

The aims and objectives of this association offers our neighboring operators an ideal opportunity to encourage regional supplier development ( RSDP), the RSDP is not unlike the CSDP programme with the only difference being that the niche focus is on Railways and Harbours. More importantly an increase in Intra-Africa trade and investment will assist in building a stronger competitive supplier base with the opportunity to export to global markets. If we are able to create suppliers of choice in Africa, the region will be able to attract more foreign direct investment.

The R&HSCA’s main objective:

Is to support and add impetus to localising the supply chain of imported manufactured goods or services to a reasonable level, while promoting local industry to assist in expanding their capability and capacity to not only supply products and services to local SOEs, but with view of supply to the region and global market.

Establishing and facilitating, where applicable a safe forum in which operators can communicate with suppliers, share knowledge, obtain information and deal with concerns raised by suppliers, without being prejudiced and without breaching the rigorous rules of engagement, which govern the Public Procurement environment of SOE’s.

To build mutually beneficial relationships between “buyers” and “sellers” within the rail and harbour industry sectors within the region.

To identify local suppliers in the market place and encourage their participation within the benchmarking process, so that they may be:

  • Identified;
  • Assessed;
  • Accredited;
  • Verified;
  • Developed.

To provide a consolidated view of suppliers of SOE targeted manufactured equipment in the region to international OEM’s.
To identify the development needs of suppliers in the region and encourage participation through the supply chain development programme, which makes visible local suppliers’ gaps in terms of OEM’s requirements, so that local suppliers are developed to meet the OEM’s needs.

Transnet is the main driver – Why?

Transnet in South Africa is the main SOE for Railways and Harbours and operates under rigorous rules and guidelines and has the added responsibility to ensure that the procurement process is “fair, transparent, open, competitive and cost effective”.
CSDP is based on the premise that SOE’s can create a cohesive picture of future spend, that will be the catalyst for suppliers investment in their own capacity and capability to meet the SOE’s future requirements.

  • How does Transnet effectively communicate with suppliers in order to fully benefit from CSDP, without breaking governance, other than through the tender process ?
  • How does Transnet have conversations with suppliers without it being seen as favoritism or prejudice against another supplier?
  • How does Transnet obtain information on innovation or other market related information?
  • How does Transnet avoid the finger pointing of one supplier not receiving the same information as his / her competitor?
  • How does Transnet effectively communicate and forge business relationships with suppliers to sustain the supply chain?

The R&HSCA’s formation will assist Transnet in reaching its CSDP objectives. The R&HSCA will start off by having a single operator, namely Transnet, but the Association will actively pursue other operators throughout the region, in order for a broader group of regional R&H operators to enjoy and share the benefits. Whilst at the same time operators in Africa will be able to access and enjoy the benefits and services offered by the R&HSCA.

The R&HSCA’s Value Proposition:

  • Providing a platform which enables communication in a non pressurised sales environment between buyers and sellers;
  • To provide cutting edge research and facilitate expert thinking and opinions to the supply chain within the rail and harbor industry sectors – problem solving;
  • Identify purpose and priorities amongst operators in the pursuit of reaching their individual objectives – through the understanding of their spend, requirements and logistics to educate, enable and develop a local supply chain – creating sustainability in the local market;
  • Develop and expand strategic partnerships with strategic players in the supply market to broaden value delivered to the operator, who is a SOE, PPP or a Concession;
  • Leveraging unique geographical position to the private and public sector throughout Africa in order to facilitate the sharing solutions for employment creation, business development and social upliftment of our region;
  • Linking local suppliers with global expertise;
  • Identification of local manufacture opportunities;
  • Identification of export opportunities;
  • Providing access to world-class best operating practices;
  • Access to the benchmarking process;
  • Access to IPSA, NQF – action in learning.

In order to achieve the objectives, the R&HSCA is supported by and has access to: DPE, DTI, IPSA, UNIDO, IDC, DST, universities and research bodies such as WITS, CSIR, etc.

The Association is NOT:

  • A replacement for decision making bodies – i.e. the Tender Board – but will provide access to tenders / RFP /RFQ’s on the website, when received;
  • A forum for dispute resolution – but will provide a platform, for open debate;
  • A contracting or negotiating authority;
  • A closed forum.

Membership to the Association is open to all companies or individuals who are:

  • Manufacturers / suppliers / distributors of manufactured equipment as prioritised by participating SOEs in their signed off SDPs – i.e. operational or infrastructure products or equipment;
  • Manufacturers / suppliers / distributors of associated components and attachments;
  • Manufacturers / suppliers / distributors of technology that interfaces or controls equipment and/or components;
  • Consultants in design, specification and operations;
  • Maintenance providers;
  • Environmental specialists;
  • Productivity managers;
  • Safety, Health and Legal practitioners;
  • Security advisers;
  • Logistic / Supply Chain service providers.