The procurement and supply function is critical to the value creation process of any businesses. The recently held Summit on Procurement and Enterprise Development sought to achieve harmony in understanding what role each stakeholder plays in the procurement process. What was unique about this first ever event is the bringing together experts from 5 countries (one of which, South Africa, contributed notable speakers).
It came as no surprise that Barclays Bank (under the Absa umbrella) would leap to the opportunity to embed themselves in this grand event which brought likes of the Minister of Finance, Honourable M. Mwanakatwe who was Guest of Honour. Melu Mizinga, Barclays Zambia CEO, emphasized why Barclays Bank’s (transitioning to Absa 2020) presence was important to this event. She announced that the bank had placed a substantial amount of money towards the development of Small to Medium Sized Enterprises for 2018. This is significant because not only does it come on the bank of Barclays sending SMEs to China to learn some of the intricacies of managing business, it also show cases that the Bank cares about development of the lower segments of the economy in order to foster growth.
There are no doubt synergies to be achieved by this summit. Bringing together procurement specialists from Zimbabwe, Uganda, Malawi, Zambia and South Africa means that the event provides a unique platform for knowledge exchange as well as best practices deliberations.
The event was flagged off by one SOE providing an overview on behalf of other SEOs in Zambia how Government, SOEs, Private Sector interface and how growth can be fostered. This was underscored by the address that was given by Hon. Mwanakatwe whose keynote address focused on “how the Zambian Government can prioritize sustainable procurement as a strategic function in realizing set sustainable and socio-economic objectives”. The tool at her disposal is the Public Finance Management Act which is envisaged to bring order and transparency to the procurement process whilst at the same time penalizing SOE and Government that do not follow the law of the Act.
The Minister of Finance took the opportunity of address the forum on some of the issues that had been bothering her and of note was the lack of participation on local SMEs who she has learned have been failing prepare winning bids. This is a clear indication that capacity building is required in the procurement ecosystem that will better enhance participation of smaller entities.
Another area of concern is the Private Public Partnership model that remains largely untapped by SMEs. The Minister encouraged SMEs to look at all projects that are funded through debt in order for players in the market are able to participate through PPP.
When the Minister of Finance, Hon. Goodall Gondwe from Malawi discussed an interesting scenario that was happening in Malawi. Their procurement authority is an independent body whose membership was composed of the key drivers of the economy; the private sector. Furthermore, the head of the authority was not appointed by the Ministry of Finance but by the independent board. He joking cautioned that this was important and that his ministry remained impartial and ensured the authority followed through with its independent mandate.
Another contributor who made an impact was the Deputy Director General of World Trade Organization from Switerland, Yonov Fred Agah, who gave an interesting narrative of why countries such as Zambia will always find it challenging when it comes to developing industries such as the motor industry. Without harmony in the supply chain, it is very difficult for a nation to realize the potential it has from a micro level. That is because all of the pieces that are required to make the end product are so fragmented and require systems in place that can bring all of them together to make an impact on the overall picture. Furthermore, in a rebuttal to the Minister of Finance’s comment of Zambia being land linked, the Yonov also indicated that this was a challenge to the supply chain because Zambia was not in charge of the ports. This position is responsible for the higher transaction costs that are associated with being land linked (land locked). The speaker also made a comment on the issue the global supply chain. From his experience, the supply chain (global value chain) is not necessarily global but more regional in practice. This supports the argument that some scholars often argue is what makes the world flat due to technical barriers and financial barriers. This is why he believes that rules and regulations from the WTO are not enough to bridge the gap. Hence the need for capacity building through assistance in technical training.
The summit provided delegates an opportunity to understand the different procurement regulation issues present in Zambia, Malawi and Zimbabwe. Through a panel discussion, representatives from the constitutional bodies from participating countries gave a detailed narrative of how their procurement authorities were set up.
When Diaspora Infrastructure group took the stage, the brought to light an issue that many SMMES have often found themselves complaining about. This issue relates to how they can participate in projects. CFO Washington Mashanda explained that to the forum that there was need for SMMEs to not be narrow in their thinking regarding where they can participate. He further stated that it was important to understand the value chain of most projects. Traditional views of where companies can participate risk limiting the opportunities that can be sought that can have a huge impact on local business. Washington gave the example of the Scaling Solar project and using a model that was analogous to Michael Porters value chain theory that shows both the core activities and support activities of projects, this level of unpacking reveals various areas in the project’s value chain that can be exploited. However, this must also be supported by regulation around how procurement activities are aligned for local participation.
On the technology front, Oracle were on hand to deliver the promise of Cloud computing coming to procurement systems in Africa. The procurement realm has undergone technological transformation and Oracle has been at the centre of leading edge technology. Some argue that the cost of procurement technology is part of the reason of why many players have not adopted tech. However, Oracle has been working hard to scale down and make technology in procurement more affordable and accessible. The latter has been enhanced by the coming to Africa of 4G and LTE technologies that make moving services to the cloud a real possibility. Furthermore, Oracle believe they are allowing end users the opportunity to re-imagine their procurement processes through a full suite of solutions that integrate every level of an organisation.
Financial Insight was privilege to moderate on of the plenary discussions on E-Government Procurement and how technology is an enabler or disruptor for Small to Medium Enterprise development and participation in the supply chain process. The panel participants included representation from Ministry of Information & Communication of Malawi, ZIPS, and Oracle South Africa. A key take away was the importance of embracing E-Government Procurement (eGP) by the government and private sectors. Furthermore, on the Government end, admittance of a phased approach to implementation of eGP was one of the causes of delays in rolling out the program. However, the audience were advised that enough had been learned from the process to make a real impact on industry. Oracle also added that Africa needed to take advantage of advancements around cloud technology for procurement as this was the key to reducing the costs associated with investments around procurement software deployment. From a financial statement perspective, Oracle see African SMMEs spending money on services which is something that would appear more on the income statement under cost of sales rather than investing in hard assets such as servers which would increase the size of the balance sheet.