Mines are increasingly required to implement programmes showing good practice in local procurement. International standards – as well as local policy and regulation – provide requirements and guidelines, but what really works in the field? In this series, SRK Consulting’s Lisl Pullinger and Andrew van Zyl, together with Mining Shared Value’s Jeff Geipel, explore five local procurement topics, highlighting good practice principles, providing case studies from mines and recommending practical initiatives mines can take to improve how they apply local procurement programmes. This third article focuses on ensuring exemplary supplier conduct and preventing corruption in the supply chain.
With 50% to 70% of all in-country mining-related expenditure going to procurement, it is a significant lever for local economic development. Within this context, however, the high risk of corruption in the procurement of goods and services, and problematic supplier practices, has often been overlooked.
Global industry and civil society initiatives have tended to focus on transparency in mining companies’ payment of taxes to governments, and on how governments use this revenue from mining royalties and profits. Only recently has attention been formally directed at the ways in which irregularities in the supply of goods and services could be more systematically addressed.
A recent research report from the Natural Resource Governance Institute, ‘Beneath the Surface: The Case for Oversight of Extractive Industry Suppliers’, points out that just under a trillion dollars a year is spent globally on suppliers by oil, gas and minerals companies. It warns that weak governance of suppliers can disadvantage companies, governments and host communities – through cost overruns that undermine company profits and government revenues, suboptimal taxation of supplier profits, and local procurement efforts not fully benefiting host countries or communities. A lack of transparency in procurement also raises the risk of bribery and favouritism.
SRK Contributors:
Andrew van Zyl, Lisl Fair
External Contributor:
Jeff Geipel
Read the full article in Engineering News
