Christian Spano, our global lead for socio-economic development, was invited to speak at the recent Extractive Industries and Local Content (LC) Development Conference in Mexico City organised by the World Bank, the Inter-American Development Bank and the Government of Mexico.
In his presentation, he focused on “changing local procurement mind-sets” using Promova as an example of a programme that delivers savings to Anglo American as well as a stronger development contribution to critical stakeholders.
What is Promova?
Promova [Portuguese for ‘promote’] is a local supplier development programme that Iron Ore Brazil established during 2012 in Brazil.
The aim of the programme is to develop small and medium size local suppliers in a responsible and sustainable way, with a number of measureable outcomes:
- Increase operational efficiency.
- Improve supply chain performance.
- Lower costs over the life-cycle of purchasing – long term.
- Contribute to our social license to operate.
- Reduce transport and logistical costs.
As part of Promova, alongside the clear financial benefits, participating suppliers are also provided with distance- and classroom-based learning courses.
Promova has particular prominence in the state of Minas Gerais, where our Minas-Rio iron ore mine is located. In that region alone, the programme has identified 520 potential local suppliers where more than 120 were being considered in the bidding processes, and 35 companies have secured business with Anglo American.
And one of those businesses is Lavandaria CMD, a laundry company which is now a regular supplier to our Minas-Rio mine.
The direct impact of the programme is clear: Promova supported business has equated to – on average – 10% of the local GDP in the municipalities where it operates, a significant amount.
Suppliers can receive payment for work immediately on presentation of an invoice. Almost $100 million has already been paid to 50 suppliers this way. And for each dollar invested in Promova, we estimate around $25 dollars are unlocked in local procurement with community-based SMEs.
Learning from the local team
The relationship between local procurement, enterprise development projects and local employment is usually close and when they work well together, the outcome is sustainable socio-economic improvement.
Most importantly, the local team at Iron Ore Brazil (IOB) learned that it can also deliver savings.
When Promova was launched there was no enterprise development programme at Conceicao and there was a local employment programme that was run separately in collaboration with SENAI, a government-led institution.
Both Promova and the local employment programme were highly successful from the beginning, but community engagement teams started to realise that as these programmes grew, a sector of the local population did not feel included.
The response of the Promova team was to listen both to the social team and to the communities.
IOB decided to implement an enterprise development programme to create growth opportunities, as they learned that for each supplier that was included in Promova there could be 20 SMEs with high growth potential but with no opportunity to become a supplier. The team also learned that as the mine goes into operational mode, there are fewer opportunities for local employment and as such, more pressure builds in the local population.
Therefore, integrating the three programmes was vital to delivering full development impact but also allowing Promova to deliver savings to the operation.
Today, the three programmes are fully integrated and savings to Anglo American are real.
The team has continued working in cooperation with global supplier Komatsu, local bank Itau and corporate dining organisation SAPORE. The result is more than 1000 jobs supported and the estimation is that with the new model, Promova could save up to $1,000 per job supported going forward.
Find out more about our local procurement and enterprise development efforts in our Sustainable Development Report 2014.
