Modern Mining June 2021

LOCAL PROCUREMENT

Local procurement: a central component

A central issue that has attracted far more attention in recent years in the mining industry is local procurement. While many mining companies are already driving local procurement strategies at their various sites, the Mining Local Procurement Reporting Mechanism – a set of disclosures that seeks to standardise how the global mining industry and host countries measure and talk about local procurement – helps give them a way to report it, and get better at it. By Munesu Shoko .

I n most cases procurement by a mining operation is the single largest potential economic impact in a host country, more than payments in taxes, wages and community investment combined. While local procurement is not a silver bullet to defeat the resource curse, it plays an important role in support- ing economic development of host communities. To help mines demonstrate that they are mak- ing efforts to support local suppliers, Mining Shared Value (MSV), a non-profit initiative of Engineers Wi thout Borders, created the Mining Local Procurement Reporting Mechanism (LPRM), a pub- licly available information sharing framework aimed at increasing and standardising information on mine site level local procurement processes and results. “The LPRM is an ESG (Environmental, Social and Governance) and transparency framework that guides mining companies to provide information on their local procurement efforts and results at site level,” explains Jeff Geipel, MD of MSV. “It is a pub- licly available framework that was created with the support of the German development agency, GIZ, to increase transparency for what is generally the single largest potential economic impact of mining in host countries.”

Why local procurement? Commenting on the significance of local procure- ment, Geipel says it is the single largest payment made in host countries by virtually all mine sites. It is, he adds, a major lever for economic and social development, and one of the most important ways for mining companies to obtain and maintain their social licence to operate. “Companies that are not able to demonstrate that they are making efforts to support local suppliers are more likely to face community conflicts and pressure from governments. In addition, building up competi- tive, local suppliers of goods and services will, in the long run, reduce procurement costs and increase

Using the LPRM will help mines structure their local procurement practices in alignment with best practices.

supply chain resilience. The coronavirus pandemic has demonstrated in stark terms the major risks that come with relying on international provid- ers of goods and services,” he says. “With hundreds of millions spent each year by a typical mine site, local procurement of goods and services has huge potential not only to create economic and social benefits for host communi t ies and countries, it is also an incredibly effective way of strengthening a mine’s social licence to oper- ate,” says Geipel. “We created the Mining LPRM as a public

26  MODERN MINING  June 2021