Incubating local businesses in South Africa

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Over 800 million people still live in extreme poverty and almost a third of the world's population still lives on the equivalent of about US$3 a day. A lack of decent work opportunities erodes the social contract underlying democratic societies: that everyone must share in progress. Sustainable economic growth depends on creating the conditions that allow people to have decent jobs that stimulate the economy while not harming the environment.  All ICMM members implement the 10 principles that underpin our Sustainable Development Framework. Principle 9 requires companies to continually improve their social performance, and contribute to the social, economic and institutional development of host countries and communities.

When the UN’s Sustainable Development Goals (SDGs) officially came into force in January 2016, the nations of the world committed to mobilise efforts to end poverty, fight inequalities and tackle climate change. Business has a significant part to play, alongside governments and civil society, in creating pathways for a greener, safer and sustainable future for us all. Metals and minerals are essential to almost all aspects of everyday life; they enable farming, healthcare, communications, construction, transport and energy and water supply. And they will arguably become more important as they help to deliver the infrastructure required for a low-carbon future. This is one of a series of case studies gathered from our members to highlight how companies are working to enhance their contribution to society and help industry to manage potential adverse impacts their activities may have on the realisation of some of the SDGs.

The Black Economic Empowerment (BEE) programme is the South African government’s initiative to give certain previously disadvantaged groups economic privileges. It includes measures such as employment preference, skills development, ownership, management, socio-economic development, and preferential procurement. 

BEE legislation applies to all business interaction with government, and companies are also encouraged to apply the legislation in interactions with one another.

In order to further support the local economy, and in excess of what is required by South African legislation, Glencore has developed numerous small business incubation initiatives. During 2015 the company supported 161 local entrepreneurs with loans, mentoring and the development of business parks.

Elements of Glencore’s enterprise development programme

Glencore’s alloys and coal businesses employ around 40,000 people in South Africa and the company makes a substantial contribution to the domestic economy. 91% of South African coal and ferroalloys procurement contracts (71% of the company’s budget) were with local suppliers, while 98% of employees at these divisions were local people.

Glencore’s alloys business has developed an enterprise development programme to promote and improve the capability, skills and experience of local BEE suppliers.

Glencore’s enterprise development programme provides a holistic set of mentorship, incubation and development measures to assist new, emerging and/or small enterprises from neighbouring and local communities to thrive. It includes: 

The programme’s primary objective is to empower BEE entrepreneurs from a grass-roots level, to evolve to the point where they can compete and be sustainable.  

Two businesses supported so far are Minatlou Trading Enterprise and Phadima CC. Minatlou is a cleaning company that cleans all areas of the local alloys plant. It is 100% owned by local BEE women and has created 79 permanent jobs.

Phadima is involved in internal transport and bulk materials handling. The company is 100% owned by local BEE individuals and has created 14 permanent jobs.

The support provided to Minatlou and Phadima has allowed both to become financially independent and sustainable. Gobestse Construction is a third example of a Glencore-supported small business.

The alloys business holds regular open days for vendors that target BEE suppliers, often on a monthly basis. At these events, the company meets potential vendors to get a better understanding of their capacity.

If suppliers meet the company’s criteria, they are included in Glencore’s preferential procurement programme. This approach works well for service providers though it has had varying success for capital items, such as ball mills or furnace roof panels, where lack of capacity and skill hinders the procurement relationship. 

Outcomes

Although supporting black-owned enterprises is mandated by the South African government, Glencore’s efforts go beyond what is required by law and aims for continuous improvement. The company monitors its BEE performance each month to ensure it is continuing to focus on local socio-economic development. This allows the company to identify specific areas where it can better support the development and growth of SMEs.

This demonstrates its commitment to addressing South Africa’s ongoing unemployment problem while contributing to social cohesion – in ways that also benefit the business.

ICMM members supporting the SDGs