At Anglo American, our vision is to become a partner in the future. Promova is achieving that by partnering with local banks, global suppliers and local entrepreneurs. This is not only injecting more than 10% of the local GDP in additional procurement, but is helping build a context where our Minas-Rio mine can operate and deliver financial value. Most importantly, Promova is becoming a source of net saving to Anglo American.
In 2014, we spent $12.3bn (£8.4bn) with suppliers, which accounted for about half our total economic value distribution. Expenditure on suppliers based in the communities close to our operations was $1.8bn (£1.2bn). This represented 14.7% of total supplier expenditure in 2014.
Christian Spano, our global lead for socio-economic development, was invited to speak at the recent Extractive Industries and Local Content 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 mindsets”, 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 (IOB), a business unit of Anglo American, 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 long-term life-cycle of purchasing
- Contribute to our social license to operate
- Reduce transport and logistical costs
As part of Promova, alongside the 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. 120 were considered in the bidding process, and 35 have gone on to secure business with Anglo American.
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. Almost $100m (£68m) has already been paid to 50 suppliers. And for each dollar invested in Promova, we estimate around $25 (£17)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 IOB learned that it can also deliver savings.
When Promova was launched there was no enterprise development programme at Conceição do Mato Dentro, a Brazilian municipality, 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 in delivering full development impact and 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 (£687) per job supported going forward.
Content on this page is paid for and provided by Anglo American, sponsor of the social impact hub
