Located in Maputo in southern Mozambique, our Mozal aluminium operation, which commenced production in 2000, was the first major development in the country in the past 30 years. The operation now accounts for more than 50 per cent of Mozambique’s exports, over 45 per cent of imports and 7 per cent of gross domestic product1. After two decades of unrest in the country, there were few local businesses that could provide the smelter with essential goods and services; development of a local supply chain has been an imperative. Commencing with a commitment to award as much work as possible to local suppliers, the focus of development support programs has moved to helping them improve their skills and capacity, with a view to building a local base of strong, competitive and sustainable supplier companies.
During the start-up of Mozal, the operation faced a number of logistical and planning challenges. A 17-year civil war had devastated Mozambique and its economic infrastructure. There were few local suppliers, which meant that a substantial inventory of operational goods and maintenance spares had to be held on site. Maintaining production therefore required a substantial investment of working capital.
The harbour estuary was regarded as difficult to navigate for the shipping of sea-bound raw materials and the road to the plant from Komatipoort on the South African border was in a bad state of repair. As the 80-kilometre journey took up to five hours, many trucking companies refused to transport loads to the site. A new road was opened in 2000, reducing the travel time to around one and a half hours.
A vibrant mix of African and Portuguese people largely populates the country. The official language is Portuguese and a large number of people had been trained in former Soviet bloc countries such as Russia, Hungary, East Germany and Bulgaria. In the early stages of start-up, virtually no English was spoken in the area around the Mozal site. This posed a number of challenges in the ordering of materials from English-speaking suppliers and in the interpretation of the description of materials required for production and plant maintenance.
As Mozal has developed, these issues have generally been overcome. The last four years have seen remarkable changes in the geographic infrastructure of the region of Maputo and Matola and in the abilities of Mozambican people to adapt to the requirements of Mozal’s high-performance, results-driven business culture.
Implementing a program to develop local supplier companies
From the beginning of the Mozal start-up, there has been a drive to identify and develop local companies and make them competitive in a completely new business environment, that of aluminium production.
A program was developed to educate and train the newly formed small and medium enterprises (SMEs) on a world-class tendering package, allowing them to compete with foreign companies. Work packages were exclusively allocated to local companies so as to enhance their development. This was done without compromising the principles of competitive pricing, compliance to specifications, timely delivery and safety.
The materials and services identified to be procured exclusively from local companies are stationery; transport labour; vehicle rental; signage; labour rate agreements; minor civil work; equipment surveys; manufacturing; small tool repairs; lifting services; hardware and software services; vehicle service and maintenance; laboratory consumables; and hand tools. The process followed was to begin with services that could be undertaken with low risk to the operation and then expand the range as local capabilities developed.
Local enterprises were included on lists of companies tendering for work, from which followed the progressive awarding of contracts for site works and materials supply. The drive was then to undertake HSE assessments and audits with all on-site suppliers, so as to develop and enhance the interactivity between Mozal and the suppliers.
Each company is required to have HSE management plans and processes in place. Those without adequate plans are provided with coaching or training to help them meet the requirements. There has also always been strong emphasis on business conduct at Mozal and workshops are conducted to introduce SMEs to the BHP Billiton Guide to Business Conduct. The goal is to sustain the local enterprises by achieving a high level of business ethics and HSE performance in their maintenance, operations and management practices.
Since the beginning of operations at Mozal, the number of packages awarded to local companies has progressively grown. A significant number of companies have been exposed to the new working environment of aluminium production, highly sophisticated plant operations and maintenance, and very high demands in materials supply.
This strategy has shown positive results, with around US$4 million on average per month being spent with Mozambican registered companies. The graph below shows the history of the spend with local companies over the last four years.
Mozlink – focusing on building quantity and capacity
To further build on the successes, it was considered important to shift the focus from dollar spend towards real growth in terms of the quantity and capacity of companies dealing with Mozal. This meant that some leeway on the competitive pricing principle was required.
The Mozlink program has been set up and, as part of the program, an SME Development Centre has been established. Through the program, Mozal builds SME capacity, shortens the supply chain, minimises cross-border complexities and reduces lead times, which in turn leads to lower stock levels.
The Mozlink process is to:
- identify, introduce and develop suitable suppliers
- create a Mozambican supplier database
- identify materials and services to be procured exclusively from Mozambican companies
- implement training and development programs for SMEs
- build cooperative relationships.
One-day workshops are held with each of the SMEs to formulate a development program that will guide them through training and coaching to improve on the baseline. The baselines are designed to enable the companies to establish benchmarks in their own areas of business and learn from each other. It further enables the Mozlink steering committee to develop training in the areas most required. The companies can follow their progress by using the graph.
Tendering training has been given to 12 companies and an additional 13 have been included in the program. An assessment has been undertaken to establish baselines in the areas of safety, maintenance and operations, quality, and management practices such as human resources and finance.
Among other services provided, major packages, in terms of spend per year and criticality to the operations, have been awarded to these Mozambican companies:
- Agro-Alfa – pot superstructure removal and replacement
- Zulmet Projectos – basement cleaning, pot de-lining and pot preparation
- Dickinson Mozambique – pot re-lining, pot sealing and ladle workshop repairs
- Tubex – small tools repairs
- Duys Engineers – potshell repairs.
The Mozlink program is in line with the Mozambique Government’s focus on industry growth. While there is no legislation to enforce expenditure, supporting the government’s plans will reinforce relationships and enhance the standing of the Company as a good corporate citizen in Mozambique.
The program has been developed in collaboration with the government’s Centre for Promotion of Investment (CPI) and the World Bank, specifically the Africa Project Development Facility (APDF) of the International Finance Corporation and Projecto Para O Desenvolvimento Empresarial (PoDE).
Mr Issufo Caba, Business Development Advisor at the Maputo Office of the APDF, has stated, ‘In Maputo, Mozal is a live example of how a Corporate can work with SMEs. This is a win-win-win situation that we started developing in Mozambique, where Mozal, the SMEs and the community benefit from the business linkage model. Mozal has consistently demonstrated its commitment towards developing local supply chains and is closely working with APDF and other local partners in the implementation of SME empowerment programs, which enables and strengthens local SMEs to be Mozal suppliers’.
Mr Caba also pointed out, ‘The first program – SME Empowerment and Linkages Program (SMEELP), which was designed and implemented for the construction phase of the expansion of the Mozal smelter – linked 14 local SMEs that successfully delivered contracts to Mozal. The current program, Mozlink, is now linking 25 local SMEs’.
The key change to the materials management strategy is a shift from quantity to quality, with a focus on safety and safety systems, lead-time and reliability, aimed at developing sustained growth and excellence. Underpinning the approach is greater collaboration with suppliers and the sharing of benefits and risks.
This provides SMEs with opportunities for information sharing that can extend their marketplace, facilitate access to useful data, accelerate growth, introduce best practice information systems and bring demand and supply together.
1 2002 figures
2 Note: Substantial increase in FY ‘03 due to the Mozal expansion project phase II
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