Procurement at SAB

Procurement at SAB is centralised in Johannesburg and operates across the supply chain. This includes packaging materials (including glass bottles, cans, labels and glue, crowns, foils, crates, cartons and pallets), brewing raw materials (a particularly specialised field that purchases malt, barley and hops from predominantly local, but also foreign sources), freight and logistics (a critical link between suppliers, transporters and SAB depots and breweries) and non-production spend (including air travel, cell phone charges, information systems and merchandising material).

The company has a dedicated preferential procurement executive to ensure that SAB Ltd's commitment to transformation and black economic empowerment extends fully into its supplier base.

During the 2004 financial year, the company spent over R730-million with empowerment suppliers, constituting approximately 14% of the company's local procurement spend. The goal for the 2005 financial year was R895-million, which was exceeded to reach R938-million, or 17.3% of total local procurement and the target for 2006 financial year was R1850b, which was once again exceeded to reach R1960b, or 31.83% of total local procurement.

Apart from negotiating the procurement of required raw materials, goods and services, SAB's commercial function also analyses key commodity industries to understand how they operate and their impact on SAB.

An important part of the success of procurement is managing the supplier relationship which also involves ensuring the right quantities of the right supplier's product are delivered to SAB at the right time.

Keeping the price of beer in South Africa well below the world average is part of the task, and detailed total cost exercises are done to ensure all raw materials, goods and services supplied to SAB are of the best quality and at the best price.

The commercial function will play a key role in the execution of SAB's recently announced 5-year R5-billion capital project strategy. The commercial expertise in negotiation, contract drafting and sourcing of required capital equipment will be key skills required to ensure SAB obtains the best possible return on its investment.

Being part of a global entity means that interaction with other worldwide subsidiaries in the SABMiller group results in an understanding of global industry trends and the ability to leverage buying power between the different companies in the group.

Preferential procurement

SAB embarked on an aggressive economic empowerment campaign during the 1980s in an effort to place a considerable portion of its business with black suppliers. The campaign attempted to alleviate historical inequalities and foster skills and training for disadvantaged individuals.

In its procurement, outsourcing and contract-awarding activities, SAB favours those companies who have demonstrated a tangible and deliverable commitment to black empowerment principles. SAB's definition of a BEE company, applied when dealing with vendors, is consistent with Government's own definition, as outlined in the Black Economic Empowerment Act 2003.

A particularly successful programme has been the focused linking of SAB KickStart recipients to SAB's commercial department. Those entrepreneurs who have become successful through an SAB social investment programme are then given the opportunity to supply SAB to make their businesses even more sustainable. (For more information go to http://www.sabkickstart.co.za/)

Special procurement guidelines are made available to all suppliers to SAB. These guidelines extend to those suppliers who currently fall within an Industry Charter, as well as those who do not. Ownership and control, as well as broad-based empowerment, are considered.

A good example of SAB's procurement policy is its Taung Barley Farmers project, where a pilot launched in 1994 with one farmer has since grown to 178 emerging farmers, with each farmer supporting, on average, about six people.

Farmers are assisted throughout the farming process to ensure that they remain sustainable. On average, SAB buys barley to the value of R20-million every year from emerging farmers.