P R O F D O U G L A S B O A T E N G

(MSc, EngD, FIPlantE, FCILT, FIoD, FCMI, FSoE, FIC, FIOM FCIPS, Finst.D, Cdir)

Professor Extraordinaire - Supply and Value Chain Management.

IOM Extraordinary Chair in Operations and Supply Chain Management Professional Development

D O I N G B U S I N E S S I N A F R I C A . “ S T O P T H E B A R G A I N I N G ”

R A T H E R N E G O T I A T E A N D A G R E E O N T H E S P E C I F I T I E S

A N D T H E N C O N T R A C T

E X E C U T I V E I N S I G H T S S E R I E S

2 0 1 5 - 1 6 P A N A F R I C A N S U P P L Y C H A I N

M A N A G E M E N T P U B L I C L E C T U R E S

D I S C L A I M E R

CAUTIONARY NOTICE REGARDING CONTENTS, FORWARD-LOOKING STATEMENTS, AND DISCLAIMER

+ The information contained in this presentation has been prepared purely as guide for educational

and information sharing purposes.

+ It aims to provide insights using excerpts and case examples from various sources. It cannot be

replicated or sold without the expressed permission of the presenter.

+ The contents, plus any presentations made to date are subject to updating, completion, revision,

further verification, and amendment without notice.

+ Interpretation and generalisation of this purposive research must take into account the population

sample used in the study.

+ To the best of the presenter’s knowledge and belief, the information contained in this presentation

is in accordance with the facts of the research, and does not omit anything likely to affect the

import of such information.

+ All rights reserved. Copyright.

A S S O C I A T E S & P A R T N E R S F O R T H E Q U A S I A C A D E M I C

A N D I N D U S T R I A L S O C I A L L Y R E S P O N S I B L E I N I T I A T I V E

P A S T & P R E S E N T

I am an

+ PAN AFRICANIST

who ORIGINATES from a part of the continent called

+ GHANA

and currently RESIDING in another part of the continent called

+ SOUTH AFRICA!

W H O A M I ?

C O N T

Professor Douglas BOATENG, Africa’s first ever appointed Professor Extraordinaire for supply and value chain management (SBL UNISA), is an International Professional Chartered Director and an adjunct academic. Independently recognised as one of the vertical specific global strategic thinkers on procurement, governance, logistics, and industrial engineering in the context of supply and value chain management, he continues to play leading academic and industrial roles in supply chain strategy development and implementation, both in Africa, and around the world. He holds, amongst other qualifications, an Institute of Directors Graduate Certificate and Diploma in Company Direction, and a Doctor of Engineering (Warwick). He is also an elected FELLOW of: Institute of Directors - UK & South Africa; Society of Operations Engineers - UK; Institution of Plant Engineers - UK; Chartered Institute of Logistics and Transport - UK & South Africa; Chartered Management Institute - UK; Chartered Institute of Procurement and Supply - UK; Institute of Business Consulting - UK; and the Institute of Operations Management - UK. Recognised for his contribution to the advancement of local and international aspects of supply chain management he was honoured with a Platinum Life Time Global Achievers Award (2016) and a Life Time Achievers Award (2013) by the Chartered Institute of Procurement and Supply, and its various local industry associations. He has been an elected member of the UK’s Institute of Directors for over 20 years, and continues to assist organisations and CEOs with board level, directional, and governance matters. In addition, Professor Boateng has been publicly acknowledged by leading institutions, including the Commonwealth Business Council, for his ongoing contribution to international procurement, supply chain development and governance, and its link to emerging world long-term socio-economic development. For more information visit www.douglasboateng.com and www.panavest.com

• Costly international ventures

• Boarder challenges

• Travel challenges

• Language challenges

• Self confidence and entitlement culture`

• Maladministration & Corruption challenges

• Water challenges

• Trust issues

• Far East Dominance

• Far East Sovereign funds and their

competitive advantage over South African

banks etc.

I A M F U L L Y A W A R E O F T H E F O L L O W I N G C H A L L E N G E S

Most of the above were created by us. Through our collective effort and

LONG TERM THINKING, a lot of the these can be fixed!

• Logistical and other infrastructural

challenges

• Red tape

• Currency challenges

• Relatively Ineffective Institutions

• Power challenges

• Skills challenges

• ROCE and profitability challenges

• Counterfeit

• Conflict and Political instability

• Governance

• Globalisation

• Commodity slump

2015 2016

WEST AFRICA 5% 6.1%

EAST AFRICA 5.6% 6.7%

SOUTHERN AFRICA 3.1% 3.5%

CENTRAL AFRICA 5.5% 5.8%

Source: AFDB/OECD/UNDP 2015

C A U T I O N :

G D P D O E S N O T R E F L E C T T H E R E A L

E C O N O M I C D E V E L O P M E N T P I C T U R E !

1. Intra African trade rose 11.5% to $61.4 BILLION in 2013

2. Merchandise exports fell 5.8% to $602 BILLION in 2013

3. Merchandise imports grew 2.2% to $628 BILLION in 2013

4. Strategic Industrial sourcing is improving in selected countries

5. Regional wide medium to long term growth prospects are strong

6. Non commodity based trade between African countries growing BUT at a relatively slower pace

7. African growth output remains strong boosted by commodity exports BUT economic development is still relatively low

8. Industrialization and economic diversification is firmly on the agenda

INDUSTRIAL GROWTH, ENTERPRISE & SMME DEVELOPMENTAL efforts

improving but can be SIGNIFICANTLY accelerated through collective effort.

Source: AFDB/OECD/UNDP 2015

THE FACTS-2015*

+ Africa is generally supporting long term job and wealth creation in other

regions of the world

+ FDI flows from China to SSA rose from next to nothing a decade ago to

US$3.1 billion in 2013, representing 7 percent of global FDI flows to SSA.

+ Five resource-rich countries, Angola, Congo, DRC, Equatorial Guinea and

South Africa account for about 75% of sub-Saharan exports to China

+ Six countries – Angola, Benin, Ghana, Liberia, Nigeria and South Africa –

account for more than 80% of sub-Saharan Africa’s imports from China

+ Resource exports accounted for about 84 percent of all SSA’s exports to China

between 2008 and 2013, up from about 79 percent between 2002 and 2007.

.

Source: AFDB/OECD/UNDP 2015/ Invest in African Forum Ethiopia March 2015

THE FACTS -2015*

1. 72% of the continents young people live on less than 2 dollars a day

2. Nearly 50% of Africans live in extreme poverty

3. Chinese trade with SSA has continued to expand at a rapid rate, reaching a total value of US$170 billion in 2013.

4. REAL and impactful medium to long term growth is subject to commodity prices remaining high, increasing domestic demand, infrastructural development

5. Intra African trade is still relatively low

1. Comparatively Africans buy more from outside the continent than any other region!

6. Industry and manufacturing contribution to aggregate output and GDP has relatively stagnated.

C O N T * *

**Direct and indirect procurement

***Source. Africa Economic Outlook 2013-15

UNECA Annual Report 2014-15

Relative lack of TRUST and CULTURAL understanding still a major challenge and

generally negatively affecting AFRICANS doing LONG TERM business in Africa

The % procurement spend of Governments of the G20 most industrialised economies has never dropped below 46% with local suppliers* for 30 years

Well over 55% OF AFRICAN GOVT spend go toward PROCUREMENT OF GOODS and SERVICES

Less than 10% of African GOVT spend goes towards “real” local suppliers*

AFRICAN GOVERNMENTS* generally do not know the “TRUE ORIGINATION” of the goods and services they are spending their money on (80%)

Based on a sample of companies/SOC/SOE -2010-14

AFRICAN GOVERNMENTS/ASSOCIATED ENTITIES are still BUYING and not PROCURING. Hence the slow growth in SMMEs, SUPPLIER DIVERSITY, local industries , high unemployment, Treasury

challenges etc

THE G20 OVER THE LAST 30 YEARS

Private sector company spend on supply chain related local companies has on average not dropped below 43%

% of local Agriculture and value chain spend has not dropped below 65%

0ver 76% of the value addition to food, body care and other related

products are produced and consumed “locally”

Focused year on year coordinated incentives and PPP re local and regional production

Based on a sample of companies Government /SOC/SOE -2010-14

Supplier diversity within the G20* has enabled them to sustain long term SOCIO-ECONOMIC GROWTH

NEGOTIATED AGREEMENTS today have a direct impact on YOU, YOUR ORGANISATION, Local INDUSTRIES and the future of the AFRICAN CHILD.

Without BOLD AND DECISIVE NEGOTIATIONS, there shall be relatively NO

SIGNIFICANT LONG TERM LOCAL AND REGIONAL WIDE:-

o Optimisation of total cost of ownership for organisations

o SMME & supplier development and diversity

o Industrialisation

o Economic empowerment, o Broader socio-economic development

+ NO! Who is actually benefiting?

+ OVER 50 YEARS since 1ST independence Intra-African trade is still less than 25% of the

continent’s estimated total GDP

+ What are we leaving for the future generation?

+ Can we play a role in reversing this trend?

But for Who?

I S T H I S S U S T A I N A B L E ?

THROUGH SUPPLY CHAIN

NEGOTIATIONS

• Two or more parties (or individuals) engaging on matters of mutual interest, to agree on a way forward.

• Other definitions:

o Interaction between individuals acting either for themselves or as representatives of organised

groups…May be exploratory and serve to formulate and delineate areas of agreement or contention

(Nierenberg, 1968, pp. 2-3).

o A dialogue between two or more parties working towards making an agreement (Dignall, 2014, p.6 ).

o Two or more representatives or parties interacting in an explicit attempt to reach a jointly acceptable

position on one or more divisive issues about which they would like to agree (Lysons and Farrington,

2012, p.527).

I N T R O D U C T I O N T O S U P P L Y C H A I N N E G O T I A T I O N S

NEGOTIATION - WHAT IS IT?

I t i s s i m p l y a b o u t C O N S T R U C T I V E L Y

e n g a g i n g f o r M U T U A L B E N E F I T !

• An agreement is a negotiated understanding between two or more parties (Boateng, 2013).

• As a general rule, agreements may not legally be enforceable because they are not formal

contracts. However, they can sometimes be used in legal cases if there is a dispute on

specificities.

1 S T O U T P U T F R O M A C A R E F U L L Y P L A N N E D N E G O T I A T I O N

AN AGREEMENT - WHAT IS IT?

1 . A n A G R E E M E N T f u r t h e r c o n c r e t i s e s t h e n e g o t i a t e d r e l a t i o n s h i p

t e r m s !

2 . A n o t h e r p o t e n t i a l o u t p u t o f N E G O T I A T I O N S i s a D I S A G R E E M E N T

a n d t h e p a r t i n g o f w a y s .

P O T E N T I A L F I N A L O U T P U T F R O M A C A R E F U L L Y

P L A N N E D N E G O T I A T I O N ?

A CONTRACT - WHAT IS IT?

A contract is an arrangement entered into voluntarily by two or more parties with the intention of

creating a legal obligation, which may have elements in writing, though contracts can be made orally.

It is pieced together to supposedly help legally enforce relationship specificities (Agreement).

The remedy for breach of contract can be "damages," or compensation of

money. In equity, the remedy can be specific performance of the contract,

or an injunction. By definition a contract already assumes that there could

be a problem, hence they are crafted…

For parties to honour agreed relationship specificities

To protect the parties

To be a warning to be careful or else!

Although a binding CONTRACT can (and often does) result from an AGREEMENT, an agreement

typically documents the give-and-take of negotiated terms (RELATIONSHIP SPECIFICITIES), while

a contract details both the relationship specificities and the permissible acceptable terms and conditions

(normally in the form of a legally binding document ).

A G R E E M E N T S V E R S U S C O N T R A C T S

WHAT IS THE DIFFERENCE?

O r g a n i s a t i o n s a r e i n c r e a s i n g l y

d i f f e r e n t i a t i n g b e t w e e n

A G R E E M E N T S a n d C O N T R A C T S .

NEGOTIATION

A means to understand each others needs and requirements through engagement

(Face-to-face, electronic, or other).

AGREEMENT

Output from negotiations.

Negotiated understanding between two or more parties.

Details the specificities of the relationship.

CONTRACT

Binding document to protect interests - just in case something goes wrong.

A means to legally solidify an agreement.

S U M M A R Y

THREE DIFFERENT CONCEPTS

W i t h c a r e f u l l y n e g o t i a t e d A G R E E M E N T S ( s p e c i f i c i t i e s )

L e g a l l y c r a f t e d C O N T R A C T S ( s u b j e c t t o t r u s t a n d

j u r i s d i c t i o n ) m a y n o t b e n e c e s s a r y .

NEED identification Determine the

specificities for the NEED

Search for a partner/provider to

deliver the specificities

Undertake own independent research on potential/existing partners to ascertain

capabilities

PREPARE & PLAN for the Negotiations

ENGAGE via

“NEGOTIATIONS”

Settle on relationship specificities

“AGREEMENT”

Draw up legally binding relationship terms

“CONTRACT”

Implement & monitor specificities and

relationship terms

S U M M A R Y

THE SCHEMATIC LINK BETWEEN THE THREE CONCEPTIONS

Purposive

Research Findings

APPOINT A LEAD

NEGOTIATOR

Develop specific negotiation objectives

Assemble relevant and value adding

TEAM

Research and gather

information on YOUR

organisation and the supplier

Analyse information and

share information related to the strengths and

weaknesses of BOTH SIDES

with the TEAM Establish

potential KEY issues and

positions for BOTH SIDES

Plan

negotiation strategy,

including location, timing,

appointment of key

spokesperson on issues, etc.

Detail the negotiation

ACTION PLAN and TACTICS with the TEAM

Review strategy and action plan

with TEAM

Undertake a MOCK

negotiation run with the TEAM

S U M M A R Y

PREPARING AND PLANNING FOR EFFECTIVE NEGOTIATIONS

• APPOINT THE RIGHT LEAD NEGOTIATOR

The lead negotiator in conjunction with the TEAM must:

o Have clear objectives.

o Spend more time on the research and planning aspects of the negotiation.

o Undertake some research on the potential supplier.

o Have knowledge about the strengths and weaknesses of both sides.

• OBJECTIVELY SELECT THE RIGHT AND CAPABLE CROSS-FUNCTIONAL TEAM

• UNDERSTAND

o YOUR own requirements

o SUPPLIER requirements

o YOUR own capabilities

o SUPPLIER capabilities

• THE CONTEXT

o Local

o Regional

o International

… C O N T .

A s c u r r e n t a n d f u t u r e C - s u i t e m e m b e r s , w e h a v e

f i d u c i a r y r e s p o n s i b i l i t i e s t o p r o t e c t s h a r e h o l d e r s

a n d s o c i e t y t h r o u g h E F F E C T I V E N E G O T I A T I O N S

B A R G A I N I N G V S N E G O T I A T I O N S

BARGAINING

• Focus is generally on price

• Focus on short term price gain

• Win-lose type of engagement

• Lead to long term business industrial and societal pain

• Bargaining means engaging from a position of weakness

• Bargaining is about wining and not necessarily about the consequences of wining !

B A R G A I N E R S g e n e r a l l y f o c u s o n p r i c e ! !

B A R G A I N I N G V S N E G O T I A T I O N S

BARGAINERS

• Psychological disadvantage in engagements

• Want “a good or service” at a cheaper price

• Product or service quality not the prime focus

• Assumes you are already poor and cannot afford

• Less confident people (normally adopts bullying tactics!)

• Price chislers

• Generally not knowledgeable about what they can get or what they have

• Not well informed

• Short term driven

• Win-lose hunters

African Governments, Policy makers and Executives generally tend to bargain:

• Underestimate the value of what they have

• Focus on short term price and cost gain

• Satisfy short term demands of business, society and shareholders

B A R G A I N E R S a r e g e n e r a l l y b e g g i n g ! !

B A R G A I N I N G V S N E G O T I A T I O N S

NEGOTIATION

• Engaging on equal terms for mutual benefit

• Not about winning. Rather it is about the benefits to be gained

• Focus is on win-win value creation and long term gain

• NEGOTIATORS generally engage from a position of knowing the intrinsic value of what they have and what value they want out of a relationship

•

Final PRICE for the good or service might even go up!

B A R G A I N I N G V S N E G O T I A T I O N S

NEGOTIATORS are generally

confident people(not bullies!)

Knowledgeable

Well informed

Long term driven

Win-win engagers

Strategic

Prepared to walk away from a deal if not in the long term interest of the parties

The developed world and selected countries in the Asia (including China ) negotiate for the LONG TERM BENEFIT OF THE ORGANIZATION, COUNTRY AND REGION

During negotiations

Price is not the most important, Rather it is the potential value to be created for each party to the negotiations

PRICE is generally not the end game for Negotiations !

QUASI ACADEMIC AND INDUSTRIAL RELEVANCE

Gauging director level perceptivities on aspects supply chain management to assist in solving vertical specific

industrial SCM related challenges

RESEARCH DESIGN

• Purposive Longitudinal Action research :

POPULATION SAMPLE ”

o Independent purposively selected global organisations (public private and government departments)

o C-Suite executives

o Directors, Chief Directors and Director Generals

SCIENTIFIC RESEARCH CRITERIA

o Generalisability, Testability, Objectivity, Purposiveness, Parsimony

o Reliability ,Replicability, Rigor, Precision and confidence

o Industrial significance

o Academic and scholastic relevance

.

P U R P O S E F U L L O N G I T U D I N A L S C I E N T I F I C

I N D U S T R I A L R E S E A R C H

PARTICIPATING OFFICERS

Chief Executive officers

Chief financial officers

Chief Information officers

Operations Directors

Chief Director, Director Generals

Chief supply chain officers

Chief procurement officers

Chief supply officers

Chief logistics officers

Chief operating officers

REGIONS

Africa

Europe

Americas

Asia

Others

Combined revenues/spend of

participating organisations* were well over a TRILLION

USD*

SECTORS/COMPANIES

Manufacturing and

production

Agriculture and allied

Services*

Food and Beverages

Government and

SOE/SOC

Institute of Directors Chartered Institute of Procurement and supply Chartered Management Institute Association of certified and chartered accountants Chartered Institute of logistics and transport

Society of Operations engineers

Institute of chemical engineers

Institute of plant engineers

Chartered Management Institute

Institute of Operations management

* Including spend from selected Government entities

G L O B A L L O N G I T U D I N A L S T U D Y

PARTI C I PATI NG D I RECTORS OVERALL PERCEPTI V I T I ES

C o n c e p t s o f B a r g a i n i n g a n d N e g o t i a t i o n s w i t h S u p p l i e r s a r e t h e s a m e t h i n g

2009 Generally disagreed 38% 2013 Generally disagreed 54%

Agr eements and Cont r ac ts w i t h S u p p l i e r s a r e t h e s a m e t h i n g

2009 Generally disagreed 27% 2013 Generally disagreed 54%

Impact o f Negot ia t ion team compos i t ion on negot i a t ion outcomes

2009 Generally agreed 89.6% 2013 Generally agreed 88%

Negot i a t ion i s i n tegra l to va l ue cha i n qua l i ty

2009 Generally disagreed 14.9% 2013 Generally disagreed 4%

PARTI C I PATI NG D I RECTORS OVERALL PERCEPTI V I T I ES

D i r e c t l i n k b e t w e e n N e g o t i a t i o n s a n d Va l u e c h a i n w a s t e

2009 Generally agreed 80.9% 2013 Generally agreed 92%

Di r ec t l i nk be tw een e f fec t ive negot i a t ions and cor r upt i on

2009 Generally agreed 68.1% 2013 Generally agreed 90%

Resear ch ing on supp l ie rs /par tner s

25% of related time 75% of related time 2009 62% 2009 8.9% 2013 50% 2013 12%

I M P A C T O F L A C K O F E F F E C T I V E N E G O T I A T I O N S

COST TO TAX PAYERS AND SHAREHOLDERS

Were the parties ever on the same page?

1. Tshwane metro and PEU (Pty) Ltd

– Over R800m already paid

2. Consumer Debt to Municipalities 98B Sept 2014-5.5B. Alone attributed to National and Govt Departments R22B by businesses R60B by households

1. Non payment and Systems failure(P. Gordhan-May 2015)

3. Minister vs Chamber of Mines

1. Mining Charter

4. Government recalls 88000 tablets (May 2015)

1. Theft devices not installed

5. Parts of Eskom must be sold(May 2015)

1. Government holding controlling stake

2. Issues of management?

6. Tourism Minister vs Home Affairs Minister(April 2015)

1. Travelers to South Africa-downward trend!

7. Siyenza Group was awarded the tender worth R631-million to build about 66000 toilets in villages by the Amathole district municipality.

I M P A C T O F L A C K O F E F F E C T I V E N E G O T I A T I O N S

COST TO TAX PAYERS AND SHAREHOLDERS

Were the parties ever on the same page?

1. Rodpaul Construction CC t/a Rods Construction v Ethekwini Municipality and Others (10075/13) [2014]

ZAKZDHC 18 (June 2014)

2. Gijma Technologies vs Home Affairs

– ICT contract over R4BILLION!

3. Sanral vs Cape Winelands tolling concession vs Protea Parkways Consortium –

4. Kuruman residents against Government

– Water and road construction tenders

5. South Africa: Cape Town first to seek damages for tender rigging

– World cup construction(OVER 400 M)

6. Telkom, Tiger Brands, SAA*(Tanzania) and Others in Africa

– Home work??

Purposive

Research Findings

REST OF AFRI CA C-SUI TE EX ECUTI VE / POL ICY MAKER PERCEPTI V I T IES

RE : THEI R UK COUNTERPARTS ON SUPPLY CHAI N NEGOTI AT I ONS

2009 2011 2013

YES NO YES NO YES NO

Trust of their UNITED KINGDOM counterparts 65% 35% 64% 36% 67% 33%

Cultural Understanding of UNITED KINGDOM 61% 39% 64% 36% 63% 37%

Why are British C-suite executives relatively more trusted when it comes to long term win-win supply chain business negotiations?

Purposive

Research Findings

REST OF AFRICA C-SUITE EX ECUTIVE/POL ICY MAKER PERCEPTIV IT IES RE:

RE THEI R SOUTH AFRI CAN COUNTERPARTS ON SUPPLY CHAI N NEGOTI AT I ONS

How do you negotiate win-win long term business agreements with a CLOSED MIND and FEAR?

The lack of trust and cultural understanding is compelling the rest of African C-suite executives/policy makers to seek short term driven alternatives from outside the continent

Purposive

Research Findings

How do you negotiate win-win long term business agreements with a CLOSED MIND and FEAR?

“Unlike our UK, European, Chinese, Indian counterparts, South African C-suite

Executives/Policy Makers generally see PROBLEMS and not the LONG TERM OPPORTUNITIES around them”

SOUTH AFRICAN C-SUITE EX ECUTIVE/POL ICY MAKER PERCEPTIV IT IES RE:

REST OF AFRI CAN COUNTERPARTS ON SUPPLY CHAI N NEGOTI AT I ONS

Purposive

Research Findings

GLOBAL C-SUITE EX ECUTIVE AND/OR POLICY PERCEPTIV IT IES

RE: - BUYERS ( I NCLUDI NG PROFESSI ONAL SERVI CES) FROM THE

FOLLOW ING COUNTRI ES V I S -À -V I S MEDI UM TO LONG TERM

I NTERESTS DURI NG SUPPLY CHAI N NEGOTI AT I ONS

UK, rest of Europe and the United States have relatively better long term win-win BUYER negotiation perceptivities than India, China and South Africa

YEAR UK REST OF

EUROPE SOUTH AFRICA

REST OF AFRICA CHINA INDIA

2009 23% 17% 9% 6% 6% 6%

2011 25% 19% 8% 9% 8% 4%

2013 26% 22% 6% 8% 8% 4%

Purposive

Research Findings

UK, rest of Europe and the United States have relatively better Long term win-win SUPPLIER negotiation perceptivities than India, China and South Africa

GLOBAL C -SUI TE EX ECUTI VE AND/ OR POL I CY PERCEPTI V I T I ES

RE : - SUPPLI ERS ( I NCLUDI NG PROFESSI ONAL SERVI CES) FROM THE

FOLLOW ING COUNTRI ES V I S -À -V I S MEDI UM TO LONG TERM

I NTERESTS DURI NG SUPPLY CHAI N NEGOTI AT I ONS

YEAR UK REST OF EUROPE

SOUTH AFRICA

REST OF AFRICA CHINA INDIA

2009 21% 17% 6% 6% 9% 6%

2011 26% 15% 8% 4% 8% 8%

2013 30% 18% 6% 6% 6% 6%

Purposive

Research Findings

GLOBAL C-SUITE /POL ICY MAKER TRUST PERCEPTIV IT IES OF THEIR

SOUTH AFRI C AN COUNTERPARTS RE: -LONG TERM W I N -W IN SUPPLY CHAI N

NEGOTI AT I ONS

South African C-Suite executives/Policy makers generally less trusted by their global counterparts during LONG TERM win-win supply chain negotiations.

Global C-Suite TRUST perceptivities of their South Africa Counterparts 2009 Generally agreed 59.6% 2011 Generally agreed 50.9% 2013 Generally agreed 38%

Global C-Suite perceptivities re culture and local business practice on Negotiations 2009 Generally agreed 87.3% 2011 Generally agreed 92.4% 2013 Generally agreed 94%

• Relatively less time is spent on researching supplier and partner capabilities.

• The is relatively a general lack of trust among African C-Suite directors when engaging in supply

chain negotiations

• Procurement, Global outlook, and Listening skills among the most critical requirements of a lead

negotiator

• United Kingdom still amongst the most trusted supply chain negotiators

• Initial negotiations are seen as critical to service quality.

• Agreements and contracts are increasingly being seen as different things.

• General misunderstandings related to the difference between bargaining and negotiations are

increasingly becoming evident to C-Suite executives globally.

• Negotiations are seen as a trigger for long term value creation.

S U M M A R Y O F D I R E C T O R L E V E L P E R C E P T I V I T I E S O N N E G O T I AT I O N S

African policy makers and business leaders often underestimate the implications of NEGOTIATIONS. More time and effort is spent on the pricing and legal aspects of a relationship as opposed to negotiating the relationship specificities for long term benefit

– AGREEMENT

1. Research your potential partner/ service provider.

– Especially internal skillset!.

2. Evaluate your own internal capabilities

3. Get to understand cultural values

– Integrating cultural values takes time

4. Executive mindset change and openness required

– Do not assume what works HERE will work THERE !.

5. Appoint the right people from Day 1 !

– Must have names in mind as part of the initial negotiations OBJECTIVES

6. Do not drag executives along

– Rather creatively pull them along! • Otherwise get rid of them!

W H AT M U S T W E D O ?

Relative lack of TRUST and CULTURAL understanding is hampering LONG TERM intra African business, job creation, SMME development and industrialisation

C-suite Directors in Africa must make a conscious effort to learn and understand amongst others each others’

business culture, values, practices etc.

COLLECTIVE EFFORT NEEDED FROM NATIONAL REGIONAL AND CONTINENTAL WIDE C-SUITE MEMBERS

We must encourage the use of effective negotiations to :

– Safe guard company, national and regional resources and assets

– Create long term shareholder wealth

– Promote the trust of investors

– Exercise duties of care, skill, integrity and diligence expected

– Ensure proper understanding of the operation, business and the regulatory

requirement

– Positively link to economic development and good corporate performance

– Maintain corporate integrity

– Manage and minimise the risk of corporate fraud,

– Combat against management misconduct and corruption

– Assist Governments and Policy makers to safeguard national assets for future generations

– Harness national and regional assets for the common good

W H AT M U S T W E D O ?

COLLECTIVE EFFORT NEEDED FROM NATIONAL REGIONAL AND CONTINENTAL WIDE C-SUITE MEMBERS

Targeted human capital integration is one of the most important aspects of developing world post merger/acquisition integration and must be part of the initial

negotiation OBJECTIVES.

A F R I C A ! S O M E M O R E I N T E R E S T I N G F A C T S

From the outset, were our POLICY MAKERS AND BUSINESS LEADERS on the same page with their suppliers, local and international Investors?!

1. FDI projects in Africa fell 8.4%, but remained well above pre-2008 levels.

2. Capital investment into the continent surged to US$128b, up 136%.

3. External financial flows to Africa to exceed US$190b in 2015

4. FDI created 188,400 new African jobs, a 68% increase.

5. The average investment increased to US$174.5m per project, from US$67.8m in 2013.

6. Africa’s share of global capital investment and job creation hit an all-time high in 2014

EY’s attractiveness survey Africa 2015 :Making choices

FDI at an all time high.

Yet, unemployment is also at a record level.

Regional wide frustrations with service delivery quality are on the increase.

Lack of agreement specificities has lead contract litigation to be at an all time high!

A person cannot eat GDP. Growth must reach all.

Donald Kuberenka, President and CEO, African Development Bank, 2014.

Africa is rising and growing BUT FOR WHOM?

Douglas Boateng (SBLUNISA, April 2014)

“Africa is not rising for ordinary citizens…The continent is still home to 6 of the 10 most unequal countries

in the world.”

Winnie Byanyima, Executive Director, Oxfam International, May 2014

“Sub Saharan Africa has taken off but POVERTY remains stuck at unacceptably high levels, still afflicting

about 45% of the regions households.”

Christine Largarde, Head of IMF Mozambique, May 2014

C O N T .

Pontificating achievements through the number of millionaires created is good. HOWEVER, long term socio-economic stability can only be sustained through how many people governments and private sector executives continuously manage to lift above the poverty line.

Boateng, 2013

• Do your home work to avoid the SHORT TERM GAIN BUT MEDIUM TO LONG TERM PAIN.”

• Supply chain Negotiation is about constructive engagement for mutual benefit.

• Supply chain Negotiations and bargaining are two distinct concepts requiring different approaches.

• Walking away from negotiations is an AGREEMENT not to engage.

• In the emerging world, tactics for AGREEMENTS and subsequent CONTRACTS must be different.

• Supply chain Negotiation is not about price chiseling

– If during negotiation you find the supplier is short changing itself you must be frank and open.

– It is about finding a common ground for each other’s needs.

• Going into negotiations with an “I must win attitude” is short term thinking and POTENTIALLY

HARMFUL.

– Yes you may win in the short term, BUT there could be unintended consequences!

– Both parties must be comfortable with the negotiated outcome, i.e. Specificities for the

relationship.

F I N A L F O O D F O R T H O U G H T

South Africa can still become one of the major vertical/specific manufacturing/service hubs for the rest of the continent and beyond through supply chain NEGOTIATIONS and not BARGAINING.

The OPPORTUNITIES are around YOU !. You can only harness them with a mindset change Effective supply chain negotiations can help you successfully and profitably do long term business in Africa !!.

S U M M A R Y

Think AFRICAN!

“As a business leader when you think South African your market just under 60 million people. However when you think African your market is just under 1 BILLION PEOPLE”

40% OF THE VALUE ADDITION in the following supply chains were

realised by local manufacturers.

44 years from now 60% of below products were produced, traded and

consumed on the continent: the impact on organisations, industries and the African Child.!

YOUR socio-

economic future

depends on YOU!

www.douglasboateng.com

Prof Douglas Boateng

(MSc, EngD, FSOE, FIPlantE, FCILT, FIoD, FCMI, FIC, FIOM FCIPS, Finst.CDir )

Professor Extraordinaire - Supply and Value Chain Management.

IOM Extraordinary Chair in Operations and Supply Chain Management Professional

Development

+ Tel: +27 11 469 3860 (SA) + Cell: +27 82 335 2688 (SA)

+ Fax: +27 11 469 3207 (SA) + Email: dboateng@panavest.com

+

F I N A L L Y

Our ancestors selflessly strived to build a better future for us. Therefore we are duty bound to at least try to better what was started for the next generation