SMME DEVELOPMENT & PROCUREMENT VALUE CHAIN Transformation Indaba 2012

Our ambition is to be the leading global mining company

‘Leading’ means being the investment, the partner and the employer of choice

‘People making a difference in a company making a difference’

ANGLO AMERICAN AT A GLANCE

Other Mining and Industrial: Following the reorganization of the business in October 2009, we decided to divest of a number of assets in addition to Tarmac (which had already been earmarked for divestment): Scaw Metals; and our zinc business (sold to Vedanta for $1.34 billion in May 2010).

Platinum

Diamonds

Copper

Nickel

Iron ore and Manganese

Metallurgical Coal

Thermal Coal

Corporate &representatives offices

Other Mining & Industrial

Key

ANGLO AMERICAN AT A GLANCE

4

13809

4500

4257

3601

2222677

Figure 1: Global Economic Value Distribution 2011 $million

Suppliers

Employees

Reinvested

Taxes

Dividends

Interests

In 2011, $13,809 million paid out across our global supplier base and $ 7,263 million of this spend was in Africa.

ANGLO AMERICAN AT A GLANCE

Anglo American aims to be the industry leader and global benchmark for Supply Chain value creation

7263

361

5104

1082

Figure 2: Suppliers share of economic benefits$million

AfricaEuropeNorth Amer-icaSouth Amer-icaAsia / Aus-tralia

5

Local Procurement: relationship between location of supplier and location of recipient of goods/ services. Divided into 3 levels:

National Supplier registered or based within the same country as the operation

ProvincialSupplier registered or based within the same province/region/state/territory as the operation.

Localised Supplier registered or based within the same immediate area as the operation.

South African Example

X

LOCAL PROCUREMENT DEFINITIONS

In South Africa, BEE ownership is an additional criterion.

6

2010 - 2011

Be Proactive• Implement LP strategic plans at all levels• Supplier development• Forward visibility, readily accessible

2012

Build Resilience• Globally competitive local

suppliers• Provide leadership to

external parties

2013 →

6

Mat

urity

/ Pe

rfor

man

ce

BASICBASICBASIC REACTIVEREACTIVEREACTIVE COMPLIANTFOUNDATIONAL

COMPLIANTCOMPLIANTFOUNDATIONALFOUNDATIONAL PRO-ACTIVEPROPRO--ACTIVEACTIVE RESILIENTRESILIENTRESILIENT

11 22 33

Foundational• Policy• Build commitment• Targets measured and reported• Guidelines & toolkits

Time

11

22

33

LOCAL PROCUREMENT STRATEGY

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ANGLO AMERICAN'S LOCAL PROCUREMENT FRAMEWORK Deepening Anglo American Local Procurement Capacity

Arro 1

Arrow 2

Arrow 44

LEARN

1. Establish the business case & understanding the business drivers

2. Determining demand opportunities for local procurement

3. Assessing capacity of local businesses

PLAN

4. Developing local procurement strategies

DO

5. Building Anglo American capacity6. Ensuring accessibility and visibility7. Integrating large and local suppliers8. Developing supplier capacity and capability 9. Supporting entrepreneurs

MEASURE

10. Monitoring progress and impact

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LOCAL PROCUREMENT

The business case for Local Procurement is aligned to Anglo American’s ambition of being the partner, investment and employer of choice.

1. Establishing the business case

LEARN

9

LOCAL PROCUREMENT2. Determining demand opportunities for Local Procurement

Determining opportunities

Prioritising opportunities

Description

Determining demand opportunities involves:• Future demand analysis for goods and

services over at least five years;• Identifying the categories with potential to

be sourced locally

LEARN

10

LOCAL PROCUREMENT3. Assessing local supply capacity

Mapping suppliers to categoriesDescription

Analysis of existing capacity within the local community will locate potential suppliers relevant to the demand opportunities.

Suppliers with potential to supply a priority category will be evaluated on a range of criteria.

LEARN

11

LOCAL PROCUREMENT4. Developing local procurement strategy

Description LP Tactics Matrix

The Local Procurement strategy integrates the business case, demand-side analysis and supply-side analysis to identify strategies to increase sourcing from local suppliers

Local procurement targets and action plans are specific deliverables

PLAN

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LOCAL PROCUREMENT5. Building Anglo American Capacity

Resources appointed

Capacity Building Workshops

Description

Appropriate resources are required:

Competent dedicated staff

Steering committees

Collaboration across disciplines

Systems and procedures

Budget

New roles were created and resources appointed to focus on local preferential procurement

Local Procurement workshop: South Africa: 2 – 4 April 2012Participants from Supply Chain, Group Category teams, Business Units, Social Performance, S&SD.

DO

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LOCAL PROCUREMENT6. Ensuring accessibility and visibility

Payment Terms

Ring-fencing / Set asides

DescriptionDrawing on various approaches to make opportunities more accessible and visible to local suppliers, for example

A range of preferential sourcing methods suited to local suppliers and SMMEs

Only considering local suppliers for some contracts (ring-fencing);

Creating smaller work packages (unbundling);

Our payment terms will accommodate the needs of SMMEs

DO

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LOCAL PROCUREMENT7. Integrating local and large suppliers

Partnerships

Connecting large & small suppliers (LP Trade Fair)

Partnerships between our construction partners are improving development in the Northern Cape.With guidance and mentoringfrom Stefanutti, a local BEE supplier is gaining considerable knowledge and exposure to safety standards, quality control, programming and commercial activity.

Description

Many opportunities for local procurement are influenced by large suppliers (e.g. integrating local suppliers into large contracts)

DO

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LOCAL PROCUREMENT8. Building supplier capability

Supplier Development Description

Using supplier development programmes to work with existing local businesses

The suppliers’ capability is built and they are guided and supported towards growth and increasing competitiveness

DO

• Increased attention is being given to Supplier Development programmes by Anglo American’s South African Business Units

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LOCAL PROCUREMENT9. Supporting entrepreneurs

Entrepreneur Internship ProgrammeDescriptionEntrepreneur Internship Programme (EIP) was launched end 2011. The EIP is a targeted internship programme hosted by Anglo American’s Supply ChainAims to be a catalyst for high potential entrepreneurs interested in developing or growing a business in strategic, non-traditional areas364 applicants applied, including current Anglo American employees. Five finalists were selected to join the 2012 programmeA mix of skills training, targeted business exposure, and business planning support is being provided

In many of the communities in which we operate, the constraints to Local Procurement are so large that our efforts to bridge the gaps also require attempts at strengthening the local market economy.

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OVERVIEW: THE EIP FRAMEWORKTransforming ideas into sustainable businesses

Mentoring & CoachingOperational Exposure to Anglo American Business

Access to Technical ExpertsNetworking with Key Stakeholders

Capability AcceleratorDemand Driven Learning & Skills Development

MarketingSystems

StrategyDevelopment

Sales Systems

1. EIP Milestone Schedule2. Aurik Monthly Reviews3. EIP Progress Reviews4. Scheduled "Show & Tell" 5. Zimele Review(s)

FinanceSystems

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LOCAL PROCUREMENT10. Monitoring progress and impact

Spend with Suppliers in Host communitiesDescription• In monitoring and measuring our progress,

we consider what impact we are having - both positive and negative.

MEASURE

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Anglo American’s approach and activities to promote local procurement and enterprise development are focused on exceeding compliance and collaborating for sustainable, meaningful change.

Lessons Learnt to DateOn Our Local Procurement Journey

• There is no magic ‘silver bullet’ – a multi-faceted approach is required

• Local procurement is sustainable over economic cycles when built on a strong business case

• Collaboration creates enabling environments for successful local procurement

• Local procurement creates a positive impact by contributing to skills development, creating jobs, and investing in local infrastructure

• Sound business principles and governance underlie all engagements and transactions

THANK YOU