Government Supply Chain and Procurement Summit Gallager Estate - 13 th & 14 th October 2008

1. Centralised Procurement Lessons Learnt from the Gauteng Shared Service Centre Government Supply Chain and Procurement Summit Gallager Estate - 13th & 14th October 2008 Namhla Siqaza: GM - Procurement Gauteng Shared Service Centre

2. Outline • Procurement Environment • Decentralized/Centralised vs. Shared Services • Prior to Shared Services • Gauteng Shared Service Centre • The Next Chapter • Lessons Learnt

3. The Procurement Environment • The role of procurement is to buy quality goods and services at a demonstrably competitive cost to be delivered at the right time and place. • Facilitates efficient service delivery in the public and private sectors • Positioned as a strategic partner with other senior level executives • Procurement is viewed as key business advisor on industry and supply market trends • Compliance to regulatory requirements: Constitution & PFMA • Commitment to Black Economic Empowerment through PPFA practices • Scarce procurement skills • Possible effect of global financial crisis

4. Decentralised/Centralised vs. Shared Services Shared Services Decentralization Centralized • Independence of business • Economies of skill • Lean, flat organization • Enhanced career Progression • Synergies • Recognition of Group functions • Dissemination of best practices • Center of excellence • Dept. • maintain • control of decisions • Responsive to needs • Maintenance • of business units • decisions • Remote from business • Unresponsive • No Dept. control of central overhead • Inflexible to Dept. needs • Common systems & • support • Consistent standards & • controls • Economies • of scale • Variable standards • Different control environments • Higher costs • Duplication of • Effort • Manual intensive & repetitive

5. Prior to Shared Services BASELINE INFORMATION No. of entities - 58 SLA for RFQ – 19 days SLA for RFP – 70 days 19,54% spend on P2P process 80.46% Maverick spend Three IT systems No pre qualified vendors

6. GSSC Business Mandate The Gauteng Shared Services Centre was established in 2001 as a key transformational initiative to revitalise service delivery in the public sector • Provides back-office transactional support services in 5 functional areas • Serves 14 Provincial Departments’ geographically spread over 126 physical locations • Serve 160,000 employees • Does business with over 12,000 active suppliers Business Functions Finance Human Resources Procurement Audit Technology Support 14 Provincial Gov’t Depts 12,000 active suppliers Business Processes Systems Service Depth People Organisational Reach

7. GSSC Procurement – The Operational Mandate The aim of GSSC Procurement is to provide procurement related services to GPG departments. It is our intent to be ‘best in class’ organisation in the areas of Sourcing, Contracting and Purchasing whilst proactively contributing to GPG socio-economic objectives

8. GSSC Procurement –The Mandate Continued The P2P process was envisioned as the official vehicle through which GPG procures goods & services, and subsequently pays suppliers 8.Reporting • From the outset, the goal was to drive the creation of public value through tight integration of the end-to-end process • We defined P2P activity ownership, staked out territories, re-examined relationships, shared roles & responsibilities of GSSC vs. Customer Departments • Measure, Measure, Measure performance and compliance through a P2P scorecard (e.g. # of PO per FTE ; % of invoices paid within SLA; etc) • Automate through best of breed system tools (SAP purchasing platform; mySAP SRM; Catalogues (MDM); BI; Workflow; etc)

9. GSSC Procurement – The Mandate Continued Procure Goods and Services 5 1 Dept receives goods Department Start completes request and/or services and Department and forwards to the acknowledges receipt of GSSC the goods to the GSSC 4 2 3 6 GSSC places GSSC receives Buyer sources GSSC receives 7 order with 8 / request goods and/or acknowledgement GSSC pays vendor on behalf Contract requisition services of Dept of receipt of goods vendor on behalf amendments and/or services of Dept and invoice GSSC 0 0 End External Process External Process Vendor submits Vendor Vendor Receives Vendor dispatches invoice to the GSSC business requirement goods and/or from the GSSC services to the Dept

10. GSSC Procurement – Realising the Promise • Reduced turnaround times from req. decision to PO placement by 50% over the previous year. • Exceeded the GPG Preferential Spend target of 50% by achieving a 53.5% spend • Doing business with 12,000 active suppliers • Process an average of 7500 purchase orders per month – an increase of 450% over the last 3 years • Reduced turnaround times from req. decision to PO placement by 50% over the previous year. • Achieved cost savings of between 5% in isolated target areas • 60% P2P spend GSSC Performance Data as at March 2007

11. Our Challenges • Demand planning • High “touch points” still causing the most headaches! • Invoice mismatches & payment delays • Non-acknowledgement of goods & services received • Use of un-registered suppliers • Our processes are still perceived as very complex • The compliance/leakage problem • Maverick spend

12. The Next Chapter – Higher Levels of Maturity Going forward, we will focus on 4 critical factors to drive full value from our GPG-wide Investments Automate & integrate further with mySAP ERP; e- registration; e- catalogue; e - auction; e- tendering ; P- Cards; e-Invoicing; etc End to end P2P process Establish strategic partnerships Prequalify; train & develop vendors Achieve and exceed GPG Annual PP Spend targets Attract, develop, retain the right cadre of people! 4 Focal Points: Process; Customer; People; Finance

13. This is a Programme NOT a Project! It’s about more than cost. It’s about service. Measure performance. Demonstrate achievements. Importance of stakeholder management. Engage in an open and frequent opinion exchange with your suppliers. Need for a solid technology platform. Do not forget about the PEOPLE! Lessons from the Frontline Just do it! It’s not about sharing – it’s about transforming the way Government does business! 13

14. Namhla Siqaza General Manager – Procurement Namhla.siqaza@gauteng.gov.za Thank you!