DOING BUSINESS IN AFRICA. “STOP THE BARGAINING” RATHER NEGOTIATE AND AGREE ON THE SPECIFITIES AND THEN CONTRACT PROF DOUGLAS BOATENG (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

EXECUTIVE INSIGHTS SERIES 2015-16 PAN AFRICAN SUPPLY CHAIN MANAGEMENT

PUBLIC LECTURES

DISCLAIMER CAUTIONARY NOTICE REGARDING CONTENTS, FORW ARD-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 AT E S & PA RT 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 LY R E S P O N S I B L E I N I T I AT I V E PAST

& PRESENT

WHO AM I?

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!

CONT

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

I

A M •

F U L LY

A W A R E

O F

T H E

F O L L O W I N G

Logistical and other infrastructural challenges • • •

•

•

• •

Power challenges

• Skills challenges ROCE and profitability challenges

Boarder challenges •

Currency challenges

•

•

Costly international ventures

Red tape

Relatively Ineffective Institutions

•

Travel challenges Language challenges

Self confidence and entitlement culture` Maladministration & Corruption challenges •

•

• Counterfeit Conflict and Political instability

•

•

Governance

•

Globalisation Commodity slump

C H A L L E N G E S

Water challenges •

• •

Trust issues Far East Dominance

Far East Sovereign funds and their competitive advantage over South African banks etc.

Most of the above were created by us. Through our collective effort and LONG TERM THINKING, a lot of the these can be fixed!

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%

CAUTION: GDP DOES NOT REFLECT THE REAL ECONOMIC DEVELOPMENT PICTURE! Source: AFDB/OECD/UNDP 2015

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

CONT**

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.

Relative lack of TRUST and CULTURAL understanding still a major challenge and generally negatively affecting AFRICANS doing LONG TERM business in Africa **Direct and indirect procurement ***Source. Africa Economic Outlook 2013-15 UNECA Annual Report 2014-15



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%)

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

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

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

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

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

IS THIS SUSTAINABLE?

But for Who?

+ + + +

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?

THROUGH SUPPLY CHAIN NEGOTIATIONS

I N T R O D U C T I O N

T O

S U P P LY

C H A I N

N E G O T I AT I O N S

NEGOTIATION - WHAT IS IT?

• 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 t

i s s i m p l y e n g a g i n g

a b o u t C O N S T R U C T I V E LY f o r M U T U AL B E N E F I T !

1

ST

OUTPUT FROM A CAREFULLY PLANNED NEGOTIATION

AN AGREEMENT - W HAT IS IT?

• 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 . An

AG R E E M E N T

2 . An o t h e r

f u r t h e r

p o t e n t i a l

c o n c r e t i s e s t e r m s !

t h e

n e g o t i a t e d

o u t p u t o f N E G O T I AT I O N S i s a n d t h e p a r t i n g o f w a ys .

a

r e l a t i o n s h i p

D I S AG R E E M E N T

POTENTIAL FINAL OUTPUT FROM A CAREFULLY PLANNED NEGOTIATION? A CONTRACT - W HAT 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!

AGREEMENTS VERSUS CONTRACTS W HAT IS THE DIFFERENCE?

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 ).

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 AG R E E M E N T S a n d C O N T R AC T S .

SUMMARY THREE DIFFERENT CONCEPTS

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.

With carefully negotiated AGREEMENTS (specificities) Legally crafted CONTRACTS(subject to trust and 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.

SUMMARY THE SCHEMATIC LINK BETW EEN THE THREE CONCEPTIONS

Purposive Research Findings

NEED identification

Determine the specificities for the NEED

Search for a partner/provider to deliver the specificities

ENGAGE via “NEGOTIATIONS”

PREPARE & PLAN for the Negotiations

Undertake own independent research on potential/existing partners to ascertain capabilities

Settle on relationship specificities “AGREEMENT”

Draw up legally binding relationship terms “CONTRACT”

Implement & monitor specificities and relationship terms

SUMMARY PREPARING AND PLANNING FOR EFFECTIVE NEGOTIATIONS

Develop specific negotiation objectives Undertake a MOCK negotiation run with the TEAM

Review strategy and action plan with TEAM

Assemble relevant and value adding TEAM

APPOINT A LEAD NEGOTIATOR

Detail the negotiation ACTION PLAN and TACTICS with the TEAM Plan negotiation strategy, including location, timing, appointment of key spokesperson on issues, etc.

Establish potential KEY issues and positions for BOTH SIDES

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

… C O N T. •

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

As current and future C-suite members, we have fiduciary responsibilities to protect shareholders 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 AT I O N S

BARGAINING VS NEGOTIATIONS

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 ! BARGAINERS

generally focus on price !!

BARGAINING VS NEGOTIATIONS

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

BARGAINERS

are generally begging !!

BARGAINING VS NEGOTIATIONS

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!

BARGAINING VS NEGOTIATIONS

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 !

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

S C I E N T I F I C

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

.

G L O B AL

REGIONS  Africa  Europe  Americas  Asia  Others

    

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

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

* Including spend from selected Government entities

L O N G I T U D I N AL

S T U D Y

SECTORS/COMPANIES  Manufacturing and production  Agriculture and allied  Services*  Food and Beverages  Government and SOE/SOC     

Society of Operations engineers Institute of chemical engineers Institute of plant engineers Chartered Management Institute Institute of Operations management

 Combined revenues/spend of participating organisations* were well over a TRILLION USD*

PA R T I C I PAT I N G D I R E C T O R S O V E R A L L P E R C E P T I V I T I E S

Concepts of Bargaining and Negotiations with Suppliers are the same thing

2009 2013

Generally disagreed Generally disagreed

38% 54%

Agr eements and Contr acts 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 2013

Generally disagreed Generally disagreed

27% 54%

Impact of Negotiation team composition on negotiation outcomes

2009 2013

Generally agreed Generally agreed

89.6% 88%

Negotiation is integral to value chain quality

2009 2013

Generally disagreed Generally disagreed

14.9% 4%

PA R T I C I PAT I N G D I R E C T O R S O V E R A L L P E R C E P T I V I T I E S

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 2013

Generally agreed Generally agreed

80.9% 92%

Direct link between effective negotiations and corruption

2009 2013

Generally agreed Generally agreed

68.1% 90%

Researching on suppliers/partners

25% of related time 2009 62% 2013 50%

75% of related time 2009 8.9% 2013 12%

IMPACT OF LACK OF EFFECTIVE NEGOTIATIONS COST TO TAX PAYERS AND SHAREHOLDERS 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.

Were the parties ever on the same page?

IMPACT OF LACK OF EFFECTIVE NEGOTIATIONS COST TO TAX PAYERS AND SHAREHOLDERS

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??

Were the parties ever on the same page?

REST OF AFRI CA C-SUI TE EX ECUTI VE/ POLICY MAKER PERCEPTI VI TIES R E : T H E I R U K C O U N T E R PA R T S O N S U P P LY C H A I N N E G O T I AT I O N S

Purposive Research Findings

Trust of their UNITED KINGDOM counterparts Cultural Understanding of UNITED KINGDOM

2009 2011 2013 YES NO YES NO YES NO 65% 35% 64% 36% 67% 33% 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?

REST OF AFRI CA C-SUI TE EX ECUTI VE/ POLICY MAKER PERCEPTI VI TIES RE: R E T H E I R S O U T H A F R I C A N C O U N T E R PA R T S O N S U P P LY C H A I N N E G O T I AT I O N S

Purposive Research Findings

 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

SOUTH AFRI C AN C-SUI TE EX ECUTI VE/ POLICY MAKER PERCEPTI VI TIES RE: R E S T O F A F R I C A N C O U N T E R PA R T S O N S U P P LY C H A I N N E G O T I AT I O N S

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”

GLOBAL C-SUITE EXECUTIVE AND/OR POLICY PERCEPTIVITIES RE:- BUYERS (INCLUDING PROFESSIONAL SERVICES) FROM THE FOLLOWING COUNTRIES VIS-À-VIS MEDIUM TO LONG TERM I N T E R E S T S D U R I N G S U P P LY C H A I N N E G O T I AT I O N S

Purposive Research Findings

YEAR 2009

UK 23%

REST OF EUROPE 17%

SOUTH AFRICA 9%

REST OF AFRICA 6%

CHINA 6%

INDIA 6%

2011

25%

19%

8%

9%

8%

4%

2013

26%

22%

6%

8%

8%

4%

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

GLOBAL C-SUITE EXECUTIVE AND/OR POLICY PERCEPTIVITIES RE:- SUPPLIERS (INCLUDING PROFESSIONAL SERVICES) FROM THE FOLLOWING COUNTRIES VIS -À-VIS MEDIUM TO LONG TERM I N T E R E S T S D U R I N G S U P P LY C H A I N N E G O T I AT I O N S

REST OF SOUTH REST OF YEAR UK EUROPE AFRICA AFRICA CHINA INDIA 2009 21% 17% 6% 6% 9% 6%

Purposive Research Findings

2011 26%

15%

8%

4%

8%

8%

2013 30%

18%

6%

6%

6%

6%

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-SUITE/POLICY MAKER TRUST PERCEPTIVITIES OF THEIR S O U T H A F R I C A N C O U N T E R PA R T S R E : - L O N G T E R M W I N - W I N S U P P LY C H A I N N E G O T I AT I O N S

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

Purposive Research Findings

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%

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

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 •

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. 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

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

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

 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.

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

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

 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.

AFRICA! SOME MORE INTERESTING FACTS

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 From the outset, were our POLICY MAKERS AND BUSINESS LEADERS on the same page with their suppliers, local and international Investors?! EY’s attractiveness survey Africa 2015 :Making choices

C O N T.  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

Pontificating achievements through the number of millionaires created is good. HOWEVER, long term socioeconomic stability can only be sustained through how many people governments and private sector executives continuously manage to lift above the poverty line. Boateng, 2013

FINAL FOOD FOR THOUGHT

•

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.

 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 ARY

“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”

Think AFRICAN!

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 socioeconomic future depends on YOU!

F I N AL LY

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

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: [email protected] www.douglasboateng.com +