Kumtor Gold Company (KGC) realizes that local procurement brings significant benefits to KGC. It is one of the most effective ways for KGC to maintain its social license to operate, strengthen its relationship within the Kyrgyz Republic, and improve the supply chain efficiency.
To get a better understanding of how KGC is doing concerning Local Procurement, and what is envisaged for the future, we interviewed Leslie Louw, V.P. Procurement & Logistics, KGC to obtain his views.
Some experts in Kyrgyzstan believe your company should be regarded as something more than an ordinary large industrial entity as the role it plays in the development of the Kyrgyz economy is far more important than that of a mere mine. Would you agree with this?
KGC understands its role in contributing to, and the development of the Kyrgyz economy, and therefore we will continuously strive to increase the quantity and range of goods and services procured locally by KGC in order to create shared value for the company and the Kyrgyz Republic.
Currently we are dealing with more than 600 local suppliers of goods and services, who supply up to 11,000 items to KGC on an annual basis.
The vast majority of the contractor services and equipment rental are rendered by the local suppliers predominantly from Issyk-Kul region.
How great is the proportion of locally produced goods in KGC’s total volume of purchases?
For 2013, we had spent USD$68 million for goods and services supplied by local entities. Excluding KGC’s expenditures on acquisition of i.e. foreign-made capital equipment (OEM) and spare parts, reagents, major consumables, fuel etc., the proportion of local goods purchased was 57,6% compared to 42.4% purchased internationally.
What types of products are supplied by local manufacturers?
Our local purchases cover a wide range of products. Ideally, we want to purchase from local producers as we realize the job creation potential. Such products will range from foodstuff, clothing and gloves, to the manufacture of grinding media and Lime.
Are you planning to increase the volume of purchases from the local market and how do you intend doing so?
That is what we would very much like to see. We do have a good strategy in place that will contribute to an increase in the percentage and value of goods and services sourced from local suppliers. These strategies include i.e. critically reviewing what we are purchasing internationally for possible local procurement, supplier presentations, newspaper advertisements, bid competitions etc.
We have a dedicated local procurement team who deals with local purchases. We are continuously looking for new business opportunities and to be more effective, we are in the process of implementing a Local Procurement Development group, whose primary responsibility will be the identification of such opportunities.
Of course, the challenge for us is to ensure that we maintain quality, pricing, availability and sustainability of supply when dealing with local suppliers.
Do you have any preferences when it comes to purchasing goods and services locally?
Yes we do. Our first preference is buying from a local manufacturer, producer, or service provider. KGC realizes that in doing so, we are contributing to job creation and sustainability. We have many success stories of goods being purchased, which are manufactured locally.
Secondly, we support development of a new sustainable local business. We believe there are still many opportunities for import replacement, currently not available in Kyrgyzstan. KGC will support proposals which are in compliance to environmental, safety and legislation standards, are sustainable, and commercial terms (pricing, quality) is acceptable.
Lastly, we prefer buying from locally based resellers where commercial terms are acceptable to KGC. We are critically reviewing what we are purchasing from international sources, for possible local procurement.
Can a local producer /supplier offer its goods or services on its own initiative?
Of course, it can. We invite potential suppliers to contact us at www.kumtor.kg. Our local procurement group will consider all proposals and will contact suppliers should the proposal meet our standards and needs.