Published on June 5, 2008
USADF – GAC SME Linkages Overview: USADF – GAC SME Linkages Overview May 22, 2008 YEN – WA Youth Employment Network Office for West Africa Slide2: Results Overview of Strategic Partnership Intro to USADF and GAC Lessons Learned USADF – GAC SME Linkages Overview Slide3: USADF Overview Fostering hope, growth and goodwill US Government agency focused on helping Africans help themselves by providing the resources they need to advance their own economic and social development Finance sustainable poverty alleviating initiatives that are conceived, designed, and implemented by Africans Stimulate and expand the participation of Africa's poor in their own development Build sustainable African institutions that foster grassroots development Slide4: Guinea Alumina Corporation Joint Venture Project Company Founded as Global Alumina Canadian public company 75 year agreement signed in 2005 with Government of Guinea Bauxite mining Alumina refinery Dedicated port In March 2007, expanded to include strategic equity partners 33% remained with Global Alumina 33% BHP Billiton 33% across DUBAL and Mubadala BHP Billiton is the managing partner Slide5: Guinea Alumina Corporation Project Overview Refinery Project Guinea has > 1/3 of global bauxite reserves Limited alumina refining capabilities Proposed refinery (4.5 MT) will be one of the largest in the world > USD 4B investment Become operational in 2011 Sangarédi Site 690 square km concession area Site for mining, refinery and power generator Employ up to 3,000 full time workers Create Workers Town with population up to 10,000 Kamsar Site New port terminal and jetty Dedicated quay / wharf (10,000 MT vessel capacity) Slide6: Results Overview of Strategic Partnership Intro to USADF and GAC Lessons Learned USADF – GAC SME Linkages Overview Slide7: USADF-GAC Strategic Partnership Partnership Overview Program Overview MOU signed in 2006 5 year $10M USD fund (50:50) Goal is community social and economic development Two components Community development SME linkages Recognized as a groundbreaking public-private partnership Community Development Participatory development Create community-based organizations Fund infrastructure, training and livelihoods SME Linkages Invest in SMEs that can act as suppliers to GAC Create jobs, improve employment conditions, and deliver training opportunities SME Linkages Program Focus: SME Linkages Program Focus Broad program goal: maximize local economic empowerment Direct supply chain linkage to GAC Indirect consumer / community investment Construction: Fastest opportunity, provide technical assistance to local subs, strengthen national firms but require use of local workers / inputs Operations: Invest in new skills and expansion of firms based in Conakry. In other cases, initially insource but spin off to local SMEs over time Local Consumer Economy: Build consumer and business-services enterprises in and around the bauxite region Community Livelihoods: Deliver local sources of income, generally ag-based, that create employment within the footprint of the mining activities Slide9: SME - MNC Linkages Methodology Linkages Roadmap 2. SME Development 3. Link SME to MNC 4. Ensure SME Performance Analyze MNC supply requirements Survey community priorities Conduct SME outreach Prioritize sectors / spend categories Assess SME capabilities in each sector / spend category Define sector strategy: Link only Invest and link Insource / spin off later Formulate SME Investment and Linkage Roadmap SME screening Business plan development Determine financing need Capacity building grant (USADF EDI) Pre-commercial expansion loan (USADF EEI) Commercial loan / link to financial institution Execute financing agreements / fund investments Implement business plans Supplier training in doing business w/ MNCs Request for Proposal (RFP) response facilitation Costing / pricing Capacity planning Working capital needs Contracting support Commitments / penalties Link to legal assistance Contract implementation Production planning Customer relationship management Track enterprise performance Quarterly financial reports Measure against growth targets Track supplier performance Self reporting MNC reporting Intervene as necessary using proven turnaround capability Facilitate additional market linkages Requirements GatheringConstruction Schedule Analysis: Requirements Gathering Construction Schedule Analysis Number of Projects: ~75 Number of Sub-Projects: ~188 (across all projects) Project Phases: Engineering Procurement Construction Commissioning Construction related activities command the most demand Sangaredi Alumina Refinery Schedule was analyzed with the following results: Slide11: SME Capability Assessment SMEs were methodically assessed using a comprehensive toolkit covering both subjective and quantitative attributes GAC Needs SME Interview Analysis SME Site Visit Analysis SME List USADF SME Assessment Toolkit SMEs were assessed and scored on the criteria below. Initial Assessment Slide12: SME Screening Vetting the Local Supply Base SMEs were identified and assessed for GAC’s needs 500 SMEs 200 60 20 Sept Oct Nov Dec 500 SMEs were found from various sources, including: GA, CBG, Chamber of Commerce, OPIP, 3AE 200 SMEs selected based on local research (reputation, references, track record) 60 SMEs were qualified based on pre-screening assessments and GA’s needs (Appendix A) ~20 SMEs were selected based on detailed assessments (Appendix B, C) Active Pipeline Manufacturing Agriculture/Foods: food conditioning, canning, seeds, flours, sugar, milk and derived, vinegars, other liquids, alcohol, chocolate Building Materials: Furnishings, glass, leather, wood, textiles, paper Chemicals: Petro-chemistry, syntheses organic, metallurgical, cold industry, greasy substances, drying, dehydration Artisan and Trades Vegetable fibre, clothing, weaving, wood, leather, shoe, metals Agriculture General farming activities, breeding, fishing and aqua-culture Services Construction, consulting, child, trade, communications, waste, education, promotion, health, market studies, environment, data processing, tourism, transport, utilities, housing, security, graphic SME Development Areas: SME Development Areas Slide14: Results Overview of Strategic Partnership Intro to USADF and GAC Lessons Learned USADF – GAC SME Linkages Overview Slide15: Results FY 2007 Investments FY 2007 SMEs Projected Impacts > 50% of businesses already have GAC contracts 700 jobs projected USD $2M in wage growth projected > $10M in incremental revenue growth projected Diallo et Fils: Build a new bakery in the Workers Town Guinea Confection: Locally produce uniforms Ferme Keba: Increase local egg production SAF: Scale refrigeration service vendor in Sangarédi ENCODI: Improve skills / equipment of local construction company to take a larger role in GAC’s construction Kyoksoul: Bring local security services provide to international standards Slide16: Results FY 2008 Planned Investments FY08 SMEs in Development AMSY: Guinea-wide driving school Create the only training center for commercial trucks in Guinea Create the first ever training for specialized mining equipment Expand job opportunities for local Guineans KPG: Local woodworking business Provide construction wood (doors / windows) and furniture Convert local waste wood into plywood Create an apprenticeship program UBM: Local rice production / marketing cooperative Increase production of rice in the local communities Strengthen contracts with mining companies Increase production and profits Slide17: Results Overview of Strategic Partnership Intro to USADF and GAC Lessons Learned USADF – GAC SME Linkages Overview Slide18: Lessons Learned Working with GAC Set up systems for communication Changes happen frequently Communicate every day Define a forum for discussing strategic issues Adjust tendering and contracting to encourage local suppliers Share supply requirements in advance Streamline contracting process Offer pre-payment Form a Procurement Council Encourage procurement to meet and discuss local supply base Showcase successes to build confidence Slide19: Lessons Learned Working with SMEs Develop a trusted advisor relationship Getting entrepreneurs to open up is difficult Jointly diagnose issues and craft plans Requires significant time investment Manage dependence on GAC GAC should be one component of the growth plan Need other mining / non-mining growth opportunities Keep focus on linkages / implementation Continuously monitor each SME Keep in regular contact with procurement Slide20: Thank You! Brent Habig Regional Investment Advisor United States African Development Foundation Thank You!