ArcelorMittal South Africa 2007 Sustainability Report Page 18 Securing our supply chain A close working partnership In delivering high quality steel products to customers and profit to shareholders, ArcelorMittal South Africa relies heavily on its large network of suppliers, which comprises both large corporations and small to medium businesses. In light of the important partnership between the company and its suppliers, ArcelorMittal South Africa strives to develop a mutually beneficial relationship with these organisations and is committed to addressing the issues relating to this important stakeholder group. Supporting economic transformation through B-BBEE One of the most important developments affecting procurement going forward has been the release of the B-BBEE Codes of Good Practice. •    Code 500 relates to Preferential Procurement and outlines the ways in which companies can contribute to economic transformation by including organisations owned by previously disadvantaged groups (B-BBEE companies) on their supplier lists. •    Code 600 relates to black entrepreneurs that struggle to take their businesses from survivalist and/or micro level to a level of sustainability and profitability. The process of accrediting verification agencies able to verify B-BBEE supplier information has not yet been completed at a national level. At the same time, all industry charters, including the Mining Charter, are in the process of aligning themselves with the DTI’s Codes of Good Practice. Considering that these developments are still ongoing, ArcelorMittal has not been able to provide final B-BBEE figures for the 2007 reporting period. Notwithstanding the above, we are committed to our B-BBEE strategy and the transformation of the steel industry in South Africa. In order to meet its B-BBEE targets ArcelorMittal South Africa embarked on two important initiatives during the year which were in line with plans laid out in 2006. Building a B-BBEE database ArcelorMittal South Africa strongly believes that true economic transformation and the goals of Broad-based black economic empowerment can only be achieved if the practice of fronting is eradicated so that established businesses can support the growth of genuine black-owned enterprises. As such, the company invested a substantial amount of time and effort in assessing the information received in 1 100 questionnaires from the company’s 1 800 active suppliers. Each supplier was required to have the information they supplied verified by a third party (B-BBEE verification agency or an independent auditing firm). ArcelorMittal South Africa also scrutinised all supplier information closely to ensure that those companies on the B-BBEE database are legitimately empowered. Addressing B-BBEE supplier issues through engagement In addition to having access to an updated database, ArcelorMittal South Africa’s procurement officers need to engage with B-BBEE suppliers on a regular basis so that they can establish good working relationships with these organisations. As highlighted in the 2006 Sustainability Report, B-BBEE suppliers also need to showcase their goods and services to company representatives and granted the opportunity to put questions and concerns to the company about the difficulties they experience in the procurement process. During 2007, the most material of these issues were identified and can be summarised as follows: –   difficulty in meeting the high international standards required by the company, particularly among emerging suppliers; –   a lack of understanding of ArcelorMittal South Africa’s production processes; and –   a lack of understanding of ArcelorMittal South Africa’s procurement and tender processes ArcelorMittal South Africa relies heavily on its large network of suppliers, which comprises both large corporations and small to medium businesses. Key procurement issues during 2007 •  Meeting the procurement requirements of the DTI B-BBEE Codes of Good Practice •  Addressing the supply chain management skills shortage. Broad-based Black Economic Empowerment is a driving force at ArcelorMittal South Africa. Since the release of the new Codes in February 2007, the company has finalised and implemented a B-BBEE strategy which is driven by a B-BBEE Steering Committee reporting to Exco. The implementation of policies relating to each of the seven codes, including preferential procurement, is driven by the Transformation Steering Committee, chaired by the Chairman of the board.