TechnoServe Report on the RMGC Potential Private Sector Impact 8 July 2010
Objectives and Content PRESENTATION OBJECTIVE Present the potential sustainable development impact of the RMGC project on the Romanian private sector CONTENTS 1. Technoserve Overview Mission and Approach Countries and Partners 2. Examples of Work in Mining Communities Local Development Regional and National Development 3. RMGC Potential Summary Local Development Regional and National Development 4. Wrap-up Methodology Impact 2
TechnoServe Mission and Approach Technoserve Mission: TechnoServe helps entrepreneurial men and women to build businesses that create income, opportunity and economic growth for their families, their communities, and their countries. Technoserve Approach 1. Empower Entrepreneurs 2. Build Businesses & Industries 3. Transform Lives Technoserve Engagement with RMGC To develop a plan to maximize the project s sustainable development impact on the Romanian economy 3
TechnoServe Company and Partners Company Partners A U.S.-based, nonprofit economic development organization. Philosophy: Private enterprise can drive economic growth and positive social change; a hand up is better than a handout. History: Founded in 1968 by businessman Ed Bullard, who pioneered the private-enterprise approach to solving poverty. Staff: Talented business advisors, many of them former management consultants or industry experts. Partners: Leverage the expertise of strategic corporate, non-profit and government partners. Funding Sources: U.S. and foreign government agencies, multi-lateral organizations, corporations, foundations and individuals. 4
Where We Work London, UK Office Norwalk, CT Office Washington, DC Office Active Programs Benin Bolivia Brazil Burkina Faso Chile Colombia Côte d'ivoire Ecuador El Salvador Ethiopia Ghana Guatemala Haiti Honduras India Kenya Mozambique Nicaragua Peru Rwanda South Africa Swaziland Tanzania Uganda Venezuela Zambia Emerging Programs Guinea Malawi Mexico Nigeria Zimbabwe Democratic Republic of Congo Guinea-Bissau Madagascar Mali Sudan Past Work (extensive) Belize Costa Rica Dominica Panama Poland 5
TechnoServe Recognition Rated one of the top 5 NGOs for corporate partnerships by the Financial Times Named one of the world s Outstanding Social Entrepreneurs by the Schwab Foundation for Social Entrepreneurship Rated one of America s 100 Best Charities by Worth Magazine Received the Presidential End Hunger Award from USAID "I was greatly impressed by the variety of sectors that TechnoServe is involved with and the tremendous impact that TechnoServe s work is having with regards to economic development and job creation." Titus Brenninkmeijer, Founder of Solgenix and Energy Access Foundation and TechnoServe member since 1998 TechnoServe s partnership with our government is bringing concrete results in the fight against poverty: jobs, opportunities, and globally competitive industries. Aiuba Cuereneia, Minister of Planning and Development, Mozambique Google is an entrepreneurial company, so we appreciate TechnoServe s business focused approach to development Together we are helping men and women turn their good business ideas into thriving enterprises. Rachel Payne, Google.org manager 6
Contents 1. Technoserve Overview Mission and Approach Countries and Partners 2. Examples of Work in Mining Communities Local Development Regional and National Development 3. RMGC Potential Summary Local Development Regional and National Development 4. Wrap-up Methodology Impact 7
Case 1: Developing Local Entrepreneurs Context Opportunity to develop small and medium enterprises within the Cajamarca region in partnership with the Yanacocha gold and silver mine. The mine is a high-value buyer of diverse products and services that can be supplied locally, serving as a springboard for regional, national and export markets. Our solution Identify 54 high-potential small and medium enterprise businesses in diverse sectors of the region. Deliver comprehensive entrepreneurship skills training program. Deliver practical and technical training. Facilitate access to finance. Improve the enabling environment by establishing SME financing relationships and funding models. Results Dissemination of the model for replication with other natural resource companies throughout Latin America and Africa. 54 small and medium enterprise entrepreneurs trained, resulting in US $1.8 million in incremental sales, 373 new jobs, and purchases from more than 1,500 local suppliers of agricultural primary products. 8
Case 2: Developing Regional and National Entrepreneurs Context Opportunity to develop local, regional, and national enterprises in South Africa in partnership the Lonmin Platinum mine. Focus on supporting women and minority owned businesses. Our solution Develop a network of over 500 minority owned businesses in South Africa. Restructure procurement policies and procedures to reach local businesses. Deliver comprehensive entrepreneurship and technical skills training program. Facilitated access to finance Results Increased procurement from women and minority owned South African firms to over USD 500 million annually, 55% of USD 1 billion annual spend Developed 70 start up new suppliers and new joint ventures over a two year period awarding them over USD 100 million in contracts Diversified local suppliers with goal of over 50% of sales from non mine sources. 9
Contents 1. Technoserve Overview Mission and Approach Countries and Partners 2. Examples of Work in Mining Communities Local Development National Development 3. RMGC Potential Summary Local Development Regional and National Development 4. Wrap-up Methodology Impact 10
Summary RMGC Project Projections TechnoServe and RMGC have identified the potential for significant local, regional, and national benefits from the project (USD). Local Economic Development Projections RMGC Plan Additional Potential Total Potential Local purchase of goods and services 120 million 110 million 230 million Local economic development - - 464 million Total 694 million Regional and National Procurement of Goods and Services Projections RMGC Plan Additional Potential Romanian purchase of goods and services (including local) Total Potential 2.5 billion 880 million 3.4 billion 11
Local Context The local population is relatively small with high unemployment and significant out-migration. Population Characteristics Local : Rosia Montana, Abrud, Campeni Total Population: 16, 841 1 Aging population, 41% of working age 2 RM 14.86% official unemployment 1, 24.6 % salaried employment 2, therefore high potential for unreported unemployment and underemployment 5% population loss over two year period Population Jan-06 3 Nov-08 1 % Change Rosia Montana 3,557 3,227-9.3% Abrud 5,980 5,809-2.9% Campeni 8,178 7,805-4.6% Total 17,715 16,841-4.9% 1 Report of the Socio-Economic State of the Roşia Montana Village, Socio-Economic Research and Development Center Muntii Apuseni Association, December 2009. 2 National Institute of Statistics 3 The County Statistics Department of Alba Iulia. 12
Local Economy The local economy has 439 registered businesses generating 120.2M USD of sales in 2008, although the top ten businesses account for 53.5 % of all sales. 1 Sector RM, Abrud, Campeni 2008 Turnover Food and Beverage 39,557 Construction 19,314 Timber/Furniture Manufacturer 13,809 Copper Mine 12,135 Transport 12,012 Other retail 6,920 Textile Industry and Retail 4,610 Other Service 4,207 Other Wholesale 2,741 Livestock 1,905 Auto Body Repair/Part Sales 906 Other 893 Business Consultancy Services 776 Hotel 375 Total USD 120,160 Sector Food & Beverage Number of Employees Income USD % Companies 3 180 of Total 23,700,617 19.4 % Mining 1 148 11,819,896 9.7% Timber/ 2 240 10,553,216 8.6% Furniture Construction 2 201 10,424,027 8.6% Transport 1 15 5,146,491 4.2% Textile and Retail 1 206 3,728,713 3.1% Total 990 65,372,961 53.5% 1 Romanian Companies Database www.romanian-companies.eu/default.asp 13
Local Purchase of Goods and Services Technoserve and RMGC have identified 230M USD of procurement opportunities that could create 445 entrepreneurial jobs locally over the life of the mine. Local Supplier Development Reagents and Consumables Construction Drilling and exploration Contract Mining Services Maintenance (mine fleet) Sample Preparation and Analysis Light Vehicle Servicing Forestry Monitor& Manage Catering Accommodation Closure Demolition (3 yrs only) Transport Earthworks Security Cleaning Contract Maintenance Contract Electrical and Instrumentation Contract Blasting Services Tire Maintenance and Monitoring Contract Surveying Services Courier Rapid Service House Demolition (3 yrs only) 14
Local Supplier Capacity The capacity to meet this demand exists locally or can be developed. Sector RMGC Mine Demand Per Year (000k) Local Opportunity (000k) % of 2008 Total Catering 350 17,765 2.0% Construction 3,139 13,761 22.8% Transport 300 12,012 2.5% Auto Body 405 1,905 21.3% Repair Hotel 315 375 84.0% Cleaning 275 63 436.5% Total 4,784 45,881 10.4% 20,000 15,000 10,000 5,000 - RMGC Spend as a % of Local Economy 2% 23% 2% 21% Catering Construction Transport Auto Body Repair Total Local Economy RMGC % of Total Economy 25% 20% 15% 10% 5% 0% 15
Local Non-Supplier Business Development TechnoServe has designed a program to develop local entrepreneurs (beyond selling goods and services to the mine) to result in USD 464 M in incremental sales over the life of the mine. Entrepreneurial Needs High Priority Business Planning Marketing Strategies Financial Projections Medium Priority Access to Finance Strategic positioning Program Focus Largest 150 businesses in area Training, skilling, access to finance, development of new markets, diversification beyond mining Intensive mentoring with select businesses Program Projections Cumulative Incremental Increase in Sales over 20 years: 464.0M Annual Incremental Sales at the end of 20 years: 25.8M Year 0 to Year 5: 50% increase in sales of 150 companies, with limited growth from Year 5 to Year 20 16
National Context Romanian Population Characteristics Total Population: 21,513,662 1 Population declined 6.5% since 1990 Unemployment at 7.5% (Dec 2009) up from 5.8% in 2008 2 Negative 7.3% GDP growth in 2009 3 Government deficit increase by 142% in 2008 and 27% in 2009 3 Real GDP Growth Rate: Growth Rate of GDP Volume - % change over Prior Year 10 5 0-5 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009-10 European Union Romania 1 World Bank, World Development Indicators 2008. 2 Harmonized unemployment rate, European Commission Eurostat 3 European Commission Eurostat 17
Development of Romanian Suppliers RMGC plans USD 2.5 billion of purchases from Romanian suppliers, with potential for an additional USD 880 million, for a total of USD 3.4 billion over the life of the mine. Romanian Goods and Services Reagents and Consumables Drilling and exploration Contract Mining Services Construction Services Earth Works Maintenance (mine fleet) Sample Prep and Analysis Light Vehicle Servicing Forestry Monitor& Manage Catering Accommodation Closure Demolition (3 yrs only) Transport Security Cleaning Social and Environmental Services Rehabilitation Services Contract Maintenance Contract Electrical and Instrumentation Contract Blasting Services Tire Maintenance and Monitoring Contract Surveying Services Courier Rapid Service House Demolition (3 yrs only) Potential Romanian Goods and Services Mining Reagents Grinding Media Mechanical Equipment Lubricants 18
Contents 1. Technoserve Overview Mission and Approach Countries and Partners 2. Examples of Work in Mining Communities Local Development Regional and National Development 3. RMGC Potential Summary Local Development Regional and National Development 4. Wrap-up Methodology Impact 19
Tools for Developing Romanian Suppliers and Businesses Joint Venture Creation Majority local/romanian Gradual transfer of ownership Access to Information RMGC with potential suppliers Database Workshops on opportunities Opportunity distribution channels SUPPLIER DEVELOPMENT Contract Structuring Contract disaggregation Outsourcing Contractor subcontractor requirements Offsets Access to Finance Debt Financial institutions Contract advance Special purpose Equity Grants Training & Development Business vs. Technical Classes and Coaching Mentoring 20
Program Methodology Local Economic Development Regional & National Development Local Supplier Development Ongoing Program to Identify and Develop Suppliers from the local community: Selection Training Joint Ventures Access to Finance Local Economic Development 3 Year program to develop local business community: Broad outreach training Advanced training for selected entrepreneurs Development of key sectors (agriculture, timber, etc.) Regional and National Supplier Development Orientation of procurement department to Romanian procurement Communication and selection of Romanian suppliers Development of key sectors for the advancement of Romanian economy. 21
Impacts Rosia Montana Private Sectors Impacts Local Purchases Supporting the local economy through USD 230 million of purchases over the life of the mine Local Economic Development Supporting the local economy through developing USD 464 million of additional sales for local businesses over the life of the mine Regional & National Purchases Supporting the Romanian economy through USD 3.3 billion of purchases over the life of the mine (including local purchases). Regional & National Economic Development Supporting the development of Romanian industries especially including hospitality, construction, earthworks, and mining related services 22