Local Content Impact on the Economy
I was privileged to be part of DAI East Africa Local Content Master Class ongoing in Dar es Salaam, Tanzania. This is a special course considering that there is no university offering the course around the world.
I’m determined to update my readers on the progress of my course on a daily basis. Therefore, going forward, I’ll keep you posted.
Definition
“The participation and development of national capital, labour, goods, services and technology in the planning and execution of oil, gas and mineral exploration, development and production.”
Others simply define local content as optimizing domestic participation in the mining, oil and gas value chain.
This raises the question, to what extent are we involved in the value chain? For instance, in Kenya are adequate number of Kenyans involved by Tullow Oil in exploration, development, production, oil and gas treatment, transport and storage, refining, petrochemicals and primary distribution?
If not, why? Have we prepared adequately to ensure that we do not miss the oil and mining bonanza?
What special skills have you acquired in readiness for the coming windfall in our economy? This is the topic we are exploring today.
Local content makes a huge contribution to the economy. This comes in terms of royalties, taxes and share of profits among others.
Type of extractives activities dictates the type, quality and quantity of jobs that will be available to the populace. For instance, Oil and Gas is capital intensive and low employment opportunities.
On the other hand, mining is labor intensive. This means that there are more direct employment in the various job levels.
Local content provides opportunities for the host countries to start generating income right from the start even at exploration stage. We do not have to wait for production stage.
Offshore Mining
I’ve never imagined about offshore mining. All along I was aware that oil and gas companies explore for oil and gas but it has never occurred to me that mining companies can explore and extract minerals on the sea bed! Now I know better.
Offshore mining faces a lot more challenges as illustrated by this paper on exploring our new ocean frontiers.
The offshore mining has less potential for distraction since there is no local community and the mining locations can be protected using speed boats armed with guns.
In fact some researchers believe that a mining company does not need a ‘social license’ to operate offshore. Once they have their mining license from the government, they are good to go.
The only challenge is the huge extent of environmental and marine destruction that comes with offshore mining.
Local Content Policy
All countries endowed with minerals need a good local content policy since it helps in creating jobs for nationals, generating business opportunities and getting a social license for the operators among other benefits.
Where can I get local content policy?
Local content policy can be found in many places. This is because some governments around the world do not have a specific document titled local content policy. Nevertheless, you can tell what their policy is by reading:
a) Legislative Bills tabled in parliament
b) Green papers
c) Government budget documents
d) Speeches made by relevant ministries
e) long-term plans such as Vision 2030 in Kenya
f) Strategic plans
g) Model concession contracts
h) white papers
i) Multi-lateral and bilateral agreements and
j) Primary and secondary legislation among others
Thank you for reading.
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