sharing in governance of extractive industries

A recap of local content related discussion at African Mining Indaba 2017

Many GOXI members were in Cape Town last week for the big Investing in African Mining Indaba, held at the Cape Town International Convention Center. Building on the momentum of past Indaba events, the need for economic diversification, as well as local content were frequent topics of discussion in many of the sessions. Below is a list of four sessions with a particularly high degree of attention to local content, including links to relevant reports and resources.

If you were at Indaba and have more to add in terms of summaries of local content relevant sessions, it would be great if people can post them in the comments on this post!

1. International Finance Corporation and Global Affairs Canada invite-only lunch session on Livelihoods & Natural Resources.

The focus of discussion was broadly centered around economic development stimulated by the mining sector and livelihoods, but local content was a dominant topic during the lunch:

  • It was highlighted that the roles and responsibilities of the various industry actors (companies, governments, civil society etc.) in local content approaches needs to be clearly defined.
  • Although the nature of business ownership is an important aspect of local procurement, what is produced locally must be considered to promote domestic industrial development. ‘Local’ has various aspects including participation, ownership and value addition.
  • Community development agreement (CDAs) were highlighted as a key tool to formalize and institutionalize community rights / stake.
  • It was highlighted that economic diversification should be the long-term goal of economic development initiatives during the life of the mine but it is important to be realistic with how much economic development is possible during the life of a mine. This was highlighted as an important aspect of managing expectations.
  • A key challenge related to local procurement included “how do we actually leverage local content for skills and knowledge transfer?”. In particular, this was highlighted by the youth present at the round table.
  • The role of infrastructure in inhibiting increased linkages was highlighted during the conversation. A participant noted that government should focus on addressing the issue of poor infrastructure which is a common challenge around many mines.

2. Report launch at the Canadian Pavilion: The Relationship between local procurement strategies of mining companies and their regulatory environments: a comparison of South Africa and Namibia.
Mining Shared Value (MSV), Engineers Without Borders Canada and Canadian International Resources and Development Institute (CIRDI) launched their report examining the local procurement regulations and mining company practices in the South African and Namibian mining sectors. This research examines the extent to which comprehensive local procurement regulatory frameworks are effective in making mining companies purchase more locally. Also, this study explores the common factors that influence mining companies when creating local procurement strategies. Empirical evidence on how mining companies engage with regulations requiring local procurement has been relatively absent even amidst dramatically increased attention on local content regulations – this research contributes to addressing this gap.

The report was launched at the Canadian Pavilion on Tuesday afternoon, and can be accessed here.


3. Leveraging the African Mining Vision Compact in Reaching Consensus for Shared Value and Shared Benefits.

While local content was not the main focus of discussion, a high-profile happening involving the former President of South Africa bears summarizing. Thabo Mbeki (served as President 1999-2008) entered the session to much commotion and certainly had an effect on the panel from that point on. Asked to provide his thoughts, he remarked that during the opening remarks of Indaba he noticed that not one single mining company mentioned the African Mining Vision. He questioned why this was, asking who was at fault, “are mining companies not listening to us or are we [governments] not pushing the AMV hard enough or is it both”?

4. Value Creation and Local Development: Linkages, investment and diversification in African Mining.

This was another session that had local content at its core. Observations made included:

  • There is a need to start the discussion on regional integration for industrial development as this is not being discussed when it comes to increasing linkages across Africa with the mining sector. In order to achieve economies of scale for certain goods and services, it will not be possible for every country to duplicate every industry.
  • A key challenge is the compartmentalization of local content across the various sectors including mining, oil and gas. There is a need to think about the aggregate opportunities and overlap in needs between these various industries.
  • Key questions include: how soon do we want local industries to mature and how do we want to do this?
    • Step 1: Product space analysis where it is decided which products it makes sense to produce locally.
    • Step 2: To be competitive globally, there is a need to coordinate regionally.
  • Specific recommendations made during the panel:
    • Incentives for local procurement: to stimulate local procurement performance by sub-contractors, it was suggested that companies need to include clauses related to local procurement as part of their performance measures such as offering a bonus it sub-contractors buy locally.
    • Addressing the information gap: a question was raised regarding supplier portals. It was questioned why each company needs their own individual portals and suggested that these should be consolidated. It was noted that especially for small businesses, the lack of alignment and overlap creates a significant barrier.
      • One company stated that they use the African Partner Pool which is a portal in Ghana and Kenya for large buyers including mining companies.
    • Lack of data: there is a significant gap in information and data related to local procurement. This is inhibiting evidence-based decision-making.

Local content was of course discussed in a large number of other sessions, but it is hoped this summary provides a useful update for those on GOXI who missed out on Indaba this year. The full agenda is available here: https://www.miningindaba.com/ehome/indaba2017/Agenda/.

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