Breakout Session 6

Managing Extractives for Transformation

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Local content and value addition could provide a winning formula for all

Breakout Session 6 Papers:

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Is Africa getting local content right?

Summary of paper: The Evolving Local Content and Value Addition Landscape in Africa’s Extractive Sectors: Is Africa Getting It Right? by Joe Amoako-Tuffour, Edward Brown and Sarah-Jane Danchie (ACET)

Resource-rich economies in the past two decades have sought to actively promote local content and value addition (LCVA) strategies as the means to increase the value contribution of extractive resources to their growth and development opportunities.

LCVA has now entered the agendas of most resource-rich economies. At the core is the requirement for investors to expand employment opportunities, invest in local supply chains and promote local procurement of inputs, open equity to local partners, use local financial institutions, encourage technology transfer and stimulate broad-based growth of the non-resource sectors.

LCVA could provide a winning formula for all. An efficient, competitive local supplier meets the needs of industry, expands linkages, opens up opportunities for suppliers further downstream, creates jobs at home, and offers opportunities for local management and ownership. LCVA strategy has taken on different forms with varying emphasis across countries. Businesses have responded with caution.

In a paper published in 2011, Chris Hanlin, of Social Business Solutions, asked whether the drive to increase local content is a myth or reality. A 2012 study by Morris and others, One Thing Leads to the Other, observed that experiences with linkage development have been mixed and modest. In its 2013 Economic Report on Africa, the UNECA observed that some governments have not adopted linkage policies; others have had not followed through with measures to support skills development, local enterprise developments, and technological capabilities.

The missing drivers were the competitiveness of domestic firms and the effectiveness of government policy. Recently, Africa Practice and Pinsent Masons sought to address the question: “Are local content policies effective in achieving national development objectives, and how should investors approach national participation?” They concluded that “local content is here to stay and … companies that fail to recognize the evolving investment reality will fall quickly behind.”

For SSA, the emerging evidence has already opened up a number of compelling questions. Broadly, Is Africa getting it right? And more specifically,

  • Against the reality that the size of national markets of resource-rich sub-Saharan Africa are comparatively too small and country endowments may not be enough to support sustained and substantial industrial activities, when does country local content development make sense? How can greater regional integration leverage Africa’s natural resources for resource-based growth and economic transformation?
  • Are there aspects of local content that should receive greater attention than others? Or that are best managed through legislation, administrative measures, or are best left to industry guided by policy incentives? Are requirements and regulations alone sufficient to achieve desired development objectives? If not, what else are needed?
  • Is the lack of country development plans and coherent industrial policies undermining Africa’s quest for efficient local content and valueaddition development?
  • Are the recent commodity price declines an incentive or deterrent to value addition strategies?
  • What role can regional development banks play in financing extractives development and optimizing value addition opportunities?
  • Have governments failed in managing public expectations around what local content could do?

Breakout Session 6 Papers:

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ATF2016 Breakout Sessions

Youth Skills & Employment
Promoting Financial Inclusion
Facilitating Trade and Regional Integration
Transforming Agriculture
Seizing New Opportunities in Manufacturing
Managing Extractives for Transformation
Managing and Financing Energy Infrastructure

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