Local Content or Regional Content - What Does Africa Need? By Sunny Oputa
Engr. Simbi Wabote
Nigerian Content Development Monitoring Board
If local content is a wave, it is seriously blowing across Africa oil producing nations and new frontiers. If local content is a song, it is the latest hit. While some countries are getting more acquainted with it, there are nations grasping to understand the rhythm.
Call it resource nationalism or local content. This socio-economic term is not nascent. It has been as old as human civilization and it is not just akin to the African economic sector. Local content in its simple terms is the value added in local oil industries by creating opportunities and encouraging indigenous oil companies to actively participate in the exploration, production, manufacturing, fabrication, procurement and allied service sectors of the oil business.
Fair to say, that local content is not resource nationalism. Local content if well comprehended is a win-win situation that will promote partnership among national oil companies, local and international companies. And it will create good business environment, through corporate social responsibility, harmony and insure maximum profit for all.
The main driver of local content is the vital need to cure or ameliorate the effect of “Dutch Disease” in oil rich- nations, and ensure that the people of these resource-rich countries enjoy increase economic benefits from the domestic oil and gas industry.
Angolanization, the term given to the local content policy of Angola, promotes human capital development with the objective of hiring local people in positions they are qualified in the oil industry and also insuring capacity building of it human capital base through training and education. Another key part of the policy is the development of a local supply market in Angola which encourages sourcing materials locally or collaborating with local suppliers in the sourcing or procurement of materials in the sector. Analysts believe that part of the growth experienced in Angolans oil and gas sector is as a result of the success of its angolanization program and the freedom given to the national oil company to operate independently without much government encumbrances.
Nigerian Content, according to the NNPC, the national oil and gas company is “the quantum of composite value added or created in the Nigerian economy through the utilization of Nigerian human and material resources for the provision of goods and services to the petroleum industry within acceptable quality, health, safety and environment standards in order to stimulate the development of indigenous capabilities.”
The World Bank defines local content as the “ extent to which the output of the extractive industry sector generates further benefits to the economy beyond the direct contribution of its the direct contribution of its value-added, as through links to other sectors” (Tordo, Warner, Manzano, & Anouti, 2013)
Local Content policy is expected to create backward links – that is : Supplying input to local economy through transfer of technology; Creating value added in domestic supply sectors, Creation of local employment opportunities, Increase local ownership and control, Alleviate poverty, cure resource –rich nations from Dutch Disease and Stimulate broad-based economy.
Local Content Policy is also expected to create forward links: Processing the sectors output, Oil refining – refineries, petrochemical industries, fertilizer plants. Considerable developments have been seen in the Front-End Engineering side, contract award and procurement. The fabrication sector is one of the viable arms that have shown big promise through the marvelous accomplishments of companies such as LADOL, Niger Dock, Dorman Long Engineering and Freezone who have continuously shown through the quality and delivery time of certain complex projects which they achieved that Nigeria’s local companies can sustain the development of the industry.
Nigeria is one of the African countries that has made big progress in her local content initiatives. It is also one of the seasoned oil producing nations in the region that has developed huge base of professionals and enhanced capacity building in the region.
Most of the nations developing their oil and gas sector looks up to Nigeria for mentorship. To solve the problem of employment and capacity building and ginger progress in the Nigerian Content, the Nigerian National Petroleum Corporation (NNPC) has put in a place a comprehensive Nigerian Content development strategy in the industry.
While the buzz of local content continues to build up, the alleviation of the effects of Dutch Disease” has not been realized as expected in the resource-rich nations and there are still dearth of qualified human capital in some of these African countries to be involved in the development of their natural resources. At present, apart from Nigeria in sub-Saharan Africa, 90% of E & P activities are handled by international companies, thereby negating the vision of local content which is to stimulate participation of indigenous companies towards economic development.
Some countries have claims of increase in GDP and standard of living but when you approach an average citizen he will make a sigh and say: “it is only the few rich that continue to get richer.” It explains that local content policy has not really started to work effectively and the people have not understood how to participate in it to reap the benefits, Dearth of jobs and unemployment is still rife in many African countries with unemployment rate reaching a 22% average.
Local contractors are not well equipped with the level of training, expertise, and technology to carry out certain jobs. Reliance on foreign companies is still high and only those who have been able to break forth and get into partnership with international companies have gained access to the arena. Problem of attracting loans is another big cog in the wheel. Local banks are either not liquid enough to give loans or are caged with multifaceted wrangling that disabled them from granting good loans.
These challenges have prompted industry observers and analysts to start thinking that Africa does not only need local content, but also regional content among nations to increase collaboration and bridge the gap of inadequate human resources in some countries. The strategy of permitting regional collaboration would help in the fast tracking the involvement of Africans in developing Africa.