Local Content Policies & Programs: An Enabler for Development & Growth in Africa
by Andrew Patterson
As governments look for ways to elevate local capacity and bolster economic development, right-sizing local content policies and programs can incentivize financial investment, and technical and technological transfers that will benefit countries competing to attract the best companies, as well as companies searching for the most attractive markets to maximize efficiencies and manage costs.
Pressure to use local content (e.g., local workers, companies, goods and services) in large or mega-projects continues to increase. For growing markets, particularly in Africa, it is a catalyst for rapid development. Striking the balance between short-term job creation and longer term specialization, diversification, and supply chain development is a challenging issue for governments, companies and communities.
Use of local workers and suppliers can be the most efficient way to execute key aspects of a project, while other jobs may require specialized skills not available among nationals. This reality can become a source of socio-economic and political tension when local supply and project demand are not well understood by all stakeholders. This is compounded when there is a “ramping up” to thousands of skilled workers in a very short period compared to what is realistically accessible within the market, or when companies bring their own labor force into the project and leave behind very little that can be transitioned into meaningful local capacities.
Also, when government requirements for local content are unrealistically high, companies may avoid pursuing a project or investment altogether, or projects can be significantly delayed which can affect not only the quality, cost, and/or duration of such projects, but the longer term development benefits generated by them.