- Horizontal Linkages (Beyond Extractives)
- Strategies to Increase Linkages to the Broader Economy
- Creating Incentives To Increase Economic Links
Creating Incentives To Increase Economic Links
At a Glance
To mediate the risks faced by first-mover companies, governments can offer them incentives to expand into new markets and innovate products.
Incentives might include tax credits, and grants supporting research and development (financed through extractive industry taxation).
The development of national support systems for innovation is key to creating economic links between the extractive sector and other sectors that use the same capabilities.
- Getting More out of the Oil and Gas Sector: Lessons from Angola and Chad (Advocates Coalition for Development and Environment)
- South African Mining Equipment and Related Services: Growth Constraints and Policy (David Kaplan)
- From Africa to Country Mining Visions (Isabelle Ramdoo)
- A Country Mining Vision Guidebook: Domesticating the Africa Mining Vision (Africa Minerals Development Centre)
- Resource-based Industrialisation in Africa: Optimising Linkages and Value Chains in the Extractive Sector (Isabelle Ramdoo)
Guidance is provided regarding policies, incentives, and systems for collaboration between economic sectors and partners. Chapter 10 of this ...
This article provides an overview of production linkages and successful case studies in Africa. It discusses the necessary inputs required ...
Through a comparative analysis of local content policies in Angola and Chad, this case study concludes that the establishment of enterprise ...
Resource-based Industrialisation in Africa: Optimising Linkages and Value Chains in the Extractive Sector
This paper focuses on leveraging mineral and oil and gas resources to boost industrial development in African resource-rich economies. How ...
This report explains how policy can be used to strengthen horizontal linkages through supporting businesses with sophisticated technological ...
The core challenge in forming horizontal linkages is that first-mover companies need to take risks to expand into new markets. To mediate these risks, governments can provide incentives to help suppliers of the extractive sector expand into new markets and products—or to help suppliers of other sectors obtain capabilities from extractive activity that will foster the development of new products.
One approach is to create a new product development fund to finance training, market research, and infrastructure. Taxes collected from extractive industries could finance the fund, supplemented by support from nongovernmental organizations and other sources that may have funding available for small and medium-sized enterprises (SMEs). First-movers could also benefit from tax credits for a limited period of time until their transition to a new sector is well established. Such a scheme could be part of a suppliers’ development program.
National support systems for innovation are key to enabling the formation of a strong and innovative SME fabric that can serve the extractive sector and other sectors requiring the same capabilities. Many countries also have business support centers that help local SMEs develop the capacity and access the funding required to participate in extractive industry value chains. Depending on the country and context, and the commodities involved, other incentives might include subsidies, tax holidays, export finance insurance and guarantees, and trade finance.
 Kaplan 2011, cited in Columbia Center on Sustainable Investment (CCSI), Linkages to the Resource Sector: The Role of Companies, Government and International Development Cooperation (Bonn and Eschborn, Germany: Deutsche Gesellschaft fur Internationale Zusammenarbeit [GIZ], 2016), 46.