Horizontal Linkages (Beyond Extractives)
At a Glance
- “Horizontal” (or “lateral”) linkages refer to the development of new industries based on capabilities and skills from extractive industry supply chains. As such, they provide a unique opportunity to diversify the economy away from the extractive sector.
- Horizontal linkages can be based on transferable skills that are not sector specific or from the adaptation of capabilities already employed in the extractive sector.
- Often referred to as “spillover benefits,” horizontal linkages are more likely to occur when “backward” linkages (involving the local procurement of goods and services) or “forward” linkages (involving the processing of extractive outputs) have already been created.
- Australia Horizontal Linkages: Positive Spillovers Through Horizontal Linkages (Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development)
- Chile Horizontal Linkages: Using Taxation to Foster Horizontal Linkages (Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development)
- Finland as a Knowledge Economy: Elements of Success and Lessons Learned (Carl J. Dahlman, Jorma Routti, Pekka Yla-Anttila)
- Guinea Horizontal Linkages: Challenges of a Linkages-Driven Approach to Mining Infrastructure Environment (Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development)
- Mozambique Horizontal Linkages: Constraints of Building Horizontal Linkages in a Low-Capacity Environment (Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development)
- Norway Horizontal Linkages: Local Context as the Main Driver for Horizontal Linkages (Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development)
- South Africa Horizontal Linkages - Building Expertise by Overcoming Country-Specific Constraints (Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development)
- South African Mining Equipment and Related Services: Growth Constraints and Policy (David Kaplan)
- Tanzania Horizontal Linkages: The Challenges of Multistakeholder Infrastructure Projects (Intergovernmental Forum on Mining Minerals Metals and Sustainable Development)
- Linkages to the Resource Sector: The Role of Companies, Government, and International Development Cooperation (Columbia Center for Sustainable Investment, Deutsche Gesellschaft fur Internationale Zusammenarbeit (GIZ))
- One Thing Leads to Another: Promoting Industrialisation by Making the Most of the Commodity Boom in Sub-Saharan Africa (David Kaplan, Raphael Kaplinsky, Mike Morris)
- Commodities for Industrial Development: Making Linkages Work (Raphael Kaplinsky)
- IGF Guidance for Governments: Local Content Policies (Aaron Cosbey, Isabelle Ramdoo)
- Extractive Industries: Optimizing Value Retention in Host Countries (United Nations Conference on Trade and Development)
This report explains how policy can be used to strengthen horizontal linkages through supporting businesses with sophisticated technological ...
This resource provides a concise summary of Tanzania’s experience developing infrastructure-led horizontal linkages in the mining ...
“Horizontal” (or “lateral”) linkages relate to the development of new industries using the capabilities and skills of the extractive industry supply chain. For example, metalwork skills required for the manufacture and assembly of oil rig control lines can be used to develop other construction and manufacturing industries. Similarly, IT skills developed for the oil sector can be used in other sectors.
Horizontal linkages provide a unique opportunity to diversify the economy away from the extractive sector. They can stem from transferable skills that are not sector specific (IT, finance, civil engineering, etc.) or from the adaptation of capabilities, know-how, and technologies specifically developed to serve the extractive industries. As such, horizontal linkages are more likely to occur in countries where backward linkages (goods and services procured from local suppliers) and/or forward linkages (the domestic processing of extractive outputs) have already been created. Horizontal linkages are also often referred to as “spillover benefits.”
Every stage of the mining or oil and gas life cycle provides opportunities to develop horizontal linkages, but the potential is greatest where deep backward linkages have already been developed and can be used as a starting point. For instance, during the exploration stage of oil and gas projects, the potential for local procurement is likely to be limited to the basic needs of foreign companies setting up offices in a new country during the exploration stage. Highly specialized and technical goods and services required at this stage are unlikely to be available in the country of operation, particularly if the country is in the early stages of sector development.
On the other hand, in large-scale mining, which requires the construction of massive transportation infrastructure during the development phase, contractors’ civil engineering skills can already be easily transferred to other sectors. Another example of this is extractive projects that are building resilient infrastructure to decrease the threat of climate change. Here, too, skills developed by civil engineers could be useful to the rest of an economy planning for climate resilience.
In less-developed markets, increasing automation may also hinder the development of lower-skilled backward linkages, reducing the potential for the development of horizontal linkages. However, if a country invests in advanced technical skills to supplement and build upon automation, these skills will likely be useful in other sectors.
The Case Studies in this section show these ideas in practice. These ideas will be explored more deeply in each of the Horizontal Linkages subtopics.
Below are a series of relevant case studies to show these ideas in practice. These ideas will be explored more deeply in each of the subtopics.
 Oyejide and Adewuyi (2011) as 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: Deutsche Gesellschaft fur Internationale Zusammenarbeit [GIZ], 2016), 44.
 Aaron Cosbey and Isabelle Ramdoo, IGF Guidance for Governments: Local Content Policies Draft (Winnipeg: International Institute for Sustainable Development, February 2018), 1.