Indirect Jobs
At a Glance
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Employment, procurement, and infrastructure typically account for 40–50 percent of the total expenditure of oil and gas projects, and 50–65 percent among mining projects. They are therefore important drivers of indirect employment if these activities are localized.
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Increasing the local procurement of goods and services can be an effective way to increase indirect employment and can lower procurement costs in the long run while improving a company’s social license to operate.
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Governments need to identify the most realistic opportunities for local suppliers, as well as which types of goods and services will result in the most jobs.
Case Studies
- Creating Sustainable Businesses (Anglo Zimele)
- Local Content Policy for the Simandou Integrated Mining and Infrastructure Project (Rio Tinto)
Key Resources
- Reverse the Curse: Maximizing the Potential of Resource-Driven Economies (Martin Bratt, Richard Dobbs, Adam Kendall, Jeremy Oppenheim, Fraser Thompson, Fransje Van der Mare)
- Enterprise Development-Zimele (Anglo American)
Topic Briefing
Government policies meant to foster the creation of indirect jobs in extractives mainly focus on ensuring that required goods and services are procured from domestic suppliers. Employment, procurement, and infrastructure typically account for 40–50 percent of expenditure in oil and gas projects and 50–65 percent in mining (figure 1); therefore, these activities can become important drivers of indirect employment if they are localized. It is important to remember, however, that procurement includes imported goods as well as services carried out by branches of international firms. In other words, these large numbers can include spending that does not create many jobs, such as when a local company sells imported fuel to a mining site for use in power generation.
Figure 1: Typical distribution of spending in extractive projects, reprinted from Olle Östensson, “Local Content, Supply Chains, and Shared Infrastructure,” WIDER Working Paper 2017/96, United Nations University World Institute for Development Economics Research (UNU WIDER), April 2017.
Increasing extractive companies’ local procurement of goods and services can be an effective way to increase indirect employment. Meanwhile, it can also help these companies lower their procurement costs overall and improve their social license to operate.
On the other hand, extractive companies often require products provided by original equipment suppliers (OEM) known to meet all applicable standards. To best foster indirect employment, governments need to identify which supply opportunities can be most realistically filled by domestic goods and services.
For a full overview of government strategies to foster local procurement, see the Supplying Extractives section.