Assessing the Current Situation

At a Glance
  • Baselines should include a clear understanding of current and potential demand for goods and services from extractive industry companies, as well as the current capabilities of local businesses to meet this demand.
  • One-on-one consultations, multi-stakeholder dialogues, and drawing on business registration data are useful ways of assessing capacities and potential.
  • Understanding which goods and services will yield the most benefits in terms of employment, learning opportunities, in-country value addition, and horizontal linkages are important value-creation considerations for local economies.

When considering how to advance local procurement from a particular region or country, it is important to develop a baseline. A baseline should include a clear understanding of the current and potential demand for goods and services from the extractive industry companies that are operating, as well as the current capabilities of local businesses to meet this demand. Local business capacity includes not only offering a good or service but the ability to provide this product in the volume and to the quality specifications and standards required by the extractive industry company.

Activities that can be useful to assess the current situation include:

  • One-on-one consultations with extractive industry companies and local businesses to determine the current and potential demand and supply. These consultations could be facilitated by a Chamber of Mines or Chamber of Commerce if businesses participate actively in these institutions.
  • Multi-stakeholder dialogues to verify and discuss where opportunities exist currently and in the future.[1]
  • Drawing on business registration data and other similar information on the type of businesses that are available in the country of operation.

Assessing the local reality allows the government to identify which goods and services can be realistically and/or strategically targeted for supplying to an extractive industry project. One important consideration is the feasibility of a supplying opportunity: is a good or service something that will be relatively easy to source locally, or one that is complex and much more difficult to source competitively?

An important aspect of conducting firm-level analysis when assessing the capacity of local suppliers is to understand the difference between a quality gap and a quantity/capacity gap. A quality gap focuses on capability while a quantity gap focuses on the size or volume of production. Both require different interventions to address the gaps. This concept is outlined below in Figure 1.[2]

Figure 1: Quality-Quantity Gap Matrix, reprinted from IPIECA, Local Content Case Studies, (London: IPIECA, 2016), 4

Value-creation for the local economy is another important consideration: which goods and services will create the most benefits in terms of employment, learning opportunities, in-country value addition, horizontal linkages, etc.? The IPIECA guide contains useful figures (such as figure 2 below) to visualize, how potential goods and services can line up along these dimensions, including a study on local procurement on oil and gas in Uganda.

Figure 2: Mapping of selected industries according to local benefits and feasibility, reprinted from IPIECA, Local Content Case Studies, (London: IPIECA, 2016), 5

 

 

 

View footnotes

[1] IPIECA, Local content case studies, (London: IPIECA, 2016), 7-8  

[2] IPIECA, Local content case studies, (London: IPIECA, 2016), 4 

Key Resources

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Local Content Case Studies

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