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.
- 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.
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.
- Local Content Case Studies (International Petroleum Industry Environmental Conservation Association)
- How to Successfully Access the Mining Supply Chain (Saskatchewan Ministry of the Economy)
- Procuring From SMEs in Local Communities: A Good Practice Guide for the Australian Mining, Oil and Gas Sectors (Mary-Anne Barclay, David Brereton, Ana Maria Esteves, Daniel Samson)
- Mining Local Procurement Reporting Mechanism (Mining Shared Value, Deutsche Gesellschaft fur Technische Zusammenarbeit GmbH)
- Guide to Getting Started on Local Procurement (International Finance Corporation)
- A Practical Guide to Increasing Mining Local Procurement in West Africa (World Bank, Kaiser Economic Development Partners)
- Extractives Industry: Local Content Early Gap Analysis (UK Aid, Adam Smith International)
- A Comparative Overview of Legal Frameworks Governing Water Use and Waste Water Discharge in the Mining Sector (Nicolas Maennling, Tehtena Mebratu-Tsegaye, Sophie Thomashausen)
- A Local Content Decision Tree for Emerging Producers (Dr Valérie Marcel, Dr Ekpen Omonbude, Anthony Paul, Roger Tissot)
- Planning for the Future and Promoting National Content, A Survey to Foster Opportunities for Ugandans in the Oil and Gas Sector (CNOOC Uganda, Total E&P Uganda, Tullow Uganda)
This document outlines three distinct criteria that should be considered when developing a definition: geography, value addition, and ...
This guide provides an example of a supply chain assessment conducted by the Government of Saskatchewan, Canada which includes the results ...
The Mining Local Procurement Reporting Mechanism (LRPM) is a set of disclosures that seeks to standardize how the global mining industry and ...
This document contains a study on local procurement on oil and gas in Uganda and is categorized into several case studies covering topics ...
This assessment provides an examination of the current supplying capabilities in Kenya and the potential products to target. It presents a ...
This report explores the opportunities and challenges associated with developing local supply chains for the extractives sector in Kenya. ...
This resource examines the links between the oil and gas industry and the Sustainable Development Goals (SDGs), supporting a shared ...
These guidelines serve as a practical policy tool to increase women’s economic empowerment in African countries through increased ...
This policy brief examines barriers to women’s economic empowerment in Sub-Saharan Africa, with the aim of mobilizing private-sector ...