Local Content, Supply Chains, and Shared Infrastructure

Abstract

Local content policies for extractive industries have attracted increased interest. Local content requirements are often included in legislation or contracts. Such efforts may be constrained by low capacity of potential suppliers, low skills, and the general business environment. A number of extractive industry companies have introduced supplier development programmes that attempt to reduce the constraints and skill gaps. Government industrial policies on local content vary: some prescribe quantitative targets for local content, while others focus on improving skills and raising the capacity of domestic industry. Infrastructure built for extractive industries can often be used by other economic activities. Difficulties in finding suitable financing arrangements have, however, limited the number of successful multi-user extractive industry-related infrastructure projects.

The Role of Inclusive Innovation in Promoting Social Sustainability

“…A representative yet ambitious example of inclusive sourcing is the Unilever “Enhancing Livelihoods” initiative, two of whose components are “opportunities for women” and “inclusive business,” with the main goals of empowering 5 million women (by advancing opportunities for women in operations, providing up‐skilling, and expanding opportunities in the value chain), improving the livelihoods of 500,000 smallholder farmers, and increasing the participation of young entrepreneurs in the Unilever value chain . In the extractives sector, Diavik Diamond Mine in Canada achieved a 34% Aboriginal employment rate; a copper mine in Zambia run by Barrick developed a supplier development program aiming to engage up to 1000 local SMEs and micro‐businesses as suppliers in the mine's value chain; and Anglo‐American took up to 49% equity stakes in local businesses (with a planned 3–5 year exit strategy) as part of South Africa's Black Empowerment Policy, funding 1885 companies through 2016 (Östensson ). In developed economies, inclusive supply chain practices are typically focused on the inclusion of minority‐ and women‐owned enterprises (Carter et al.…”

“…IFC () identifies access to capital as a bigger challenge for women‐owned enterprises relative to others (due to weaker property rights, lower asset ownership, lower credit history, cultural norms, etc.). An example of a successful partnership towards inclusive sourcing is the INOVE supplier development program in Brazil that, via partnership with commercial banks, has provided invoice factoring and working capital loans to local suppliers (Östensson ).…”

“…There are a number of operational and strategic challenges in achieving inclusive sourcing practices. For instance, firms need to put in place policies that require their suppliers to pay subcontractors without delay (Östensson ), undertake a gender‐differentiated approach to their supply chain analysis (IIED , table 2, Barraja and Pontes ), be more cognizant of the detrimental impacts of time pressure on suppliers (Caro et al. ), design incentive mechanisms for their suppliers that promote inclusiveness, find effective ways to source from a larger network of smaller suppliers, or experiment with new financing and information/knowledge sharing strategies to empower smallholders (Chen and Tang , Chen et al.…”

Scaling up and scaling down supply chains in volatile resource-based economies

“…These human capacity challenges are exacerbated by limited access to local training that has led to a shortage of skills and formal education in rural regions (Ngoasong, 2014). Furthermore, as local businesses seek to recruit and retain a competitive workforce, they face difficulties competing with industry wages ( € Ostensson, 2018). Infrastructure deficits, such as with specialized equipment, power, broadband networks and computer requirements, may not well position local businesses to have the capacity to scale-up, grow and compete for supply and servicing contracts (Acheampong et al, 2016;Tordo et al, 2013).…”

“…Infrastructure deficits, such as with specialized equipment, power, broadband networks and computer requirements, may not well position local businesses to have the capacity to scale-up, grow and compete for supply and servicing contracts (Acheampong et al, 2016;Tordo et al, 2013). Existing equipment may have limited uses in other industries and resource sectors as businesses look for ways to respond to economic pressures and expand supply chain opportunities ( € Ostensson, 2018). Due to inadequate information infrastructures, procurement information may not be readily available to local businesses or may reflect poor industry communication about procurement opportunities and project updates (Arthur and Arthur, 2014;Ramdoo, 2018).…”