WB pushes local procurement for mining

Governments need to enact and implement appropriate policies and regulations to encourage mining companies to procure more equipment, supplies and services from local companies while providing a supportive enabling environment for enterprise development and investment, the latest World Bank mining study has proposed.

“Governments can require mining companies to develop and submit local procurement plans, review concessions on targetted import tariffs and duties, promote linkages and investment along the mining supply chain and allocate revenues from mining to support local supplier development,” the study said.

The study, under the theme ‘Increasing Local Procurement by the Mining Industry in West Africa’ and focused on Ghana, Guinea and Senegal, recommended that West African governments work with mining companies, suppliers, and civil society to strengthen definitions and indicators for measuring local procurement.

It again suggested that regional organisations can help develop a harmonised list of products across the region that may be exempted from customs duties, promoting linkages and investment along the mining supply chain, developing a regional list of suppliers, and continuing to facilitate regional trade.

“Mining companies need to ensure that local companies have full, fair and reasonable access to opportunities. They should share information on their procurement needs, helping to identify and assess the viability of suitable products and services for local supply, and broadening access to tenders and requests for quotation.

The World Bank revealed that raising the share of local procurement by mining companies will spread the benefits of mining more evenly across a countries’ economy, creating jobs and stimulating the sustainable development of local enterprises.

“Increasing local procurement by the Mining Industry in West Africa would spread the benefits of mining more evenly across a country’s economy, creating jobs and stimulating the sustainable development of local enterprises.”

The report revealed that few mining companies in West Africa have established policies to support local procurement, although some efforts had already been launched to seek a more consistent, formal approach.

“There are important potential opportunities for expanding local supply in areas such as camp management, civil works, construction and transport, as well as drilling, mining, and equipment maintenance.”

The WB said local procurement by mining companies could bring significant benefits to a wide range of stakeholders in resource-rich countries, due to the large scale of current and potential mining activity in West African countries.

The World Bank's Vice President for Africa, Obiageli K. Ezekwesili, said: “A key message of this study is that mining companies need to be transparent about informing local communities on procurement opportunities, so that these communities can benefit economically from mining operations.
“Buying local goods and services would serve as a catalyst for private sector development and lead to sustainable growth.
“Mining companies should not only extract wealth, they must inject opportunity, mining served as an economic engine for West Africa, supplying about nine percent of the world’s bauxite, and eight percent of its gold.

She said: “This contribution is expected to grow, with large gold, iron-ore, and bauxite projects in advanced planning stages, along with unexploited uranium, copper and diamond deposits across the region.

“Even if those levels of mining activity involved significant procurement spending, both in capital investment and operational costs, there has so far been only limited participation in mining supply chains by companies based in West Africa.

“This situation endures despite existing capacity and the potential to expand the capacity of local small and medium enterprises.”


Local mining sector

An estimated 34% of annual mineral exports, currently enjoyed by foreign firms and expatriates providing mining services in the country, could revert to locals if they take steps to make themselves able to provide these services.

Estimates according to the Minerals Commission show that these services procured by the mining firms in 2008 alone came to US$680million, and they continue to go to foreigners because the locals have not positioned themselves to take advantage of these opportunities in the mining sector.

Local content and capability issues are national issues, and so they call for a collaborative approach between public and private partnership.

The best way to keep the mining industry as an integral part of the country’s economy is to put in place deliberate and sustained local content and capability development policies, backed by legislation and enforcement mechanisms, and not just resorting to appeals or pleas to mining exploration and production companies.

The non-existence of capacity currently in the country should not be an excuse. There must be conscious and systematic development of local capability.