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[Column] Charné Hundermark: Local content rises to top of Mozambique’s developmental agenda

[Column] Charné Hundermark: Local content rises to top of Mozambique’s developmental agenda

Mozambique is experiencing an influx of investment across energy, agriculture, tourism, construction and mining sectors, positioning the country for transformative economic growth.

The benefits of ongoing megaprojects, however, have the potential to extend beyond government revenues and critical infrastructure and to local capacity building and the assurance of sustainable socioeconomic improvement.

In a bid to increase country-wide living standards and boost local participation in expanding sectors, Mozambique is prioritizing the expansion of local content policies and leveraging large-scale developments to capitalize on skills transfer and training initiatives.

Promoting Participation Through Policy

In response to large-scale developments taking place across the country, the Government of Mozambique has enacted several local content requirements to ensure that the flow of capital extends to local communities and economies.

Notably, the country is in the process of passing a revised Local Content Law, which aims to increase local participation through the enforcement of a minimum percentage requirement, ensure preference is given to local suppliers, encourage technology transfer and require the presentation of a local content plan by enterprises to relevant authorities on an annual basis, among other key provisions.

Additionally, the Local Content Law will be monitored and managed by an independent public entity that will determine certification of companies and specific local content requirements. The Law aims to significantly increase indigenous participation across sectors, with a view to driving employment and the creation of local industries.

Mozambique already has a series of laws in place that contain local content provisions. Namely, in the petroleum sector, the Mozambican Petroleum Law and the Mega Project law provide for the mandatory registration of oil and gas companies on the Mozambique Stock Exchange; concessionaires are required to obtain Mozambican participation in their share capital between five and 20%; and when public interest requires, holders of oil or gas exploration rights shall give preference to the Mozambican Government in the acquisition of petroleum produced in the concession area.

 In the mining sector, the Mining Law requires concessionaires to also obtain Mozambican participation in their share capital; the acquisition of goods and services of MZN 15 million ($200,000) or more are to be executed through public tender; and titleholders and contractors are to give preference to Mozambican goods and services when available. 

Capacity as a Key Determinant

One of the primary challenges hindering the realization of local content policies, however, is a lack of local capacity. Despite enforcement of policies that promote inclusivity of and increased participation by the local workforce, the lack of a highly skilled workforce, characteristic of industries such as mining and extractives, continue to reduce compliance.

Therefore, the transfer of skills, knowledge and technology from foreign entities to local counterparts has emerged as a key priority. In fact, the proliferation of multi-sector developments in Mozambique presents unique opportunities for international companies to utilize projects as an avenue for capacity building. Many large-scale developments rely on an international workforce; by re-injecting knowledge and transferring skills to the local community, projects can significantly expand their available resources, spurring long-term and sustainable economic growth in the process.

Secondly, local content requirements imposed by government can help facilitate regional networks, otherwise underutilized. Since partnerships with local companies are already required under current local content regulations, integration and collaboration with the local workforce can ensure enhanced cooperation across the value chain. Notably, projects such as the Total’s Mozambique LNG are establishing a series of high-impact initiatives and education-based programs in a bid to transfer knowledge and spearhead local capacity building.

To fully realize industry objectives and ensure long-term, sustainable project development, the establishment and enforcement of local content is necessary, but only in conjunction with adequate capacity building initiatives. With effective capacity building in tow, which aims to strengthen the local workforce and drive local participation, multi-sectoral success can be translated into socioeconomic improvements.

Charné Hundermark is a writer and Sub editor at Africa Oil & Power


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