Ndapwilapo Selma Shimutwikeni
In light of the recent oil and gas discoveries in Namibia, local content was a central focus at the recently concluded 6th edition of the Namibia International Energy Conference, which was attended by over 750 delegates from 46 nations. In the oil and gas industry, local content refers to the development of local industries, workforce, and resources to support the operations of international oil companies within a country. For Namibia, fostering ‘Namibian Content’ can significantly enhance economic growth, social development, and technological advancement.
As highlighted by the World Bank, “Implementing effective local content policies can drive economic growth and development in resource-rich countries. By building local capacity and fostering the development of local industries, these policies can create jobs, enhance skills, and ensure that a greater share of the benefits from natural resource extraction remains within the country.” This article delves into the benefits of local content – in our case, ‘Namibian Content’ as well as highlighting success stories from other countries.
Key Benefits
Economic Growth and Job Creation
Local content policies can be a catalyst for economic growth by ensuring that a significant portion of the industry’s value chain is retained within the country. By promoting the use of local goods, services, and labor, these policies can create a myriad of job opportunities for Namibians. This not only fosters employment but also stimulates the development of ancillary industries, such as manufacturing, logistics, and services, which support the oil and gas sector.
For instance, in Brazil, the implementation of local content requirements led to the growth of the domestic shipbuilding industry, creating over 30,000 jobs and reducing the country’s dependency on foreign vessels. Similarly, in Ghana, local content policies in the oil sector have resulted in increased employment, with over 7,000 direct jobs created since the inception of the policies, and the establishment of new businesses to service the industry.
Skills Development and Knowledge Transfer
One of the most significant benefits of local content is the development of skills and the transfer of knowledge to the local workforce. By involving Namibians in various aspects of the oil and gas industry, from exploration to production, they gain valuable expertise and experience. This not only enhances their employability within the sector but also equips them with skills that are transferable to other industries.
Norway provides a prime example of how local content can lead to substantial skills development. The country’s local content regulations required international oil companies to partner with Norwegian firms and train local employees. As a result, Norway developed a highly skilled workforce and a robust oil services industry, which now competes globally. The country has consistently maintained a high employment rate within the oil and gas sector, with approximately 250,000 jobs supported by the industry.
Economic Diversification
Local content policies can also contribute to the diversification of Namibia’s economy. By developing industries related to the oil and gas sector, the country can reduce its reliance on oil revenues and build a more resilient economy. This diversification can include the growth of sectors such as engineering, tourism, construction, information technology, education, agriculture and environmental services, which can provide stability during periods of oil price volatility.
Malaysia’s approach to local content has facilitated economic diversification. The country’s Petronas-led initiatives ensured that local companies were integrated into the oil and gas supply chain, leading to the growth of Malaysia’s engineering and construction sectors. Today, these sectors contribute significantly to the national economy, with the oil and gas industry supporting over 200,000 jobs.
Increased Local Participation and Ownership
Local content initiatives often emphasise increased local participation and ownership in the oil and gas industry. By encouraging joint ventures and partnerships between international companies and local firms, Namibia can ensure that a more significant share of the profits remains within the country. This can lead to the creation of local champions, that is, companies that grow to become major players in the sector.
Nigeria’s local content law, for example, has been instrumental in fostering local participation. The Nigerian Content Development and Monitoring Board (NCDMB) has overseen the growth of indigenous oil companies and service providers, ensuring that a significant portion of the industry’s value is retained within Nigeria. The NCDMB’s efforts have resulted in an increase in local participation from 5% to over 30% in the past decade.
Social Development and Community Benefits
Local content policies can also drive social development by ensuring that the benefits of the oil and gas industry extend to local communities. In some countries, these policies can mandate investments in community infrastructure, education, healthcare, and other social programs, thereby improving the quality of life for Namibians. Additionally, local content can foster a sense of ownership and pride among local communities, as they see tangible benefits from the industry operating in their region.
In Angola, local content regulations have contributed to social development through initiatives like the Angolanisation policy, which prioritises hiring and training local citizens. The oil companies operating in Angola are required to invest in community projects, leading to improved healthcare facilities, schools, and infrastructure in oil- producing regions. For example, investments in the health sector have led to the construction of over 100 health centers in the country.
Technological Advancement and Innovation
By involving local companies and workforce in the oil and gas sector, local content policies can spur technological advancement and innovation. When local firms are part of the industry’s supply chain, they are often required to meet international standards, which drives them to improve their technologies and processes. This can lead to a broader technological base in Namibia, benefiting other sectors of the economy as well.
Brazil’s local content policies in the oil and gas sector have significantly boosted the country’s technological capabilities. The collaboration between Petrobras and local firms has led to advancements in deepwater drilling technologies, making Brazil one of the leaders in this area. The technological expertise developed through these initiatives has also been applied to other industries, promoting overall economic growth.
Keys to Successfully Implement Local Content
Successfully implementing local content policies requires strategic focus and proactive measures. Here are the key factors to consider:
Capacity Building: Invest in developing a skilled local workforce and capable local companies. Establish comprehensive training and development programs to transform the local talent pool, creating a robust and competent workforce that meets industry demands.
Streamlining Regulatory Processes: Simplify and improve regulatory frameworks to enhance compliance and boost investor confidence. Address bureaucratic challenges to ensure smoother operations for both international and local companies, resulting in accelerated project timelines and a dynamic business environment.
Financial Support: Provide financial incentives and investment opportunities to empower local firms. This support helps them upgrade infrastructure and technology, enhancing their competitiveness and ability to meet industry standards, thus fostering collaboration and growth alongside established international companies.
Adapting to Market Dynamics: Encourage local companies to embrace the global nature of the oil and gas industry. Competing with advanced international firms can drive local companies to innovate and improve, enabling them to gain a strong foothold in the market.
Ensuring Quality and Standards: Focus on quality enhancement and adherence to industry standards. Continuous improvement and training programs can help local products and services achieve the high standards required, boosting their reputation and competitiveness on the global stage.
By concentrating on these key areas, local content policies can be successfully implemented, leading to sustainable growth, innovation, and a thriving local industry.
Examples of Success Stories from Other Countries
Norway: As previously mentioned, Norway’s success in the oil and gas sector is a testament to the effective implementation of local content policies. By mandating the use of local suppliers and workforce, Norway has developed a world-class oil services industry and a highly skilled workforce. This has resulted in substantial economic benefits and positioned Norway as a global leader in the sector.
Brazil: Brazil’s local content requirements have not only created jobs and fostered economic growth but also driven technological innovation.
The country has developed a robust oil and gas industry that supports a wide range of local businesses and industries. The success of Brazil’s local content policies has made it a model for other countries seeking to maximize the benefits of their natural resources.
Nigeria: Nigeria’s local content law has significantly increased local participation in the oil and gas industry.
The Nigerian Content Development and Monitoring Board has ensured that local companies and workforce are integral parts of the industry, leading to increased revenues, job creation, and social development.
Nigeria’s experience demonstrates the potential of local content policies to transform an economy and improve the livelihoods of its citizens.
Qatar: Qatar has implemented local content policies to ensure that its citizens benefit from the country’s substantial oil and gas wealth. The country’s Qatarisation policy aims to increase the number of Qatari nationals employed in the energy sector to 50%. This policy has resulted in significant investments in education and training programs to equip Qataris with the necessary skills. The success of these programs is evident in the increased participation of Qatari nationals in technical and managerial positions within the industry.
United Arab Emirates (UAE): The UAE has also seen success with its local content initiatives. The In-Country Value (ICV) program, launched by ADNOC (Abu Dhabi National Oil Company), aims to support local businesses and create jobs for UAE nationals. The ICV program has driven over $20 billion back into the UAE economy and created thousands of jobs for Emiratis. Additionally, it has encouraged international companies to partner with local firms, fostering technological transfer and capacity building.
In conclusion, the benefits of local content in Namibia’s oil and gas sector are manifold. By focusing on economic growth, skills development, economic diversification, increased local participation, social development, and technological advancement, Namibia can ensure that its oil and gas resources are a blessing for its population of 3 million.However, it is crucial to recognise and address the challenges associated with implementing local content policies. Learning from the success stories of countries like Norway, Brazil, Nigeria, Qatar, and the UAE, Namibia can implement effective local content policies that drive sustainable development and improve the quality of life for all Namibians. It is important to take a pragmatic approach, considering Namibia’s unique qualities and context to ensure the policies are tailored to the specific needs and potential of the country. The key to success is striking the right balance between local requirements and international competitiveness. In addition, governance is
crucial to ensure transparency, accountability, and effective implementation, ultimately leading to sustainable and inclusive growth.
About the Author:
Ndapwilapo Selma Shimutwikeni is the founder of the distinguished Namibia International Energy Conference (founded in 2012) and the Chief Executive Officer of RichAfrica Consultancy. She specializes in natural resources law and policy and facilitates investment linkages. She holds an LLM in Mineral Law and Policy from the Centre for Energy, Petroleum and Mineral Law and Policy (CEPMLP) at the University of Dundee, as well as an LLM in International Trade Law from the University of Leeds. Ndapwilapo was on the team that reviewed the White Paper on Energy and drafted the National Energy Policy, where she served as the lead consultant for upstream and downstream oil and gas, as well as cross-cutting issues such as mainstreaming gender, local content, and capacity building.
