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Local content at the top of Mozambique’s development agenda (By Charné Hundermark)

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By Charné Hundermark

Mozambique is seeing an influx of investment in the energy, agriculture, tourism, construction and mining sectors, positioning the country for transformative economic growth. The benefits of on-going megaprojects, however, have the potential to extend beyond government revenue and critical infrastructure and to building local capacity and ensuring sustainable socio-economic improvement. With the aim of improving the standard of living nationwide and stimulating local participation in expanding sectors, Mozambique prioritizes the expansion of local content policies and takes advantage of large-scale developments. to take advantage of skills transfer and training initiatives.

Promote participation through politics

In response to large-scale developments taking place across the country, the government of Mozambique has promulgated 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 adopting a revised local content law, which aims to increase local participation by enforcing a minimum percentage requirement, to ensure that preference is given to local providers, to encourage technology transfer and to require the presentation of local content. plan by companies to competent authorities on an annual basis, among other key provisions. In addition, the Local Content Law will be overseen and managed by an independent public body which will determine the certification of companies and specific local content requirements. The law aims to significantly increase the participation of indigenous people in all sectors, with a view to stimulating employment and the creation of local industries.

Mozambique has already put in place a series of laws containing provisions relating to local content. Namely, in the petroleum sector, the Mozambican Petroleum Law and the Mega Project Law provide for compulsory registration of oil and gas companies on the Mozambique Stock Exchange; concessionaires are required to obtain a Mozambican participation in their share capital between 5 and 20%; and when the public interest so requires, holders of oil or gas exploration rights will give preference to the Mozambican government for the acquisition of oil produced in the concession area. In the mining sector, the mining law obliges concessionaires to also obtain a Mozambican participation in their share capital; procurement of goods and services of MZN 15 million ($ 200,000) or more must be carried out by public tender; and title holders and entrepreneurs should give preference to Mozambican goods and services when available.

Capacity as a key determinant

One of the main challenges hampering the implementation of local content policies, however, is the lack of local capacity. Despite the application of policies that promote inclusion and increased participation of the local workforce, the shortage of highly skilled labor, characteristic of industries such as mining and extractive industries, continues to reduce conformity. Therefore, the transfer of skills, knowledge and technology from foreign entities to their local counterparts has become a key priority. In fact, the proliferation of multisectoral developments in Mozambique presents unique opportunities for international companies to use the projects as a means of capacity building. Many large-scale developments rely on an international workforce; By reinjecting knowledge and transferring skills to the local community, projects can significantly increase their available resources, thus stimulating long-term and sustainable economic growth. Second, government-imposed local content requirements can help facilitate regional, if not underutilized, networks. Since partnerships with local businesses are already required under current local content regulations, integrating and collaborating with the local workforce can ensure enhanced cooperation along the value chain. Notably, projects such as Total’s Mozambique LNG are implementing a series of high impact initiatives and educational programs with the aim of transferring knowledge and carrying out local capacity building.

To fully achieve industry goals and ensure long-term sustainable project development, establishment and application of local content is necessary, but only in conjunction with adequate capacity building initiatives. With effective capacity building, which aims to strengthen the local workforce and stimulate local participation, multisectoral success can translate into socio-economic improvements.

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