Increase Local Procurement in Mining to Promote Growth in Africa, says World Bank Study

February 6, 2012

CAPE TOWN, February 6, 2012 — Mining companies can boost economic growth in West Africa by purchasing more equipment, supplies and services from local companies, says a World Bank report released today.

The study, Increasing Local Procurement by the Mining Industry in West Africa, shows that raising the share of local procurement by mining companies 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, which focuses on Ghana, Guinea and Senegal, recommends that West African governments work with mining companies, suppliers, and civil society to strengthen definitions and indicators for measuring local procurement, and that mining companies develop and implement local procurement plans.

“Buying local goods and services is a catalyst for private sector development and sustainable growth,” said Obiageli K. Ezekwesili, World Bank’s Vice President for the Africa region, and a former Nigerian Minister of Extractive Industries. “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. Mining companies should not only extract wealth, they must inject opportunity.”  

Potential for local supply

Mining is an economic engine for West Africa, which supplies about nine percent of the world’s bauxite, and eight percent of its gold. 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.

But even if these levels of mining activity involve 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.

Few mining companies in West Africa have established policies to support local procurement, although some efforts have 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.

“Local procurement by mining companies can bring significant benefits to a wide range of stakeholders in resource-rich countries,” says Paulo de Sa, manager of the Oil, Gas and Mining unit in the Bank’s Sustainable Energy Department. “Due to the large scale of current and potential mining activity in West Africa, countries have a huge opportunity to realize these socio-economic benefits.”

The report’s main recommendations for stakeholders seeking to seize local procurement opportunities include the following:

  • Regional organizations can help develop a harmonized 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.
  • National governments need to enact and implement appropriate policies and regulations to encourage local procurement, while also providing a supportive enabling environment for enterprise development and investment. Governments can require mining companies to develop and submit local procurement plans, review concessions on targeted import tariffs and duties, promote linkages and investment along the mining supply chain and allocate revenues from mining to support local supplier development.
  • 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 (RFQs). 

The study, supported by Kaiser Development Practice, was developed with inputs from policy makers, the private sector and civil society in workshops and consultations held last year in Accra and Guinea-Conakry.

Media Contacts
In Cape Town
Mauricio Rios
Tel : + 44 7709 415 251
In Pretoria
Sarwat Hussein
Tel : +27 73 888 1778
In Washington DC
Christopher Neal
Tel : 1 202 473 2049