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Part E: Local Development, Labour, Health and Safety | 40. Local Development

Local development, or local content (a term borrowed from the oil and gas sector), provisions address the combination of international best practice, national policies and companywide policies that collectively support the economic and social development of the country in which mining operations take place. These policies typically focus on many of the following areas:

  • building the capacity of workers, goods and service providers;
  • transferring knowledge between mining companies and the local population;
  • construction and ensuing use of infrastructure (roads, bridges, trains etc.) by surrounding communities
  • other projects that increase access to health, education and/or other necessities that support the communities around the mining sites

As with beneficiation, local development or local content policies are encouraged in the Africa Mining Vision. The latter is one of the critical factors to ensure that the mining sector contributes to sustainable development and poverty alleviation in developing countries. Well designed and implemented, this is the most lucrative multiplier of benefits from mine operations, rather than collecting royalties and taxes. Indeed, the most important expenditure part of mining companies are related to purchase of good and services, infrastructures, energy or employee’s salaries. Capturing a bigger part of these expenditures in the country is challenging but highly sustainable.

Increasing local development should be pursuant to an overall plan or policy by the government that identifies areas where local capacity can be developed and the kinds of goods and services to be targeted for increasing local content. Governments can maximize benefits by identifying skills, goods and services for increasing local capacity that have the ability to be applicable to other sectors of the economy. Consultation with industry is encouraged in developing these requirements to ensure they are realistic.

When developing local development or local content provisions, governments need to ensure that such provisions are consistent with their international treaty obligations, notably with respect to: (a) the Schedule of Commitments undertaken as World Trade Organisation (WTO) members under the GATS and TRIMs Agreements. Some countries such as Botswana, China, DRC, Guinea, India, Peru and Tanzania exclude the entirety of the mining sector from Schedule of Commitments while countries such as Australia, Canada, Cote D’Ivoire, South Africa, United States and Zambia include services incidental to mining; (b) negotiated bilateral investment treaties (BITs), which are agreements between two countries that establish the terms and conditions of foreign investment within a country and provide rights directly to the investors of each country which is a party to the treaty. Some BITs expressly prohibit countries from imposing certain types of local content requirements on companies and can be directly enforced by mining companies if they are incorporated in the same country as has entered into a BIT with the host country.

In term of plan or policy, government is also encouraged to develop curricula in Universities and High schools, at national or at regional level with others countries, to create or increase local capacity in targeted specialized skills. This could be a complementary policy to enhance the effectiveness of local development requirements put on the mining industry.

Finally, it is essential that any policies addressing local development/content clearly define what the term “local” means according to each individual country context and in a way that is consistent with the national vision for maximizing the benefits of the extractive sector. It is important for a government, when doing so, to take into account existing free movement of persons and good regulations or policy at regional integration organizations where it may be a member state. The following are some examples of how “local” can be defined: national, geographic residents, national, long term resident and/or producers in a region or subnational entity. It is critical to take a look at the potential for a progressive definition of “local” building from a “national” to a regional and ultimately continental categories.