The Economics and Politics of Local Content in African Extractives

Lessons from Tanzania, Uganda and Mozambique

Michael Hansen, Lars Buur, Anne-Mette Kjær, Ole Therkildsen

Publikation: Bidrag til tidsskriftTidsskriftartikelForskningpeer review

Resumé

Extractive foreign direct investment (FDI) is heralded as the new development
opportunity in Africa. A key precondition for FDI’s contribution, however, is
that foreign investors create ‘local content’ by linking up to the local economy.
Consequently, African host governments are contemplating ways in which they
can promote local content. This paper examines local content policies and
practices in three African countries – Tanzania, Uganda and Mozambique – all
countries with huge expectations for extractive based economic development. It
is found that in spite of high ambitions and strong expectations, local content is
limited, shallow and inefficient. The paper explores why local content apparently
is so difficult to achieve in these African countries. It is argued that conventional
economic explanations, focusing on market failures and weak institutions, are
partial at best and therefore must be complemented with political explanations.
Hence, it is proposed that local content practices in the three countries can be
understood partly as the results of ruling elites’ efforts to build and maintain
stable political coalitions.
OriginalsprogEngelsk
TidsskriftForum for Development Studies
Vol/bind43
Udgave nummer2
Sider (fra-til)201-228
Antal sider28
ISSN0803-9410
DOI
StatusUdgivet - 2016

Citer dette

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The Economics and Politics of Local Content in African Extractives : Lessons from Tanzania, Uganda and Mozambique. / Hansen, Michael; Buur, Lars; Kjær, Anne-Mette; Therkildsen, Ole.

I: Forum for Development Studies, Bind 43, Nr. 2, 2016, s. 201-228.

Publikation: Bidrag til tidsskriftTidsskriftartikelForskningpeer review

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AU - Kjær, Anne-Mette

AU - Therkildsen, Ole

PY - 2016

Y1 - 2016

N2 - Extractive foreign direct investment (FDI) is heralded as the new developmentopportunity in Africa. A key precondition for FDI’s contribution, however, isthat foreign investors create ‘local content’ by linking up to the local economy.Consequently, African host governments are contemplating ways in which theycan promote local content. This paper examines local content policies andpractices in three African countries – Tanzania, Uganda and Mozambique – allcountries with huge expectations for extractive based economic development. Itis found that in spite of high ambitions and strong expectations, local content islimited, shallow and inefficient. The paper explores why local content apparentlyis so difficult to achieve in these African countries. It is argued that conventionaleconomic explanations, focusing on market failures and weak institutions, arepartial at best and therefore must be complemented with political explanations.Hence, it is proposed that local content practices in the three countries can beunderstood partly as the results of ruling elites’ efforts to build and maintainstable political coalitions.

AB - Extractive foreign direct investment (FDI) is heralded as the new developmentopportunity in Africa. A key precondition for FDI’s contribution, however, isthat foreign investors create ‘local content’ by linking up to the local economy.Consequently, African host governments are contemplating ways in which theycan promote local content. This paper examines local content policies andpractices in three African countries – Tanzania, Uganda and Mozambique – allcountries with huge expectations for extractive based economic development. Itis found that in spite of high ambitions and strong expectations, local content islimited, shallow and inefficient. The paper explores why local content apparentlyis so difficult to achieve in these African countries. It is argued that conventionaleconomic explanations, focusing on market failures and weak institutions, arepartial at best and therefore must be complemented with political explanations.Hence, it is proposed that local content practices in the three countries can beunderstood partly as the results of ruling elites’ efforts to build and maintainstable political coalitions.

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KW - linkages and local content

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