The chief criticism of resource companies operating in Africa, and in most developing countries, is their penchant for creating “brief case economies.” This predatory economic model often involves a global major resource player investing cash through a local front, supplying labor via its expatriate staff, and repatriating profit in full with no significant local benefit after greasing the palms of public officers in the host country; corrupting their government and minimizing tax bills at the same time.
The resulting economy is one that hemorrhages resources, but has little or no impact on unemployment, job creation, quality of life and/or development. Such economies, aside from being bedeviled with poverty, are also ridden with the “resource curse” of corruption which ensures a near permanent cycle of conflict over meager perks offered by access to state coffers.
To tackle this unending cycle of poverty, many countries have begun to promulgate local content laws that ensure actual investment in local human resources, industry and infrastructure by global resource firms that wish to partake in the enormous wealth locked in their local natural resources, be it crude oil, gas, diamonds, copper, iron or gold. This involves setting hard local participation targets for exploration, production and refining concessions, employment, contracts or procurement of goods and/or labor. These laws (like the one recently promulgated in Nigeria) often require gradual implementation timelines, as well as punishment for violators.
The goals of these laws are to encourage technology transfer, optimization of labor while encouraging investment and global collaboration. More importantly, local content laws have the ability to curb the spiraling unemployment rate as well as reverse brain drainage. The issue of brain drain particularly offers opportunities for larger developing countries like Nigeria to quickly bridge the technology gap present at home, but clearly absent abroad amongst her Diaspora communities. In the United States, Nigerians are reportedly the most educated immigrants. This fact is repeated across Europe, Asia and South America where very capable Nigerians (and Africans) continue to contribute their professional quota to their host country's economy.
Tapping into this exported immigrant labor is a crucial construct in exploiting optimally the yet-to-be-unlocked potential of local content development. In this vein, a number of Nigerians in Diaspora Technology & Business Development companies partnered to host a key player in the implementation of the Petroleum Industry Local Content Law in Nigeria to a networking meeting in Houston, Texas this October. This event, and other initiatives of its kind, has the potential to connect key policy and business players with one another, and advance the cause of job creation and brain drain reversal.
Photo: Trevor Samson / World Bank