Local Content Policy (LCP) Tanzania

Despite the presence of bountiful minerals and breakthroughs in oil and gas explorations and investments, less economic growth and more impoverished local communities have been hallmarks of many resource-rich African states. To ensure that revenues trickle down, particularly to avoid the so-called ‘natural resource curse’, efforts to have a Local Content Policy (LCP) in the emerging oil and gas industry of countries such as Tanzania are gaining momentum. Indeed, Tanzania published its draft LCP in April, 2014.

=Definition= There are several definitions of local content. The Local Content Policy of Tanzania for Oil and Gas Industry (2014) defines local content as “the added value brought to the country in the activities of the oil and gas industry in the United Republic of Tanzania through the participation and development of local Tanzanians and local businesses [particularly] through national labour, technology, goods, services, capital and research capability." The policy further states that the participation and involvement of local businesses may be implemented through: “Workforce development, employment and training of local workforce; and investments in supplier development through developing and procuring supplies and services locally.”   Generally, within the oil and gas industry, local content is recognised as an intervention by a national government to ensure that the majority of the goods and services required at each stage of the oil and gas value chain are locally supplied.

=Tanzania Local Content Policy Framework=

Policy Aims
The draft LCP stipulates three main issues as central to the realisation of the local content benefits to Tanzanians:


 * Devising strategies for the Local Content implementation with a view to developing a skilled, knowledgeable and sustainable local labour force;
 * Developing appropriate strategies to foster the transfer of technology and knowledge, in addition to investing in research and development in the oil and gas industry; and
 * Creating a mechanism for enabling Tanzanians and their businesses to utilise effectively opportunities to manage, supply goods, services and labour in the oil and gas industry.

To realise these aims, the policy, among others, expects government entities and companies to work together to “support the development of adequate local skills that are necessary to fulfil the strategic and operational objectives of the oil and gas sector.”

Key Focus Areas
According to the policy, there are five key focus areas:


 * Capacity-building and technology transfer;
 * Participation of Tanzanians and Tanzanian-owned entities;
 * Procurement and usage of locally-produced goods and services;
 * Fabrication and manufacturing in-country; and
 * Socio-economic responsibilities.

Policy Objectives
The policy’s main objective is to provide the necessary guidelines to engender maximum engagement of local content and involvement of Tanzanians in the development of the oil and gas industry to ensure Tanzanians optimally benefit from such investments. The specific objectives are as follows:


 * To develop Tanzania’s local businesses to become globally competitive through the empowerment of local suppliers to meet the needs of the oil and gas industry;
 * To transfer appropriate technology to Tanzania for managing and operating the oil and gas industry;
 * To enable local training institutions to provide relevant and appropriate training for the oil and gas industry;
 * To maximise the participation of skilled and unskilled Tanzanians in the oil and gas supply chain and value chain activities;
 * To have local goods and services procured by operators in accordance with terms and conditions of their operating licences; and
 * To support gender-related activities in the oil and gas industry and addressing HIV & AIDS and other infectious diseases.

Under the Petroleum Act of 1980, applications for exploration or development licences must include proposals regarding the training and employment of Tanzanians. Moreover, the National Energy Policy of 2003 addresses issues pertaining to local content related policies in oil and gas sub-sector. Broad emphasis is placed on enhancing the local content. What is missing is detailing the level of participation of Tanzanians and Tanzanian-owned companies in these oil and gas deals. The local content provisions are stipulated under Article 20 and 21 of the Model Production Sharing Agreement (MPSA) of 2013 and are periodically reviewed to ensure they are in sync with developments in the industry. The MPSA of 2013 contains the latest local content requirements, but so far they have yet to be adopted into any effective contract.

Legal framework and Implementation
For the implementation of the LCP, the proposed legislations (Local Content, Natural Gas and Natural Gas Revenue Management) need to be enacted and the existing legislations (Income Tax Act and EWURA Act) need some amendments. The Minister for Energy and Minerals is required to consult with the relevant government agencies to propose fiscal incentives to assist foreign companies to develop the technological capacity and the skills of citizens and local Tanzanian companies to establish factories and production units.

The draft LCP envisages a Petroleum Regulatory Authority and an independent National Local Content Committee which will oversee its full implementation. Generally, the TPDC has an obligation of monitoring compliance with the PSA Local Content provisions on behalf of the Ministry of Energy and Minerals in accordance with the Petroleum (Exploration and Production) Act of 1980.

Institutional Framework
The policy recognises the following institutions as key players in the implementation of the policy: the Central Government, Local Government Authorities, National Oil and Gas Company, Regulatory Authority, the Bank of Tanzania, Private Sector, Academic and Research Institutions, Media, Civil Societies and Communities. Each player is assigned specific roles.

National Local Content Committee
The policy introduces a national committee whose role shall be to co-ordinate and oversee the full implementation of the policy. Specifically, the policy states that the committee shall: “Supervise, co-ordinate and monitor the implementation of the policy in liaison with sector operators and institutions; appraise, evaluate and endorse for approval the local content plans (feasible Business Plan, Capital Plan, Procurement Plan, Imports Plan, Employment and succession Plan and Capacity Building Plan), and reports submitted by the operators, as well as coordinate with the private sector to enable Tanzanians to take advantage of the available opportunities.” The Committee shall be under the chairmanship of the Ministry of Energy and Minerals and will be constituted by:


 * The Ministry of Trade and Industry
 * The Attorney General
 * The Ministry of Finance
 * The Ministry of Labour and Employment
 * The President’s Office - Policy Reform Unit
 * The Prime Minister’s Office (PMO)
 * The Tanzania Procurement Authority
 * The Tanzania Revenue Authority
 * The Tanzania Investment Centre
 * The Ministry of Home Affairs - Immigration
 * The Tanzania Private Sector Foundation
 * The Tanzania Chamber of Commerce, Industry& Agriculture (TCCIA), and
 * Two Representatives from the Civil Society

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