8. Country case studies
In Brazil the 1997 petroleum local content law is often considered an example of global best practice. The legislation incrementally augmented the local content proportions in consecutive bidding rounds for oil extraction projects, substantially improvingthe domestic supplier industry in the petroleum sector . However, more recently local procurement targets for the extraction of deep offshore resources have become increasingly difficult to meet, leading to delays and fines for oil and gas companies operating in Brazil. The government is therefore now seeking to ease the requirements for the next bidding round.
Ghana made its local content law more effective by revising it to include gradual targets to go into effect over 10 years instead of a single target to be achieved by the 10-year mark.
Since the early 2000s Chile has also been focusing on increasing their local content in the mining industry. Despite having no formal regulation or policy on local content requirements the government works together with national and international mining companies to increase the competitiveness of their local suppliers. The World Class Supplier program, a collaboration between BHP Billiton, the Chilean public mining company Codelco and the Chilean governments has so far led to the establishment of 65 Chilean world class suppliers (2015) and it is planned to establish up to 250 world class suppliers by 2035.
Like Ghana and Brazil in petroleum, South Africa has also achieved success in the mining sector by offering flexibility. In late 2010, the South African Government introduced the Broad Based Socio-Economic Empowerment Charter for the South African Mining Industry (hereafter referred to as the “Revised Mining Charter”). This, among other things, promotes beneficiation within South Africa by allowing international and South African mining companies to apply the value of their in-country beneficiation activities towards up to 11 percent of their Historically Disadvantaged South Africans (HDSA) ownership requirements.
Since then, more HDSAs are employed in the sector and national businesses have grown. In June 2011, the South African government introduced the “Beneficiation Strategy for the Minerals Industry of South Africa”, to expand beneficiation and develop six priority value chains: iron and steel, energy, auto catalytic converters, jewellery, diesel filters, pigment and titanium metal production.
On the other hand, there is still room for improvement as indicated by the 2012 strikes and violent protests. In response to mounting accusations that mining is not providing as many benefits as expected, the ruling party has debated an increase in government’s share of the revenue and even the possibility of nationalisation.
These discussions have only added to South Africa’s regulatory uncertainty, which, combined with its persistent infrastructure problems, aggressive unions and declining skills sets, are reducing the appeal of South Africa as an investment destination. According to the 2016 Annual Survey of Mining Companies, South Africa has fallen out of the top-ten mining investment destinations on the continent and dropped to 66th out of 109 destinations globally.