Report No. 66585-AFR Increasing Local …

1 Report No. 66585-AFRI ncreasing Local procurement By the Mining Industry in West AfricaReport No. 66585-AFRI ncreasing Local procurement By the Mining Industry in West AfricaRoad-test versionJanuary 2012 Document of the World i1/31/12 4:03 PM1/31/12 4:03 PMiiAcronymsAfDB African Development BankAUAfrican UnionBBBEEB road-Based Black Economic EmpowermentCAMRMRD Conference of Ministers Responsible for Mineral Resources DevelopmentCFRCost and FreightCICC arbon-in-ColumnCILC arbon-in-LeachCIPC arbon-in-PulpCSO Civil Society OrganizationsECOWASE conomic Community of West African StatesEITIE xtractive Industries Transparency InitiativeEMDPECOWAS Mineral Development PolicyEPCE ngineering, procurement , and Construction EPCME ngineering, procurement , Construction, and ManagementEUEuropean UnionFOBFree on BoardGDPG ross Domestic ProductHDSAH istorically Disadvantaged South AfricanHSEH ealth, Safety.

2 And EnvironmentIFCI nternational Finance CorporationJVJoint VentureMoUMemorandum of UnderstandingNCOMN ational Coalition on MiningNEPADNew Partnership for Africa s DevelopmentNGOs Non-Governmental OrganizationsOEM Original Equipment ManufacturerPPEP ersonal Protective EquipmentPROMINPP rograma de Mobilzacao da Industria Nacional de Petroleo e Gas NaturalRECR egional Economic CommunityRFQR equest for QuotationsRWI Revenue Watch InstituteSEBRAES ervico Brasileiro de Apio as Micro e Pequenas EmpresasSMES mall- and Medium-sized EnterprisesSPX Subcontractor and Partnership ExchangesUNCTADU nited Nations Conference on Trade and DevelopmentUNECAU nited Nations Economic Commission for AfricaUNIDOU nited Nations Industrial Development OrganizationWACAM Wassa Association of Communities Affected by MiningWAEMUWest African Economic Monetary UnionWAMPOCWest African Mining and Power ConferenceWTOW orld Trade OrganizationRegional Vice President: Obiageli Katryn EzekwesiliSector Director: Subramaniam V.

3 IyerSector Manager: Paulo de SaTask Team Leader: Kristina ii1/31/12 4:04 PM1/31/12 4:04 PMiiiContentsACRONYMS ..iiACKNOWLEDGEMENTS ..viEXECUTIVE SUMMARY ..vii1. WHAT ARE THE OBJECTIVES AND SCOPE OF THE Report ? ..12. WHY SUPPORT Local procurement IN WEST AFRICA? ..43. WHAT ARE THE OPPORTUNITIES FOR WEST AFRICA? ..94. WHAT IS Local procurement ? HOW CAN IT BE DEFINED AND MEASURED? .. A Common Approach to Defining Local procurement .. An Overall Framework for Measuring Local procurement .. Defining Thresholds for Value Addition and Local Participation .. Developing Indicators to Measure and Monitor Local procurement .. Implementation Principles .. 415. HOW IS Local procurement CURRENTLY SUPPORTED IN WEST AFRICA? .. By Regional Organizations.

4 By National Governments .. By Mining Companies .. By Civil Society .. 576. GOING FORWARD HOW CAN EACH STAKEHOLDER HELP REALIZE OPPORTUNITIES? .. The Role of Regional Organizations .. The Role of National Governments .. The Role of Mining Companies .. The Role of Civil Society .. 887. CONCLUSION ON SUPPORTING Local procurement IN WEST AFRICA ..89 APPENDIX A: STAKEHOLDER INPUT ON Local procurement THRESHOLDS AND SPEND RECOGNITION LEVELS ..91 APPENDIX B: SUGGESTED FORMAT FOR A Local procurement PLAN ..93 APPENDIX C: STAKEHOLDERS CONSULTED ..97 APPENDIX D: RELEVANT REGIONAL SUPPORT PROGRAMS ..101 APPENDIX E: SELECTED F: MINING POTENTIAL IN GHANA, GUINEA, AND SENEGAL .. iii1/31/12 4:04 PM1/31/12 4:04 PMivSummary of DiagramsPotential Benefits of Local procurement by Stakeholder.

5 7 Inputs by Stage of Mine Development .. 9 Process Flow for Activated Carbon .. 24 Framework for Measuring Local procurement .. 35(A): Suggested Approach for Measuring Value Addition .. 37(B): Suggested Approach for Measuring Local Participation .. 37 Spend Recognition Levels .. 40 Realizing Opportunities: Stakeholder Roles .. 60 Identifying Opportunities: Key Questions to Consider .. 77 Suggested Thresholds for Local Participation (as discussed at Accra workshops) .. 91 Suggested Spend Recognition Levels (as discussed at Accra workshops) .. 92 Summary of Tables West Africa Mineral Resources: Key Commodities Production and Growth Potential .. 4 Extent and Potential of Local procurement of Services .. 12 Extent and Potential of Local procurement of Capital Equipment and Construction Materials.

6 16 Extent and Potential of Local procurement of Consumables .. 18 Extent and Potential of Local procurement of Bulk Services and Infrastructure .. 20 Extent and Potential of Local procurement of Non-Core Goods ..22 Specific West Africa Regional Mining Applications, Market Demand Indications, Processes, Pricing, and Companies for Activated Carbon .. 23 Specific West Africa Regional Mining Applications, Market Demand Indications, Processes, Pricing, and Companies for Sodium Cyanide .. 24 Specific West Africa Regional Mining Applications, Market Demand Indications, Processes, Pricing, and Companies for Caustic Soda .. 26 Specific West Africa Regional Mining Applications, Market Demand Indications, Processes, Pricing, and Companies for Personal Protective Equipment .. 27 Benefits and Trade-Offs in Defining Local procurement .

7 32 Key Principles to Consider When Defining Local procurement .. 34 African Mining Vision s Framework for Action: Objectives and Actions Related to procurement /Upstream Linkages .. 42 Challenges to Accessing Opportunities for Mining Companies .. 73 Challenges to Accessing Opportunities for 82 Access to Finance Challenges .. 85 Suggested Weighting for Calculating Total Local procurement Spend (as discussed at Accra workshops) .. 92 Summary of BoxesCase Study Countries: Country Facts, Mining Potential, and Industrial Base .. 1 Benefits of Local procurement : Global Cases .. 7 Local Supplier Example: Electrofax .. iv1/31/12 4:04 PM1/31/12 4:04 PMvLocal Supplier Example: Caesar Kilns and Furnaces .. 17 Some Global and West African Examples: How Is Local procurement Defined and Measured?

8 29 Supplier Categories .. 38 Local Content Measurement: Brazil Oil and Gas Industry .. 39 Regional West African Harmonization of Mining Policy .. 43 National Mining Codes and Local procurement in West Africa .. 45 South Africa Mining Policy and Regulation .. 47 Chile: Mining 49 Kazakhstan Oil and Gas Local Content Regulation .. 51 Newmont Ghana s Local procurement Policy .. 53 Examples of Support for Local procurement in West Africa .. 55 IFC s Approach to Supporting Linkages in Partnership with Extractive Industry Companies .. 56 Revenue Watch Institute .. 57 International Examples of Partnerships Between Civil Society and Mining Companies .. 58 Latin American Mining Industry EXPONOR Exhibition .. 62 Cases Where Poor Regional Integration Has Inhibited Local procurement .. 63 WTO Provisions and Local procurement .

9 65 Global Practice: Submission of Support Plans .. 69 Nigerian Content Suppliers Fund .. 71 Full, Fair and Reasonable Access Australian Industry Participation National Framework .. 74 Identification of Opportunities: Approaches from Global Practice .. 75 Development of Supplier Databases: Practices in Chile, Southern Africa, and Chad .. 79 Broadening Access to Opportunities: Approaches from Chad and Australia .. 79 Developing Common Requirements for Supplier Certification: Atacama Mining Cluster in Chile .. 81 Certification: Escondida .. 84 Anglo Zimele Development and Empowerment Initiative .. 87 The Diavik Diamond Mine Rio Tinto (Canada) .. 87 Key Considerations for Development and Updating of a Local procurement Plan .. 93 Local Business Opportunities ExxonMobil and IFC (Chad) .. 109 EPC Preferential procurement and Enterprise Development Dube TradePort.

10 111 Example of Franchising: The Butterworth School Project .. v1/31/12 4:04 PM1/31/12 4:04 PMviAcknowledgementsThis Report Increasing Local procurement by the Mining Industry in West Africa is a product of the World Bank Sustainable Energy Oil, Gas, and Mining Department (SEGOM). The task team comprised of Kristina Svensson (Task Team Leader), Boubacar Bocoum (Senior Mining Specialist), and Gary McMahon (Senior Mining Specialist).The World Bank would like to thank the contribution of the Governments of Guinea, Ghana, and Senegal for their participation in the case studies. Particular thanks go to Ben Aryee, CEO Ghana Minerals Commission, for their support to the Ghana workshop. It would also like to thank the keen participation of the mining companies, the Ghana Chamber of Mines, the Guinea Chamber of Mines, and civil society groups in the region.