A globally increasing awareness of the benefits for countries of increased local content in indus try is being further stimulated by the prospect of a double dip recession. Increased local content is widely held to result in more jobs and the growth of protection of local economies. However, as solutions provider Local Content Solutions director Dr. Micheal Warner points, the million dollar question on local content at the moment is whether morestringent local content regulations will stimulate greater competitiveness in the local supply industry or lead to uncompetitiveness and protectionism.
"For successful local content in supply chains, there needs to be longevity of demand. Only a certain amount can be done with a spike in capital expenditure, but a lot more can be done if there are ongoing maintenance and equipment replacement requirements," Warner explained.
The mining sector has been quite progressive in building up the skills base of local suppliers and increasing the creation of direct jobs within mining companies. Deloitte Consulting manager Genevieve de Carcenac believes there will be an increased focus on local content regulation in all developing economies globally. Such regulations may be positive for any country, as it could boost skills development, employment growth as well as demand from local suppliers.
"Potentially, mining companies could benefit in the medium to long term on cost and delivery from the use of local content, because of the logistics and the possibility of shorter distances over which they materials and equipment are transported, as well as on total cost of ownership and on average yearly costs about ten years," said Warner. There would be the expected benefits of lower labor costs; however, the same level of productivity would need to be achieved."
Warner believes that the most important factor is how a country's government decided to handle local content and the implementation of local content regulations. Also, the government must decide the most significant challenge facing the country, and push that particular aspect, working in conjunction with local mining companies to determine what is possible and what is not possible.
Source: Mining Weekly