Local content: Unpopular, underutilised procurement opportunity by Tanzanians

PROCUREMENT opportunities comes in different ways. Worldwide procurement is used professionally and strategically to implement varies government policies. Policies like economic development, jobs’ creations, revenue collections, social inclusion to mention few are the best examples. In the course, Tanzania Public Procurement Act No 7 of 2011 in 2016 amendments have necessities, which include local firms and experts in government consultancy contracts (Section 55A). Additionally the use of local experts in goods, works and non-consultancy services contract (55B), preference to procure local goods (55C),   and capacity building of local firms (55D) are advised.

Further, Public Procurement Regulations GN No. 446 of 2013 (2016 amendments) includes special groups (Reg 30), preference to local persons or firms (Reg 34) and exclusive preference scheme to local persons or firms (Reg 39). All these measures are aimed at implementing different policies apart from procurement professional itself.

Local Content philosophy is another procurement strategic aspect in Energy and Minerals Sectors. Due to high and rich in natural resources in Tanzania, huge investment comes from foreign companies. Latin America countries, Brazil and Norway have been successful local content policies.

Local content means utilisation of local experts/workforce, goods and service produced locally to enhance the economy, development and encourage local participation and investment. The philosophy originated from dealing with Dutch Disease. Dutch Disease is the famous phrase to countries with rich natural resources like Tanzania. Which means foreign investors extract resources and leave countries with weaker industries and economy due to procurement of goods and services from other foreign companies.

Local content usually comes in five basic parameters: – hiring of local experts, procurement of goods and services from local suppliers and service providers, training for local experts, transfer of technology and other enticements for domestic business development. My discussion will simply base on procurement of goods and service from local suppliers and service providers in Petroleum sub sector. The amount of investment in extractive sector is estimated to be billions of United States Dollars. This entails that investors are going to procure different materials, requirement, services to support their operations. This is procurement opportunity that most of Tanzanians are not well informed of and searching for.

Countries which implemented Local Content Policies witnessed the increase of the economy activities and local business expansion. For example-Angola which is rich in oil, specify that all goods and services must be procured from state companies and companies owned by Angola citizen. They further give reference right of 10 per cent, foreign company must supply in Joint Venture (JV) with locals.

Brazil increased local procurement from 5 per cent to 80 per cent in 1979 due to local content, they put local content as evaluation criteria during licensing stage. In Ghana investors mandated to procure from local suppliers. 10 per cent of preference is given to local suppliers, foreign supplier must supply in JV with locals. Some of the procurements are limited to locals only such as insurance, financial and legal services.

Indonesia, gives the advantage to bids from investor with high percentages of local content. Tender with value above USD 100,000 supplier needs to have local content minimum of 30 per cent. Kazakhstan introduced 20 per cent preference to local suppliers and services providers. In Norway goods/services should always be procured locally and investors must inform the government about companies involve in bidding process. In Trinidad and Tobago, it is mandatory for all investors to procure goods and service produced locally.

Malaysia oil companies are required to procure goods and service from local companies, approval from Petronas (National Oil Company) to procure from foreign companies is requires and must JV with local with minimum of 30 per cent of ownership. Nigeria procurement of goods and services to each activity value between 45-100 per cent. Fabrication and welding activity, financial and legal services are limited to locals.

Let’s get back in Tanzania. In last decade, we developed local content policies, laws and regulations. The Petroleum Act No. 21 of 2015 (Part VIII) and The Petroleum (Local Content) Regulations GN No. 197 of 2017. Mining Act Cap 123 Revised Editions of 2018 (Part VIII) and The Mining (Local Contents) Regulations of GN No. 3 of 2018

Petroleum Act No. 21 of 2015 “The Act” (Part VIII) and The Petroleum (Local Content) Regulations GN No. 197 of 2017 “The Regulations” gives control of local content to EWURA and PURA. Where by EWURA (midstream and downstream activities) while Petroleum Upstream Regulatory Authority (PURA) (upstream activities).

Section 219 of “The Act” and Regulation 15 of “The Regulations” requires a license holder, contractors and subcontractors to give preference to goods and services available/produced in Tanzania. If not, available foreign companies will provide in JV with locals.

Regulation 7 of “The Regulation” requires them to comply with local content requirements, submit comprehensive local content plan including procurement of goods and services (Regulation 9 and 11(d)). Preference to works, goods and services provided, manufactured or locally available (Regulation 15). Regulation 30 requires them to establish and implement procurement process that will give preference to a local company.

Companies must be registered to EWURA (cqs.ewura.go.tz) portal to grab these opportunities. Registration requirements for local suppliers are; Certificate of Incorporation in Tanzania, Tax Clearance, Tax Identification Number (TIN), Valid Business License(s), Professional Registration, National Social Security Clearance Certificate,  Banker’s Reference Letter/Bank Statement (at least three months) and Current shareholding structure issued by BRELA.

According to EWURA website (eqs.ewura.go.tz visited on 17 May 2023), only 1796 companies and 268 experts are registered for local content procurement opportunities. This is 1721 for midstream activities and 75 for downstream activities. The numbers show how much locals are not aware or if they are aware they are not ready to grab these procurement opportunities. Thus, it deprives, government effort to enhance development of economy, local industries, businesses, and local suppliers/service providers.

Available opportunities are like; accommodation, food supply, auditing/tax consultations, legal services, aviation, clearing and forwarding, general supplies, marketing, professional and technical support, real estate, security services, supply of spare, materials and equipment, booking and financial service, insurance services, marketing services, electrical works, construction, building and mechanical works,  transport and logistics, wholesale/retail traders etc.

Despite of the government determinations to improve the wellness of local suppliers and service provide through local content, still there are some issues that hamper the efforts. Most of service provider/suppliers does not have enough capital to meet the requirements, corruption issues, distortions and inefficiencies, inadequate implementation and monitoring of policy. Moreover, there is no published information about coming procurement opportunities and procurement performance reports of the local contents policy.

CPSP Jackson William Musiba

Email: jackswilly10@gmail.com

Tel: +255715287088

Twitter: @jackmusiba