‘Local-local’ content in economic growth

Monday September 21 2020



Honest Ngowi

Honest Ngowi 

By Honest Ngowi

The need for local content in economic development has received huge traction in the recent past. In Tanzania, this has mainly been the case in the context of natural gas discoveries.

Of late, however, it has expanded to other sectors not adequately so though. The concept implies the extent to which local as opposed to foreign factors of production are used in various economic activities.

This piece focuses on not just local but also local-local content perspectives.

Local economic development

Various interventions at international, continental, sub-regional, national, and sub-national levels (districts, wards and villages in Tanzania) have been and are in place in the bid of attaining economic development. Among the current thinking in the economic development space is Local Economic Development (LED).

It focuses on identifying and utilizing primarily local resources, capital, ideas and skills to stimulate economic development.

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The current focus on LED globally reflects on several concerns. They include the limited utility of aggregating contributions of vast and distinct populations into countries or economic regions of productive sub-national entities.

Attractiveness of LED as a development strategy owes much to its supposed ability to create contextually-relevant and organisationally-flexible entities capable of responding to changes and demands of local, national and international market economies.

Attaining LED

Attaining LED is a function of availability of economic productive activities in a given locality. The activities include production of goods and services in virtually all sectors of the economy including mining, agriculture, industry, tourism, finance, transportation, recreation and many other ones. Production of goods and services leads to direct and indirect jobs creation, incomes generation, consumption, savings and investments.

Local content

Production in a given locality can be done by Multinational Enterprises (MNEs) or by local firms. It can be done by using foreign or local factor inputs. It is in this context that the issue of local content arises.

Local content is the incidence of domestic inputs - such as capital, labour and intermediate products - in the various parts of a value chain. It includes the share of employment and sales to the sector locally supplied at each stage of the value chain. It is the use of a certain proportion of domestic components or intermediate inputs in production. It is inclusion of local companies in production.

Domestic inputs can refer to either inputs that are made in the host country, or made by entities owned by a host country’s nationals. Local content is the extent to which foreign producers of goods and services procure inputs in form of goods and services from the local economy.

Local content ranges from one country to another and from one sector to another within a country. Multinationals can create local content as part of their sourcing strategies and in response to public policy.

Local content can be local in the sense of factor inputs from anywhere within a given country. In Tanzanian context it can be a factor input from any geographical zone, region, district, ward or village. This piece departs from this general and commonly referred to local content to discuss a relatively new concept of local-local content.

Local-local content

Local-local content focuses on factor inputs not from anywhere within the country but from a given specific location within a region, district, ward or village.

It is an important concept because local economic development happens at a specific location.

The more the local content from

that location, the higher the local-local content and by extension the higher the local economic development in that particular location other factors remaining constant. It assumes that there is local content in the first place.

Proponents of local-local content are not satisfied with just local content in its broader sense. It focused on sub-national level of local content at regions, districts, wards and village levels. It is about having local content issues not just at national but at sub-national levels.

Ways forward

Local-local content based and driven LED is a function of investment in local-local capabilities of local firms and individual services providers. Expecting local-local content to contribute meaningfully in LED without investing in local-local competitive capabilities of local-local firms and individuals is seeking profit without investing. Local and local-local content is supposed to be all about economics and business.

The need for strong business cases in this context cannot be overemphasized.

The author is Associate Professor of Economics at Mzumbe University and Principal of Mzumbe University, Dar es Salaam Campus.