Leveraging local content policies to accelerate growth and development of micro small and medium-sized enterprises in Southern Africa.

Abstract

According to the Organization for Economic Co-operation and Development (OECD), local content policies are “policies imposed by governments that require firms to use domestically manufactured goods or domestically supplied services in order to operate in an economy” (OECD, 2016). Developed and developing countries employ local content policies to promote the use of local inputs and to protect and foster domestic industries. A central objective of local content policies is to create jobs, stimulate local industrial development and respond to calls to address policy failures and stimulate resource based economic transformation. An increasing number of countries have introduced or reinforced local content policies with a view to stimulating the use of local labor, capital and supplies of goods and services to create value in the domestic economy and hence expand the industrial sector. As noted in Dobbs and others (2013), 90 per cent of resource-rich countries apply one form of local content policies or another, aimed at developing and deepening economic linkages between the extractive sector and the rest of the economy. Of the countries that were surveyed, six are in southern Africa (Angola, Mozambique, Namibia, South Africa, Zambia, and Zimbabwe). Well-functioning local content policies can assist countries in boosting their productivity and moving up the value chain, thereby ultimately improving their international competitiveness. In summary, the objectives of local content policies are, among other things, to facilitate increased use of competitive national goods and services, expand commercial cooperation between national and foreign companies, enhance the sophistication of national financial institutions, and develop linkages among industries in the context of global value chains.