2015 03 03 investing in africa seminar - hatch - local participation
TRANSCRIPT
03/2015
Local Supply Participation in African Capital ProjectsHow to Maximize Opportunities and
Minimize Disappointments
Marc EscandeGlobal Director, Local Participation
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03/2015
Investors / owners to build a strong, sustainable social license to operate
Who Wants to Maximize Local Participation In African Capital Projects?
Everyone! Local stakeholders
(governments, communities, interest groups) to maximizesustainable local benefits
Global organizations to help reduce poverty and inequalities
So why is Local Participation in African projects still achieving disappointing results?
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The (Usual) Problem with Local Participation…
Expectations Current Capacities, Capabilities and Competitiveness
Intentions
Lack of local
knowledge /Fear factor
Excessively ambitious
targets
Lack of coherence and substance in development
plans
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… and its Consequences if it is Not Addressed
Local Participation
Inadequate Quality
Schedule slippages
Owner cost overruns
Operations disruptions
Wasted public / shareholder’s money
Disillusioned communities
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Optimizing Local ParticipationLo
cal B
enef
its
Project start
Optimized LP
t“LP as usual”
Operations Start
Stakeholders involvement
Realistic targets
Early program start
Adequate LP methods
Effective participants development
Effective Participants engagement
Effective Participants promotion
Smart program financing
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03/2015
Local Stakeholders
Optimizing Local ParticipationLo
cal B
enef
its
Project start
Optimized LP
t“LP as usual”
Operations Start
Stakeholders involvement
Realistic targets
Early program start
Adequate LP methods
Effective participants development
Effective Participants engagement
Effective Participants promotionInvestors /
OwnersLP Collaboration
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Collaboratively Building And Successfully Executing LP Programs
Expectations Current Capacities, Capabilities and Competitiveness
Intentions
Realistic expectations Building of additional
capacities and capabilities / increase
competitiveness
Ensure effective engagement of local
participantsLP Target
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The Proven Path to Collaborative LP Optimization
LP Program Initiation
Local ParticipantsAssessment
LP Strategy Design
Local Participants Development
Local Participants Engagement
LP Program Monitoring
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LP Program Initiation• What are the program quantitative and qualitative goals?
– During each FEL phase and ensuing operations• Who are the targeted suppliers and individuals?
– Location, size, ownership, number, etc., - see illustration next slide• How much will it cost to achieve the program goals?
– Filling the capacities and capability gaps of existing supply base• Which local communities will be impacted?
– current level of expectation / resistance• Which local business institutions will be involved?
– Government, industry association, chamber of commerce, education institution, etc.• Which development institutions will be involved?
– World Bank, IFC, Regional development banks, UNIDO, etc.• What will be the role of each party?
– Client, Hatch, Local business institutions, Development institution • How will the program be managed?
– Steering Committee, frequency of meetings, level of authority
These questions must be answered in FEL1 to adequately fund the development of LP plans in FEL2
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Who Are The “Locals” Targeted By The LP Program?
NationalRegional?Vicinity?
Ownership Type (color, gender,…?)
Max Company Size?
Ethnic groups?
Gender?
Age?
Unemployed?
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Defining Realistic LP Goals And Estimating Associated Costs Requires a Regional Economic Development Study
• Step 1: LP Program Ecosystem Assessment – Project(s) supply scope (Capex and Opex)– Local economy current state and business outlook– Local interest / resistance to local developments– Local supply base current state: Capacities, Capabilities, Competitiveness– Local business environment maturity, typical Risks
• Step 2: LP Opportunities and Costs– Identify the industry segments capable of benefiting from the LP program – Estimate the time and effort required to bring specific supply segments to
adequate levels of competitiveness
• Step 3: LP Macro planning– Propose multiple scenarios with associated expected benefits, costs and
duration– Activities, teams, schedule– Identification of financing options
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LP Strategy Design1. Local Suppliers Mapping
Entire project
Package 1
Package 2
Package 3
Package 4
Package 5
Opex Cat. 1
Procurement packages
Category A
Category B
Category C
Category D
Category E
Category F
Category G
Category H
Package details
Local suppliers
Client SDB
Region SDB
Industry SDB
Hatch SDB
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LP Strategy Design1. Local Suppliers Mapping
Package 1
Package 2
Package 3
Package 4
Package 5
Opex Cat. 1
Category A
Category B
Category C
Category D
Category E
Category F
Category G
Category H
Entire project
Procurement packages
Package details
Local suppliers
Local suppliers able to deliver full scope
Local suppliers unable to deliver full scope
Client SDB
Region SDB
Industry SDB
Hatch SDB
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03/2015
LP Strategy Design2. Choosing LP Strategies
Localization target
Supplier A
Supplier B
Supplier D
Supplier E
Supplier C
Estimate capability development effort
Localization target
Building of new capacities
Local suppliers unable to deliver full package scope
Local suppliers able to deliver full package scope
And / Or And / Or
And
Unbundle Procurement packages
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Local Participation Strategy Summary By Procurement Package
1. Local Participation Potential and Implications
2. Recommended Local Participation Strategy and Resulting Sourcing Plan
Created in FEL2 /
Updated in FEL3
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LP Optimization
LP Optimization: A Multidisciplinary Effort
Learning
Economic studies
CapexProcurement
CSROpex
Procurement
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Board Sponsor
Global Lead
Mgmt Consulting
CSRCapexProcurement
OpexProcurement
Learning
LPO Core Team
Systems
Hatch Local Participation Optimization (LPO) Consulting Practice
Global LP frameworkGlobal LP partnershipsLP toolsLP Best practicesLP Knowledge sharingGlobal client interface
LPO Regional Teams
LP local knowledgeLP framework localizationLP local partnershipsLocal client interfaceLP services delivery
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Local Participation – Recommendations
• Set ambitious yet realistic and non-ambiguous LP goals
• Build an integrated supplier knowledgebase that can be easily leveraged by any mining project
• Develop an “LP Playbook” to remove the LP fear factor from investors / owners and facilitate matchmaking between local and foreign suppliers
• Maximize internal awareness and alignment on LP criticality and proven path with a 2 Days LP Executive Workshop
• Conduct an LP Opportunity and Risk Assessment study to understand the LP context around your project
• Proactively reach out to local stakeholders to jointly design Local Participation strategies
Local Stakeholders Investors / Owners
Make it SIMPLE Make it CENTRAL
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Local Participation - 7 Golden Rules
1. Build early, robust consensus on the LP program2. Be bold “If your dreams don’t scare you, they are too small”
3. Be realistic Unachievable LP targets are the best way to destroy local benefits
4. Keep It Simple “Complexity is your enemy. Any fool can make something complicated. It is
hard to make something simple”
5. Involve the 5 key Disciplines throughout the LP Program
6. Leverage foreign suppliers7. Closely monitor supplier performance Pre-qualification, bidding, execution
