The economics and politics of local content in African extractives: Lessons from Tanzania, Uganda and Mozambique

Extractive foreign direct investment (FDI) is heralded as the new development opportunity in Africa. A key precondition for FDI’s contribution, however, is that foreign investors link up to the local economy and create local content. Consequently, African host governments are contemplating ways in which they can promote local content. This paper examines local content policies and practices in three African countries – Tanzania, Uganda and Mozambique - all countries where there are huge expectations to extractive based economic development. It is found that in spite of high ambitions and strong expectations, local content remains limited, shallow and inefficient. The paper explores why local content seemingly has failed. We argue that conventional economics inspired explanations focusing on ill-conceived policies, weak institutions and low absorptive capacities are partial at best and therefore must be complemented with political explanations. These seek to understand local content practices as functions of ruling elites’ efforts to build and maintain stable political coalitions.