The discovery of huge hydrocarbon reserves will potentially transform East Africa. International energy companies are set to invest more than US$100 billion in developing the resources discovered in the last decade in Kenya, Mozambique, Tanzania and Uganda. However, to fulfill its potential, Africa requires urgent attention to address its current challenges around the deterioration not only in its physical infrastructure such as road, rail and seaports, but also of the infrastructure around further education.
A lack of sustained investment in education has led to chronic skills shortages and perpetuates a cycle of disadvantage in Africa’s global competitiveness. This represents an obstacle to business that requires renewed dialogue between industry, development donors and African governments. The UN Economic Commission for Africa, Africa Development Bank and Africa Union and Regional Economic Communities have all identified this as a problem. They have signalled the absence of science, technology and innovation strategies in many individual African countries as a barrier to sustainable growth, which needs to be addressed.
Many major frontier oil and gas producing regions, including Africa, have introduced local content requirements into their regulatory framework to create jobs for nationals, develop skills, and promote technology transfer. Companies also recognise the importance of reducing the high cost of maintaining an international workforce by recruiting local talent. Gone are the days where the oil and gas companies paid for a school to be built, only to realise that there are not any teachers available to teach there. There is no place for tokenism in the corporate social responsibility (CSR) initiatives of today, which demands a far more sustainable, long-term approach.
Community Engagement in Security
From a security perspective, for example, local engagement is absolutely central to overall risk management. Security strategies in Africa require an approach that marries hi-tech responses to the physical security of assets, combined with a more nuanced approach to creating local community support and ‘buy in’ to commercial activity. Common sense and appropriate risk management dictates that, for an oil and gas company, community engagement through the employment of local security officers automatically applies the first layer of defence to an installation and reduces the overall number of security incidents.
However, risk management is one of many skill sets that are not yet readily available in local African markets. This is why risk management partners such as PGI that are serious about long-term operations in this region are training local people so that they are properly qualified to work in security management positions.
There are obvious challenges related to baseline skill sets. Former Royal Marines all have a certain level of training, but this does not apply to Africa, where there is a considerable variation in military skill levels across the continent. While the Kenyan military and navy have honed their skills through deployment in Somalia, countries such as Tanzania and Mozambique have not had that exposure. And not only combat skills are missing. Many naval personnel in East Africa have not been to sea and lack basic sea survival skills – a fundamental prerequisite for any security professional working in the offshore environment.
We cannot pretend that a month’s training followed by regular refresher courses can replace the rigour of the training considered standard for expatriates from developed nations. But by empowering local people to undertake training that achieves a minimum standard, followed by continuous mentoring by colleagues whilst ‘on the job’, an evolutionary cycle of development can ensue.
This approach is not an exercise in exemplary CSR credentials, but is central to future proofing the flow of business in the region. Take Brazil, which currently has some of the most demanding local content laws in the world, where awarded contracts require that exploration phase activities use between 37 and 85% local goods and services, while those in the development phase must use 55–80%. The stringency of these laws has the potential to stifle supply, and create bottlenecks and inefficiencies. Should production in East Africa move forward apace, the very same challenge could present itself, exacerbating the inherent skills shortage.
The backdrop of indigenisation, skills transfer and local content, and procurement requirements increasingly adopted across the continent, can prove challenging for energy companies operating within this complex environment. However, the early adopters and developers of creative partnerships that enable them to ‘walk the talk’ will mitigate reputational risk and gain competitive advantage.